Executive Summary
Gas Sector
Competitive Landscape
Current Market Needs
Gas Market Liberalization
Recent Market Trends
Urban Gasification
Technical Barriers and Tariffs
Procurement and Tenders
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Local Industry Resources
U.S. Commercial Service Information
Tab Options
Executive Summary
Gas Sector
Competitive Landscape
Current Market Needs
Gas Market Liberalization
Recent Market Trends
Urban Gasification
Technical Barriers and Tariffs
Procurement and Tenders
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Local Industry Resources
U.S. Commercial Service Information
Executive Summary:
Bulgaria’s natural gas domestic market is only 3 bcm. per year. However, the country has an extensive network of gas pipelines that serve Bulgaria’s needs as well as those of neighboring Turkey, Greece, and Macedonia. Bulgaria is also a gas transit country that currently transports Russian gas to North Macedonia, Turkey and Greece (approximately 15 bcm). As of January 1, 2020 Bulgaria has started receiving Russian gas through the Turkish Stream pipeline. The local gas supplier Bulgargaz signed an agreement with Gazprom Export regarding new fuel deliveries coming via Turkey, and changing the entry point for Russian natural gas. As the contract with the Russian gas supplier expires in 2022, a careful balance is needed for preparing and negotiating the new gas agreement with Gazprom. The problem with these contracts is not so much their term but the mandatory quantities. Under the current contract with Gazprom, 80% of the gas quantities for Bulgaria are under the “take or pay” clause. According to gas experts, the management of the state gas company Bulgargaz is hindering the import of cheaper Azeri gas from Greece, which can be realised through swap deals.
Gas is currently a small component of the country’s energy mix. It is primarily utilized by the industrial sector, with a modest role in power generation and very low consumption in the residential and commercial sectors.
Roughly 10 percent of industrial consumers represent 80 percent of gas demand, primarily in the chemicals, fertilizers, cement and glass sectors as well as combined heat and power plants. Bulgaria’s gas transmission network is ring-shaped with a maximum technical capacity of 7.5 bcm/year, pressure of 54 bar and with 115 exit points (AGRS, GMS) – see the picture below.
Yellow Circles: Represents Rehabilitation and Modernization of Compressor Stations Purple Lines: Represents Expansion of the Existing Network Red Circles : Represents Rehabilitation and Replacement of Sections of the Gas Transmission Network – 81 km
In Bulgaria natural gas is primarily utilized in industrial processes, with a modest role in the power generation mix and very low consumption in the residential and commercial sectors. Some 10% of industrial consumers represent 80% of demand, 19 with the largest individual industrial consumers in chemicals, fertilizers, and glass sectors, as well as some large industrial CHPs. From industrial users, major consumption is in the chemical industry and energy sectors. The domestic consumption of natural gas in 2021 exceeded 3.3 bcm.
Bulgaria intends to receive half of that volume from Azerbaijan via the Greece-Bulgaria gas link, currently under construction, and through deliveries of liquified natural gas (LNG) from a coastal terminal in Greece. In 2020 Bulgaria’s government granted approval to the state-owned gas transmission system operator to acquire 20% interest in Gastrade - the company developing a floating LNG terminal off Greece’s northern coastal city of Alexandroupolis. The participation in the LNG terminal project is in line with Bulgaria’s long-term energy strategy for diversification of gas supply sources and routes, and will support the development of the Balkan Gas Hub project.
Bulgartransgaz will book a capacity of around 500 m.c.m. of gas per year for a ten-year period at the Alexandroupolis Independent Natural Gas System. The most recent projections for gas demand in the next ten years of Bulgaria’s gas TSO, Bulgartransgaz are for a growth based on sustained economic growth (GDP growth between 2 and 3 % per year) and associated increase in final energy consumption (a 60% increase by 2024) and an increased market share for gas (19% in 2025 against 14 % in 2015).
