Bulgaria’s Bulgargaz moves to quash fears of gas shortages in 2013

Written by on September 25, 2012 in Bulgaria, Business, News - No comments

Bulgaria’s state-owned gas company Bulgargaz moved on September 25 to quash fears that the country could face a gas shortage next year, caused by a statement made earlier in the day by a company official.

Bulgargaz chief executive Dimitar Gogov told reporters that the company decided to fill up its gas storage facility at Chiren, banking that the next gas delivery contract with Gazprom will allows Bulgargaz to recoup losses sustained this year.

Bulgaria’s current deal with the Russian state monopoly expires at the end of the year and the negotiations on a new contract have stalled over a number of disagreements, including Bulgaria’s insistence that the contract is signed directly with Gazprom, rather than intermediaries partially or fully-owned by the Russian company.

Earlier, the head of corporate relations and licencing at Bulgargaz, Alexander Petrov, said that shortages in 2013 was a realistic possibility because the company did not have the money to stock up on Russian gas before the end of 2012, when the 11 per cent discount granted by Gazprom expires.

Speaking during the meeting hosted by the State Energy and Water Regulatory Commission (SEWRC) to discuss gas price changes for the last quarter of the year, Petrov said that the company’s reserves at the Chiren gas storage facility were extremely low.

The regulator has suggested reducing the gas price for end-users by 0.67 per cent. Earlier this year, SEWRC denied Bulgargaz a price hike, pointing out the expected Gazprom discount as a reason to do so, despite Gogov warning in June that the regulator was denying the company funds to take advantage of that discount.

Bulgargaz had to take a loan to address cash-flow issues and pay for Gazprom deliveries, Petrov said.

He said that Bulgargaz planned to buy less gas from Russia (receiving a smaller discount in the process), and use about 210 million cubic metres from the Chiren storage (out of 380 million cubic metres currently stored) by the end of the year to satisfy domestic demand – only to be contradicted hours later by his boss.

The company’s dire financial straits was caused by the loss Bulgargaz was taking on domestic sales, at a price below what it paid Gazprom. Petrov said that Bulgargaz lost 300 million leva that way, but was countered by SEWRC chairperson Angel Semerdjiev, who said that the regulator’s calculations put the figure at 250 million leva.

Semerdjiev said that it was not the time yet to address Bulgargaz’ lost revenue, saying that only after the last quarter of the year could a clearer picture of the company’s losses in 2012 emerge. “We all hope that from the start of 2013, Bulgargaz will have secured such delivery prices for the country that would allow the company to cover a large portion of its lost revenue,” Semerdjiev was quoted as saying by Bulgarian news agency BTA.

He played down the fears that gas shortages could impact heating companies, leading to interrupted service during the coldest period of winter – much as it happened in 2009, when the price war between Moscow and Kyiv cut supplies to Central and Eastern Europe during a bitter cold spell.

Semerdjiev said that the contingency plans developed in 2009, such as heating utilities switching from gas to fuel oil, could come into play this winter. “In this situation, we cannot expect rationing. These are companies that are required to deliver central heating to consumers under any circumstances,” he said.

However, fuel oil results in higher carbon emissions, which could prompt heating utilities to demand regulatory approval for higher prices, so that they can buy additional emission credits in order to meet Environment Ministry quotas.

(Photo: Jayesh Nair)

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