August 24, 2022
August 24, 2022
Bulgaria has been facing a serious crisis in recent days, scrambling to procure 2 billion cubic meters of gas, the quantity it lacks to meet its annual consumption. Only one of seven liquefied natural gas (LNG) tankers originally agreed with a US supplier will now be delivered, while the remaining shipments have been cancelled. Sofia is now looking to Azerbaijan and Turkey for additional gas supplies, while the energy minister in the caretaker government is announcing talks with Russia’s Gazprom.
The seven tankers of LNG from US energy supplier Cheniere had been agreed before the fall of ex-Prime Minister Kiril Petkov’s government, in a deal brokered by the European Commission. However, only one will now be delivering gas for Bulgaria.
Bulgaria needs about 3 billion cubic meters of natural gas a year, one-third of which is consumed by heating plants and the rest by industry. The country has secured 1 billion cubic meters from Azerbaijan, and will need to buy the rest on the market.
The country used to cover around 90% of its needs with Russian gas, but Gazprom suspended deliveries in April over Sofia’s refusal to pay in rubles. Now, officials in the interim government insist that negotiations with the Russian energy giant are inevitable.
Only one of seven US tankers will deliver LNG for Bulgaria
Under the deal with the former Bulgarian government, seven US tankers were to deliver about 1 billion cubic meters of LNG from October this year to April 2023, covering a half of the missing quantities. Three shipments were due to arrive by the end of 2022 and four more in 2023.
The caretaker cabinet was to confirm the agreement with the US supplier on August 19, but it eventually opted to accept only one shipment of LNG, which will be unloaded in Turkey in October.
Bulgaria gave up the remaining LNG deliveries from the US due to the high cost of slots at terminals in Turkey and Greece
The reason for cancelling the remaining deliveries is the high cost of slots at LNG terminals in Turkey and Greece, according to Rosen Hristov, the energy minister in the interim government.
Bulgaria is looking for another supplier
The preferable way of procuring gas is through pipelines, whether from Azerbaijan or Turkey, and Bulgaria is looking to conclude medium-term agreements to cover its consumption during the upcoming winter, according to Hristov. Bulgaria can find gas, but the prices are too high, he says.
Hristov: Bulgaria can find gas, but the prices are too high
Sofia will open talks with Azerbaijan on additional gas deliveries, but the price is expected to be different from the one agreed under the existing deal. Hristov also announced negotiations with Turkish gas traders with the aim of ensuring fixed offers for deliveries over six to 12 months.
Business associations and labor unions have warned that the high gas prices are hurting industry, and they called on the government to seek ways to restore Russian gas imports, which would be cheaper than gas bought at market prices, according to Hristov.
Talks with Gazprom are inevitable
Hristov’s statement that negotiations with Gazprom on resuming gas deliveries are inevitable is a new U-turn in Bulgaria’s energy policy.
He claims that Bulgarian business cannot bear a gas price above EUR 125 per MWh, forcing the government to enter into negotiations with Gazprom to resume gas supplies, according to a report by Euractiv.
The wholesale price of gas jumped by some 60% in August to over EUR 150 per MWh.
Russian deliveries were suspended in April, and negotiations with Gazprom are necessary to ensure cheaper gas and sufficient supplies for the winter. Bulgaria’s long-term agreement with Gazprom expires at the end of 2022.
Negotiations with Gazprom are necessary to ensure cheaper gas and sufficient supplies for the winter
Russian Ambassador to Bulgaria Eleonora Mitrofanova says deliveries can resume if there is political will in Sofia, but that payments should be made in rubles.
Bulgaria is led by a caretaker government, appointed by President Rumen Radev and headed by Prime Minister Galab Donev. The opposition claims the interim administration is taking advantage of the situation to renew cooperation with Gazprom. Early parliamentary elections are scheduled for early October.
IGB gas interconnector will supply Balkan countries
Interconnector Greece-Bulgaria (IGB), a 182-kilometer gas pipeline, has recently been unveiled and is expected to start commercial operations by October 10. The pipeline’s initial capacity is 3 billion cubic meters of gas a year, but it can be increased to 5 billion cubic meters. The interconnector will enable Balkan countries to get gas from Azerbaijan and from the Alexandroupolis LNG terminal in Greece. It will initially be supplied from Azerbaijan through the Trans Adriatic Pipeline (TAP).
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