Source: EWRC to European Commission. Click here to view report: http://www.dker.bg/PDOCS/ann-rep-ewrc-to-ec-2018.pdf
Gas Sector:
National Gas Strategy: Gas Prices :Gas Projects:
Russian natural gas started flowing in early 2020 via the Balkan Stream pipeline, which is an extension of the Turkish Stream new pipeline. Meanwhile, the EU and the Western Balkans (WB) will be able to diversify gas routes bypassing still unstable Ukraine. Turkish Stream pipeline, with design capacity of 31.5 bcm/year, is transporting Russian natural gas across the Black Sea to Turkey.
Bulgargaz has booked a capacity of around 500 m.cu m of natural gas per year for a 10-year period at the Alexandroupolis Independent Natural Gas System (INGS), offshore Greece. Bulgaria’s participation in the gas terminal project is in line with the government’s strategy for diversification of its natural gas sources, aimed at guaranteeing the country’s energy security. Bulgarian gas transmission system operator Bulgartransgaz holds 20% interest in Gastrade, which is developing the floating LNG terminal off Greece’s northern coastal city of Alexandroupolis. Greece-Bulgaria Interconnector Pipeline (IGB):
Southern Corridor:
Competitive Landscape:
The two major international natural gas pipelines on the Balkans— the Southern Gas Corridor from Azerbaijan to Turkey, Greece and Italy, and Turkish Stream from Russia to western Turkey—have offered Bulgaria the opportunity to become a regional gas hub. There is severe competition in the Bulgarian gas sector. Significant market power is concentrated in only one player - Bulgartransgaz EAD. There are several main operators in the gas sector in Bulgaria. Other smaller players that supply gas to end-users are Overgas Inc., Citigas Bulgaria, Aresgas AD. US-based Linden Energy Ltd. acquired a 50% stake in the local gas supplier Overgas Inc. Until the end of 2020 the same interest was held by Gazprom, Overgas’s decade-long partner. The new partners have already announced plans to import American LNG in the region.
Current Market Needs:
The Bulgarian gas market needs to undergo reforms. Like many markets in the region, demand shows high seasonality, which is managed by storage operations through the Chiren underground storage facility and also by some import flexibility. With insignificant domestic production, supply is over 95% met by Russian imports. Currently there is a strong political support for Bulgaria’s gas wholesale market development and plans for achieving gas independence.
The energy regulator increased heat cost thus putting district heating utilities that rely on natural gas under pressure. Around the turn of lat year the parliament froze the prices for electricity and heating until the end of March 2022. The watch dog urged the new centrist government to launch its state aid scheme to help the heating utilities cope with the higher gas prices. The regulator-set gas price in Bulgaria has risen sharply in 2021, having nearly quadrupled from BGN 26.93 (USD16,0 )/MWh in January 2021.
Gas Market Liberalization:
The short-term segment offers short-term standardized products and products for the needs of balancing. Trading is carried out on an anonymous basis in accordance with the requirements of Regulation (EU) No 312/2014. The long-term segment of the platform offers products that are traded on a medium- and long-term basis again anonymously: monthly – up to 60 months ahead, quarterly – up to 12 quarters ahead and annual – up to 5 calendar years ahead. The brokerage service enables gas purchase contracts by end customers or suppliers without incurring costs for membership on exchange and without the need for access to the transmission services over the network.
Recent Market Trends:
The government of Bulgaria is actively promoting the Balkan Gas Hub project that will require significant investment in pipeline infrastructure, adequate gas storage facilities and gas market liberalization three major challenges for the government . The response to the increasing cost pressure, geopolitical and regulatory constrains, concerns for ecological threads and impact, as well as other complex and demanding challenges will be vital for the development of the gas market in Bulgaria.
The former government delayed the gas sector reforms . Project financing for additional infrastructure should be secured by the current state leaders. The existence of a single gas storage facility, that can only hold about 550 mcm, is insufficient. Given that there will be more gas volumes coming to Bulgaria from Azerbaijan, possibly Turkmenistan, the Eastern Mediterranean or liquefied natural gas (LNG), achieving sufficient gas storage capacity is critical.
