Bulgarian PM coy on South Stream, gas deal talks ongoing

Written by on November 13, 2012 in Bulgaria, Business, News - No comments

Bulgarian Prime Minister Boiko Borissov did not confirm, on November 13, reports in Bulgarian language media that he would attend the South Stream groundbreaking ceremony next month; meanwhile, talks on the long-term gas deliveries deal with Gazprom were still ongoing with two days left before the signing date.

Last week, Bulgaria’s Cabinet approved, in principle, the framework final investment decision on South Stream, but linked the issue to the new long-term gas deliveries contract with Gazprom. The current deal expires at the end of the year.

The two contracts – the final investment decision on South Stream’s Bulgarian stretch and the gas deliveries deal – are to be signed on November 15, during a visit to Sofia by Gazprom chief executive Alexey Miller.

The signing was initially scheduled for earlier in November, with Russian president Vladimir Putin in attendance. After he cancelled the trip, it was interpreted by Bulgarian observers as a sign that negotiations had stalled; Putin’s spokesperson later confirmed reports in international media that Russia’s president was suffering from an old sports injury.

“When I spoke to Putin, we agreed to discuss it later – when will he come to Bulgaria and whether I might attend the groundbreaking, but we have not spoken since then,” Borissov said on November 14, talking to Bulgarian reporters during an official visit to Slovakia.

Borissov said that Bulgaria wanted a relatively short deal with Gazprom, no longer than six years – indirectly confirming that the details of the contract were yet to be fully settled.

“The shorter, the better. I am convinced that we will have a lot of Black Sea gas in the next three to four years, so we should be wary of contracts running longer than six years. That is when we expect to start gas extraction [in the Black Sea],” Borissov said.

In August, Bulgaria gave French energy giant Total a five-year exploration licence for the Khan Asparouh 1-21 block on the Bulgarian Black Sea shelf. Total, which will prospect the area together with Austria’s OMV and Spain’s Repsol, is expected to invest more than one billion euro over the period, mainly in two high-depth oil and gas wells. Bulgaria’s optimistic expectations are that the group will find gas reserves comparable, if not greater, to the 40 billion to 80 billion cubic metres found nearby in the Romanian Black Sea shelf.

Borissov also declined to give details on the gas price in the new deal with Gazprom – another detail that has remained vague even as the signing date draws closer – but said all would be clarified on November 15.

Bulgaria’s Economy and Energy Minister Delyan Dobrev said that in a worst-case scenario, Bulgaria’s gas import prices will be cut by 11 per cent, the same discount Gazprom gave starting April. Nevertheless, the talks would go until the very end as Bulgaria attempts to negotiate an even better deal, he said on November 13.

Reports over the past several days in Bulgarian media said that Bulgaria had saved about $70 million from the discount offered in spring by Gazprom in exchange for securing Sofia’s approval for South Stream. That figure, however, is significantly lower than the initial estimates that Bulgaria’s savings would run up to $120 million, mainly because Bulgaria bought less gas than expected.

Since the start on November, Hungary and Serbia both signed final investment decision accords on South Stream, with Slovenia joining them on November 13, during a visit by Slovenian prime minister Janez Jansa to Moscow.

Austria, which was to be the terminus of the pipeline in central Europe, has not done so. In spring, Gazprom chief executive Miller said that he favoured a route that ended in northern Italy, but Italy’s ENI, Gazprom’s main partner in the South Stream project, is yet to finalise its own final investment decision with Gazprom on the underwater stretch of the pipeline.

Uncertainty about the exact details of the route was among the reasons cited by the European Commission for playing down the importance of the recent spate of South Stream agreements.

On November 12, Marlene Holzner, spokesperson for EU energy commissioner Guenther Oettinger, said that the European Commission had “no concrete information that indeed a final investment decision on South Stream has been taken already, because normally if you use this term in a general sense, you would have different things established […] and one is that you have the route. It has never been communicated [to the European Commission] that there is a final route.”

There have been no environmental impact studies done either, she said.

The EU has launched an anti-trust investigation against Gazprom, suspecting that the Russian company used its market position in a number of Eastern European countries, Bulgaria included, to hinder competition.

The EU has so far declined to comment on the ongoing investigation, but the point was echoed by Bulgaria’s Meglena Kouneva, a former European commissioner who finished third in Bulgaria’s presidential elections and whose party is expected to win a significant share of seats in next year’s parliamentary elections.

Bulgaria was having its “arms twisted” and risked being taken to court by the European Commission for failing to liberalise its gas market, Kouneva said.

(Photo: Jayesh Nair)

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Alex Bivol is the news editor of The Sofia Globe.