Russia’s Gazprom no longer wants to pay its transit fees for gas deliveries sent through Bulgaria to neighbouring countries. This emerged on April 14 after a meeting between Bulgaria’s Energy and Economy Minister Roumen Ovcharov and Alexander Medvedev, Gazprom’s deputy executive director and general manager of Gazexport, held in Sofia.
The deal signed in 1998 pays Bulgaria’s natural gas retailer Bulgargaz a transit fee of $1.67 worth of natural gas for the local market for every 1000 cu m transported over every 100km, valued at the fixed price of $82.50 a 1000 cu m – or roughly three times below the current market levels. As the market price and the transit price of gas to Greece, Macedonia and Turkey is rising at a quick pace, the contract has become highly beneficial for Bulgargaz and local consumers, who pay a weighted average price, including the portion of the cheap supplies retained under the gas transit arrangement.
Bulgaria would have to make concessions to Gazprom and agree to a revision of the formula for calculation of the price for natural gas transit, Medvedev told reporters after the meeting. The formula of the transit fees had to be changed, because it was no longer economically justified, he said.
“Otherwise we will have to approach the European Union’s regulatory bodies,” Medvedev said.
However, Ovcharov said that the transit fees in the agreement were fixed, while the European energy charger bans barter deals below market prices. The new terms are related to prices and total quantities of transit, and refer to a period extending to 2025. The current contract between Bulgaria and Gazprom expires in 2010. Gazprom has proposed a lower transit fee, which will be compensated by investments to the tune of $100 million a year, dedicated to gasification projects.
In the long term, Gazprom may transit as much as 20 billion cu m of natural gas a year to Macedonia, Serbia and Turkey. Gazprom will be ready with concrete proposals for contract amendments in July this year, Medvedev said.
Medvedev’s statement contradicts Ovcharov’s statement in January 2006, when the latter said that the current agreement with Gazprom would not be amended. It has been calculated that Bulgaria could lose roughly $1 billion by the end of 2010 if the fixed-price terms of the contract are replaced with a market-oriented pricing. Despite his previous comments, Ovcharov said that the Government will have to consider the new requests of Gazprom and may be forced to accept amendments in exchange for higher gas transit volumes that could offset the price hikes.
At present, Gazprom and its gas-trade arm Gazexport hold a total of 50 per cent of the shares in Bulgargaz, while the other 50 per cent stake is controlled by a local private entity.
Gazprom is also interested in the privatisation of the Sofia heating utility, Toplofikacia. The company is owned by the city and has not been offered for sale yet. Ovcharov said that such plans are deposited by the Czech Electricity Company and the French Dalkia. Another field of Gazprom’s interest is bidding for the contract for the construction of Bulgaria’s second nuclear power plant at Belene. Russian Atomstroyexport, controlled by Gazprom, and a Czech group led by Skoda JS, which is also controlled by Gazprom, have bid to build a 2000MW Bulgarian nuclear power plant at Belene. The future plant should make up for lost capacity after Bulgaria shuts down in 2006 two 440MW reactors of its existing Kozloduy nuclear power plant.
