Capital Sofia
Time Zone EET (GMT+2)
Country Code 359
Mobile Codes 91,92,95,98,99
ccTLD .bg
Currency Lev (1EUR = 1.95BGN)
Land Area 110,993 sq km
Population 7.5 million
Language Bulgarian
Major Religions Orthodox Christianity, Islam

Bulgaria Upgrades its Regional Energy Role

By Ioannis Michaletos

For the better part of 2012, Bulgaria has been upgrading its role in regional energy developments, engaging in a multilayer policy regarding multiple projects that will potentially elevate its role in the geo-economic sphere in the mid- and long-term.

Bulgarian-Russian Engagements

Presently, Bulgaria imports around 3 billion cubic meters of natural gas per year from Gazprom, which covers its total domestic consumption.

The envisioned South Stream project is probably the single largest proposed natural gas pipeline project in Southeastern Europe. Designed and directed by Gazprom and Italy’s ENI, it has also attracted collaboration interest from French and German companies. Bulgaria features in two onshore pipeline routes: the first is to Austria (via Serbia, Slovenia and Hungary), the second to Italy (via Greece).

In that case, Sofia has already enacted a plan for acquiring extra benefits, and thus to win as many concessions as possible. First of all, Bulgaria will not finance the construction of the portion of pipeline passing through its territory, leaving all expenses to Gazprom and its consortium partners.

In parallel, Bulgarian Energy Minister Dobrev has recently stated to the local press that by 15 November 2012, new contracts for the supply of Russian gas are going to be signed with Gazprom that stipulate an 11% reduction in import prices. A first agreement was signed in April 2012 and will continue to be enforced during 2013 as well.

In the oil sector, Lukoil has announced that its refinery in Bulgaria will receive a 1.5 billion euro Russian investment for the construction of a hydrocracking plant. It is estimated that 3,000 jobs are to be created and, most importantly, that after this the oil refinery products exports of Bulgaria will be boosted (mostly to Eastern European markets), of course also providing a source of additional revenue for state coffers.

Hydrocracking is a chemical process for converting petroleum crude oils into products such as gasoline, kerosene, jet fuel, and diesel oil. The Southeast European region, including Turkey and the Eastern Mediterranean, may experience a lack of these types of fuel (and especially diesel) in the coming decade, thus opening a market for oil refineries such as Lukoil’s.

In a recent international energy conference in Thessaloniki, organized by the Institute of Energy of South East Europe (IENE), it was cited by specialized working groups of energy experts, that there is great potential for hydrocracking units, and for the time being only the Greek refineries and the Bulgarian one will be capable of reaping substantial benefits due to the coming shortfall of diesel in the nearby markets.

Regional Engagements

Bulgaria has also upgraded its regional cooperation with Romania by inaugurating recently a 25km natural gas interconnector, commissioned by Bulgartransgaz EAD and Transgas SA. The total cost was around 24 million euros, out of which 9 million euros were provided by EU structural funds, under the purpose of energy security and diversification of the Balkans- a catch-phrase for reducing local markets’ dependence on Gazprom.

Thus, at the same time that Bulgaria is getting closer to Gazprom’s policies, it is also playing in the opposite direction, following a clear model of keeping a balance between the three major players in the region, namely, the USA/Germany and Russia. In times of crisis, such as the infamous Russo-Ukrainian ‘gas wars,’ Bulgaria would be able to use the interconnector to supply certain amounts of gas, so as to keep the local electricity market going without major interruptions.

Moreover, Bulgaria and Greece are boosting their interoperability on an energy level with the 170km-long IGB interconnector. Connecting the Thracian towns of Stara Zagora in Bulgaria with Komotini in Greece, this will be complete by the end of 2013 and will be fully operational in the beginning of the following year.

The engineer contractor for this project is PensPen, a British company specializing in natural gas infrastructure. The company has subcontracted a gents in Greece and Bulgaria, and is in the process of executing the environmental studies needed to implement the IGB.

The total cost is estimated at 150 million euros, out of which 45 million euros will be awarded by the European Union. The EU strongly supports IGB as an implementation of the bloc’s natural gas diversification strategy in the Southeast European region.

On August 11, 2011, when the contract for the Front End Engineering Design and Environmental Impact Assessment was signed in Sofia, PensPen announced that “the interconnector IGB is a project of the utmost strategic importance for Greece and Bulgaria, since it reinforces the security and provides diversification of supply in Southeastern Europe, adding that “Penspen’s local partner C&M Engineering S.A is considered one of the most experienced consultancy & engineering firms in Greece, specialised in the energy sector, due to its portfolio of large, complex energy projects.”

The shareholders of the Athens-based venture will be the Poseidon consortium, in which DEPA and the Italian company Edison are involved. From the Bulgarian side, the partner here will be Bulgarian Energy Holding (BEH).

The importance of the IGB, as the press release cited above indicated, lies mostly in the diversification policies as implemented by the EU; this directly correlates with Azerbaijan’s final decisions regarding which project will be selected as the so-called ‘Southern Corridor’ one. For the moment, Nabucco West and the Trans-Adriatic Pipeline (TAP) are the main competitors for the contract to deliver significant amounts of gas from the Shah Deniz field to Europe, either through the eastern Balkans (Nabucco) or through Greece-Albania (TAP).

Bulgaria is also preparing to construct an interconnector with Serbia, to have a capacity of 4.9 million cm/day, to be completed in 2015. This capacity might go up to 13.6 million cm per day eventually, according to technical studies conducted.

Domestic Culminations

Bulgaria also strives to become an oil producer and in July 2012 awarded licenses for offshore oil explorations to French energy giant Total, in the location 1-21 Khan Asparouh. Two other companies, the Spanish Repsol and the Austrian OMV, will also be included as partners and will together research a region of 14,000 sq km, around 50 miles off the coast of Varna. The duration of the license is five years.

According to estimates made by Bulgarian scientists, 85 billion cubic meters of recoverable reserves could lie beneath these waters, along with significant amounts of oil. The total investments needed for deep-sea drilling may well exceed 1 billion euros over the next five years. A large part of that would be subcontracted to local industrial and maritime companies.

Meanwhile, in August 2012 Sofia awarded a license for oil exploration in the Block 1-19 St. Athanasius. This is located south of the block where quantities sufficient for 10-15% of domestic gas consumption are currently being extracted. The company involved, Scotland’s Melrose Resources, merged with the Irish Petroceltic International PLC on October 10, 2012.

Lastly Block 1-22 Teres, close to the maritime border with Turkey is estimated to have some amounts of hydrocarbons. On 11 October 2012, the Bulgarian government announced it would proceed here, announcing a public tender for interested companies wishing to explore that part as well.

In short, should all these explorations prove to be fruitful, Bulgaria may well be secured in energy terms in less than a decade, while it will also participate in all major energy networks between the West and the East.


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