Pundits: Foul play on the Bulgarian gas market profits Russia

A flag of the Russian multinational energy corporation Gazprom waves outside of Moscow office building of the company in Moscow, Russia, 03 January 2021. [EPA-EFE/MAXIM SHIPENKOV]

The Bulgarian state-owned gas import company Bulgargaz wrote to the State National Security Agency (DANS) to report that competing interests seek to sabotage by jeopardising the agreement between Bulgaria and Azerbaijan on importing 1 billion cubic meters of gas per year. EURACTIV Bulgaria reports.

According to the letter dated 21 December seen by EURACTIV, Bulgargaz tells DANS about its fears that in violation of trade secrets, interested parties had disclosed confidential information about its contract with Azerbaijan Gas Supply Company (AGSC) from 2013.

This, according to Bulgargaz, entitles Azerbaijan to terminate its contracts with Bulgargaz. The contract for importing 1 billion cubic meters of Azeri gas per year, about one-third of the country’s consumption, offers the first real alternative to the imports of Russian gas.

The nearly 100% Russian monopoly of Bulgaria’s gas imports will likely erode when the Greece-Bulgarian interconnector (IGBisbe) is completed in late 2022. In the meantime, Azerbaijan has agreed to sell Bulgargaz smaller amounts of gas, using existing connections between Bulgaria and Greece.

The agreement Bulgargaz has with AGSC is seen as very profitable for Bulgaria, especially considering the current energy price spike. Bulgargaz will also lose the bank guarantee of $73 million if competitors succeed in sabotaging the contract, putting the state-owned company in a tough financial position.

One of the entities Bulgargaz told DANS has been involved in the alleged sabotage is the Bulgarian Gas Association. The company, which does not even have a website, allegedly disclosed information on contracts which could cause financial ruin to the company.

The management of BGA includes former bosses of Bulgargaz from the period before 2015. The new Deputy Minister of Energy, Iva Petrova, is among the founders and the new Minister of Energy, Alexander Nikolov, before becoming Deputy Minister of Energy in the caretaker cabinet in May 2021, worked for businesswoman Tsvetelina Borislavova, the ex-partner of former Prime Minister Boyko Borissov.

Furthermore, the one GW one-billion-euro gas power plant project proposed in Bulgaria’s Recovery Plan is also linked to her name.

The proposed plant would require Bulgaria to increase its current gas imports, which is three billion cubic meters of gas per year, by a third. Without diversification of gas supplies, this would be in Gazprom’s interests.

Likely, the destabilisation of Bulgargaz would mainly lead to much higher gas prices for Bulgarian consumers. Bulgargaz is in a better position this year as a company with long-term contracts than companies trading on the spot market. Last year, it managed to import small quantities of American liquefied natural gas, which was cheap at the time, but has seen prices skyrocket recently.

The prices at which Bulgargaz sells on the Bulgarian market are 30-40% lower than on European markets, thanks to long-term contracts with Gazprom and the import of Azerbaijani gas through alternative routes. If Bulgargaz is liquidated, Azeri gas will pass into other hands, but the prices will not be the same.

Martin Vladimirov, Director of the Energy and Climate Program at the Center for the Study of Democracy, told EURACTIV that the Bulgarian state is not trying to have an active dialogue with Azerbaijan to amend the long-term agreement or protect Bulgargaz’ interests. Instead, there are attempts to remove the company’s management, he claims.

According to him, Gazprom benefits the most from such a development, as the diversification of supplies is slowing down, while the Russian monopolist pushes forward new players that are beneficial for it on the Bulgarian domestic market.

Vladimirov said that in the absence of gas import diversification, plans to build a new gas plant with a capacity of 1 GW would mean a sharp increase in Bulgaria’s dependence on Russian gas.

“Obviously, the construction of such a large and economically unnecessary plant is rather aimed at artificially creating a larger natural gas market that can serve a specific private commercial interest,” Vladimirov said.

EURACTIV asked Bulgargaz whether the institutions have already reacted to their letter of 21 December 2020. In a response received late Monday (27 December), Bulgargaz wrote that a response was not yet been received, but was expected.

Bulgargaz writes that “individuals outside the government” had been quoting confidential information from the agreement with Azerbaijan in blogs and in lobbying correspondence, which had provoked an extremely sharp reaction from Baku.

According to Bulgargaz, the Azerbaijani side expects to be informed about the investigation of the leaked information and the legal actions taken against the persons harming the interests of parties to the agreement.

[Edited by Alice Taylor]

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