Bulgaria Tangled in New Gas Price Talks with Gazprom

Gazprom head Miller (front left) in Sofia at the ceremony for singing the Bulgarian-Russian agreement for South Stream. Photo by BGNES

Bulgaria's state natural gas company Bulgargaz has started a new round of talks with Russian energy giant Gazprom on the price of natural gas supplies.

Bulgargaz CEO Dimitar Gogov and Gazprom CEO Alexei Miller have met in Moscow discussing anew the price that Bulgaria pays for Russian natural gas, the Russian press reported Wednesday.

Gogov and Miller have discussed the possibilities for signing a direct commercial contract between the two state companies, which is expected to be signed by the end of June 2011, according to unconfirmed reports.

The two major issues in Bulgaria's gas talks with Gazprom are the Bulgarian demands for lower prices and for elimination of three intermediaries.

Over 90% of Bulgaria's natural gas comes from Russia. Preliminary data shows that in 2010 Bulgaria bought a total of 2.6 billion cubic meters of natural gas from Russia, the Vedomosti newspaper reports.

Vedomosti points out that Bulgaria demands the removal of two of the three companies acting as intermediaries between Gazprom and Bulgargaz because it views them as unnecessary.

The three intermediaries are the Bulgarian company Overgas, the German company Wintershall, and Gazprom's own subsidiary, Gazprom Export. Bulgaria wants to sign a commercial contract only with the third company. Media reports have claimed indirect or direct connections between Gazprom and the other two companies as well.

At the end of 2010, one of Bulgaria's contracts with Gazprom expired; it was for the delivery of 1 billion cubic meters of Russian natural gas per year. However, Bulgargaz has also other contracts with Gazprom expiring at the end of 2011 and 2012. Bulgaria's all contractual relations with the three intermediaries are set to expire at the end of 2012.

During Russian Prime Minister Vladimir Putin's visit to Sofia in November 2010, Gazprom announced it was going to offer Bulgaria a new price package stipulating a 5% to 7% reduction in the price of Russian gas supplies by the end of 2012.

According to another Russian publication, RusEnergy, the development of the future South Stream gas transit pipeline was also a topic of the Bulgargaz-Gazprom talks in Moscow this week.

Bulgargaz and Gazrpom signed a road map for the construction of the Russian sponsored South Stream pipeline in Varna in July 2010, and during Putin's visit in Sofia in November 2010, they signed a shareholders' agreement for the project company, which is to construct the Bulgarian section of South Stream. Both parties will have 50% of the shares in the joint venture.

The preliminary survey for the Bulgarian section of South Stream is expected to be completed by the end of March 2011, and after that Bulgaria will make a final decision on an EUR 500 M investment in its section of the South Stream project.

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