Bulgaria offers Azerbaijan ‘a package’ of energy projects

The Lukoil refinery in Burgas, Bulgaria

The Lukoil refinery in Burgas, Bulgaria.

The Bulgarian government has proposed a package of energy cooperation projects to Azerbaijan. It remains unclear if the massive deal is part of a swap of property linked to a plan to divest 17% of Azerbaijan’s shares of Greek gas operator DEFSA to a third country.

Bulgaria is reported to have invited Azerbaijan to participate in the construction of filling stations, and to invest in the construction of oil and gas storage facilities, and refineries.

Bulgaria has only one refinery near the port city of Burgas, owned by the Russian company Lukoil, which has been designed to process only Russian crude. Bulgarians frequently complain of Russia’s monopoly of the fuel market, as a result of the dominant position of Lukoil. 

“At present, the Azerbaijani side is examining these projects and their profitability,” the Azerbaijani ambassador to Bulgaria Emil Karimov was quoted as saying by the Azerbaijan’s Trend agency.

Bulgaria is also interested in purchasing Azerbaijani gas, and its government has already committed to purchase one billion cubic meters of gas per year (bcm/y), when Azeri gas will start flowing through the Southern Gas Corridor (see background). At present, Bulgaria uses 3 bcm/y of gas, exclusively from Russia.

IGB (Greece-Bulgaria inter-connector), known also as the Stara Zagora-Komotini interconnector, is the gas pipeline which will allow Bulgaria to receive Azerbaijani gas from the Trans-Adriatic Pipeline (TAP) section of the Southern Gas Corridor.

“Bulgaria intends to build a pipeline, which will be connected with TAP in the future,” the ambassador said. “Azerbaijani gas will be delivered to Europe via this pipeline. Thus, Bulgaria will be able to receive gas from Azerbaijan.”

A Memorandum of Understanding and Cooperation was signed between TAP and ICGB in January 2014.

The document provides an opportunity for cooperation between the two companies, to work together on connecting the pipelines in the vicinity of Komotini (Greece), which will open the way for new supplies of gas to the gas distribution network in Bulgaria, and further to Southeastern Europe.

The TAP project is designed to transport gas from the Caspian Sea region to Italy’s south through Greece, Albania and the Adriatic Sea and further to West Europe. The total length of the pipeline will near 870 kilometers.

It remains unclear if Bulgaria plans to engage in massive cooperation with Azerbaijan are linked to its possible divesting from DEFSA, the Greek gas operator of which Azerbaijani’s state gas company SOCAR bought a 66% stake in 2013, for an estimated €400 million.

The European Commission has expressed serious concerns about the sale and has been reviewing it since, because Azerbaijan is to become both a major gas supplier to Greece, and also a majority owner of the gas operator.

It has already been reported that Athens was examining an option under which SOCAR would divest at least 17% either to the Greek government, or a third entity, to address the EU’s concerns.

>>Read: Greece optimistic about gas grid deal with Azerbaijan’s SOCAR

Bulgaria has no funds available to buy 17% of DEFSA, but a property swap could obviously solve Baku’s problems with the commission and strengthen its positions in the broader region. 

The Southern Gas Corridor (SGC) is a plan to bring as to the EU from sources other than Russia.

Currently refers to the three pipelines, including TAP, which will bring Azeri gas to the EU. The South Caucasus Pipeline Extension from Shah Deniz via Azerbaijan and Georgia, the TANAP pipeline via Turkey, the TAP pipeline starting from Greece and taking the gas further across Albania and an offshore section in the Adriatic to Italy.

The first gas, originating from the offshore gas field Shah Deniz II in the Caspian Sea, is expected to flow via SGC in 2019-2020. A branch is expected to take Azeri gas from Greece to Bulgaria and further north.

Read: Šef?ovi? gives his blessing to Southern Gas Corridor

In future, gas from Iran or Iraq could also flow through SGC. 

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