FT: Bulgaria Pins Hopes on Black Sea Gas

From The Financial Times

By Andrew MacDowall

These are early days, but interest from energy majors in Bulgaria's offshore gas potential is raising hopes that the country can reduce its dependency on Russian imports.

ExxonMobil of the US, Total of France and Melrose Resources of the UK have submitted bids for the 15,000 sq km Khan Asparuh field in the Black Sea near the maritime border with Romania. A five-year exploration permit should be awarded in coming days and, if deposits are found, extraction could start in three to four years.

Exxon and OMV of Austria recently found natural gas deposits of 40bn to 80bn cubic metres in a field on the Romanian side of the border. Delyan Dobrev, Bulgaria's energy minister, said a similar discovery at Khan Asparuh would cover domestic gas needs for up to twenty years.

Several projects are under way in the Black Sea, formerly a sensitive border zone during the Cold War but now a focus of interest for energy companies across the world. In April, Russia's Rosneft and Italy's Eni signed an exploration agreement and in May Ukraine said it would boost offshore production in the region.

If gas is found in Khan Asparuh - and it is still a big "if" – it would have big implications. Gazprom, the Russian state-owned company, supplies about 85 per cent of Bulgaria's gas needs. It supplied almost all the country's needs until 2010, when Melrose began production at the Galata block, also in the Bulgarian Black Sea.

Bulgaria remains vulnerable to Moscow's price-setting whims or worse, including the risk of shut-offs resulting from Gazprom's transport disputes with Ukraine, as happened in the particularly hard winter of 2008-09. Khan Asparuh could support diversification – theoretically a policy priority for the Bulgarian government – and lower prices, as domestic gas is up to 40 per cent cheaper, according to Dobrev.

Having its own supplies would also give Sofia more leverage in discussions with Gazprom, such as over the proposed South Stream pipeline, expected to carry Russian gas to central Europe through Bulgaria.

But optimism about the Khan Asparuh field should be tempered. Nothing has yet been found and, if it is, Russia will still account for a big proportion of Bulgaria's gas supply for the foreseeable future.

"This is just the beginning of the process, we're in the preliminary stages," says Tomasz Daborowski, a Bulgaria-watcher at the Centre for Eastern Studies, a Warsaw think-tank. "It's too early to say if there are resources and they are unlikely to be huge. But we can see there is significant interest from big and serious companies in exploring gas in Bulgaria and elsewhere in the Black Sea, relatively new and under-explored areas. Bulgaria's motive is very clear – to reduce dependence on Russia."

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