Will Bulgaria become a new European gas hub?

Sofia is trying to agree with Gazprom about the transit of Russian gas through Bulgaria through the shore or offshore branch of the Turkish Stream pipeline currently being built. However, in order to approve the gas hub project, according to the requirements of the European Commission, Bulgaria must become a gas trader, not just a transit country, providing at least three different sources of natural gas supplies, Vesti.Ekonomika writes. Two new Russian pipelines – Nord Stream-2 (with a maximum capacity of 55 bcm) and Turkish Stream (the maximum capacity of 32 bcm) – will channel almost the entire Russian gas transit going through Ukraine today to Germany and Turkey. In 2017, Gazprom supplied 155 bcm of gas in the member countries of the European Union and another 23 billion cubic meters to countries that are not part of the EU (including Turkey), with 93.5 billion cubic meters transit through Ukraine, notes the oilprice.com information portal. If Nord Stream-2 is built, more than 70% of Russian natural gas exports to the EU will be transported along a single route to one country – Germany. If the Turkish Stream also becomes a reality, almost 90% of all Russian gas exports to Europe and Turkey will be delivered to two countries – Germany and Turkey. Bulgarian Prime Minister Boyko Borissov proposed to build a Balkan gas hub not far from Varna soon after the Russian President Vladimir Putin abolished the South Stream gas pipeline in December 2014. Before that, Sofia was forced to suspend the construction work of the project under EU pressure. Borissov then hoped that the European Commission and Gazprom would come to an agreement on the compliance of the project with EU laws and Bulgaria would eventually become a major transit country for Russian gas and, at the same time, receive the low prices promised by Moscow, large investments and thousands of new jobs. When there was nothing left of that dream, Bulgaria faced the prospect of paying heavy fines to Gazprom for refusing contractual obligations after the suspension of the South Stream. This threat was over in May last year, when the European Commission appealed to Moscow to withdraw its lawsuit against Sofia for 800 million Euros ($ 937 million) in the form of fines for termination of the contract within the agreement to settle the EU antitrust investigation against Gazprom. However, Borissov remains concerned about Putin’s attitude towards Bulgaria, as the Russian leader accused Sofia of the failure of the South Stream. Borissov clearly tried to make peace with Putin during a personal meeting in May and discuss the supply of Russian gas to the Balkan gas hub. The Bulgarian government resumed talks with Moscow on the revival of the South Stream in 2017 amid the active construction of the Turkish Stream. Among the proposed options was the offshore branch of the gas pipeline towards Varna, where a large gas storage facility could be built. Another option would be to connect the Turkish Stream with the Bulgarian gas network through a pipeline connection with Turkey. Alternative options for Russian gas exports to Europe include construction of a new pipeline from Turkey via Greece to Italy or the use of the future Trans Adriatic Pipeline (TAP), one of the three pipelines of the Southern Gas Corridor, intended for transportation of Azerbaijani gas to Europe. But none of these options is advantageous to Bulgaria. Gazprom has already announced that it wants to use the EU Gas Directive, which provides for the reservation of facilities for third-party gas suppliers in all European pipelines. However, the initial capacity of TAP of 10 billion cubic meters is liberated from EU regulation for 25 years; and when it in the future will be expanded to 20 billion cubic meters, only half will be available for alternative suppliers. This makes two options through Bulgaria more promising for Gazprom, especially since the Bulgarian government has promised to take on the negotiations with the EU. Despite the fact that Borissov secured the support of Turkish President Recep Tayyip Erdogan and Russian President Vladimir Putin for the construction of the hub, it will not be easy to supply gas from three sources, as required by the European Commission. In March, the Bulgarian government signed a contract with Consult to conduct a feasibility study of the Balkan gas hub, determine its business model, and also give recommendations on the project financing mechanism. Preliminary results of the Consult analysis were presented in Brussels in June. The report says that 11 countries are interested in the potential development of the Balkan gas hub. Gas supplies will be provided from three sources: Russia, Azerbaijan and local gas production in Bulgaria and Romania. However, the extraction of Bulgarian natural gas is negligible, while Romania is unlikely to supply Black Sea gas to its southern neighbor. Thus, local gas production should be excluded from the list of potential sources. In addition, Bulgaria has a contract with the Shah Deniz consortium only to supply 1 bcm of Azerbaijani gas. In the future this volume may grow, but it is unlikely that it will ever reach 15 billion cubic meters to match the Russian volumes of gas that Sofia is discussing with Gazprom. Consequently, the Balkan gas hub will be mainly supplied with Russian gas. However, the commission will find it difficult to prohibit Sofia from obtaining a regional gas hub if Gazprom is allowed to build the Nord Stream-2. The EU indecisiveness with regard to the expansion of the Nord Stream in the Baltic States creates a precedent that will almost certainly be used in another place. Source: Novinite