Given the outdated vehicle fleet in Bulgaria and the average income of the population, natural gas is the most affordable fuel, especially in areas with heavy traffic or high fuel consumption (such as the capital city public transport, as well as river and maritime transport ).
Urban Gasification:
Despite government’s target of 30 percent of Bulgarian homes powered by natural gas by 2020, there is a much lower number (estimated at 70,000 - 90,000 of the 3 million homes in the country or 2-3%). Government efforts have been focused on subsidizing the costs of installing gas boilers and associated switching costs (typically away from electricity as the source of heat). This scheme has had limited success.
There is a vast potential in expanding gasification in the country as means to pursue a low-carbon economic development. An increased use of gas, especially for heating and cooking purposes, would reduce Bulgaria’s CO2 emission footprint. However, expanding gasification poses serious issues of diversifying the country’s gas supply routes and sources, as well as the adopted gas pricing policy. Achieving the government target of 30% of gasification in homes would mean a gas demand increase of approximately 0.7bcm (24% of total gas demand).
Technical Barriers and Tariffs:
An important change to the Energy Act in 2018 removed a legal barrier that prevented private investors from obtaining a license to operate underground storage facilities in Bulgaria. However, like the long delays in building the Bulgaria-Greece gas interconnector, progress on the Galata gas storage project remains stalled due to the vested interests of Bulgargaz and Bulgartransgaz, which stand to lose their monopolistic positions and beneficial relations with Gazprom if genuine gas market reforms take place.
A new requirement for traders in natural gas to obtain a license for gas trading activity, was adopted in January 2021. https://tbp.bg/en/licensing-trading-with-natural-gas/
The licenses are issued for a period of ten years. The total number of companies licensed by the state energy regulator to trade in natural gas at the end of 2021 is 17.
Procurement and Tenders:
In 2020 Bulgartransgaz completed Balkan Stream pipeline which allowed Russia to supply gas to Central Europe by extending TurkStream. Commercial gas supply through Balkan Stream pipeline started on 1 January 2021. Bulgarian authorities claimed that the local treasury will earn about EUR 180 M every year in transit fees from 2021 onwards. Moreover, the Balkan Stream required a systemic modernization of the Bulgarian gas network and, thus, further investments.
In March 2021 a tender for choosing a contractor for the construction of a gas pipeline connecting Serbia and Bulgaria was opened. The new interconnection will link Niš with the Bulgarian capital Sofia, while its planned capacity is 1.8 billion cubic metres a year. The project will be financed with EU IPA Fund grants for Serbia worth EUR49.6 M and a EUR25 M European Investment Bank loan. After complains on the selection of Canpipe BG as contractor for a project winner, the Bulgarian competition authority suspended the construction of the the gas interconnector between Bulgaria and Serbia. The statement from the CPC said that the project did not meet the criteria of urgency that would justify the awarding of the public procurement contract to the selected candidate before the Commission has issued its final ruling on the complaints.
The project has been deemed an EU “Project of common interest (PCI)” and is a priority project in the context of the Central and South-Eastern Europe energy connectivity (CESEC) high-level group, the EU Delegation in Serbia added.
Best Prospects for U.S. Exporters:
Best prospects and opportunities for U.S. companies exist in the following areas:
Significant booking capacity exists for expanding the Bulgarian gas transition system to Turkey and Serbia;
Depleted fields are being considered for the construction of underground gas storage (UGS) in the Black Sea;
Expansion of the existing Underground Gas Storage facility located at Chiren (current storage capacity is 550 mcm, of which 250 mcm is reserved for emergency situations.) The project should be completed by 2024 and USD 330 M will be needed (included in the EU’s funding list of priority energy infrastructure projects);
Onshore gas exploration opportunities in Western and Northern Bulgaria;
Technology and services for a floating LNG terminal in Alexandroupolis, Greece—project of EUR 413 M, for the upgrade of the energy supply diversification of Greece, Bulgaria and southeast Europe as a whole;
Advanced small-scale liquefaction technologies as well as sale, transport and regasification of LNG;
Services on the transition paths for coal-fired power plants at Maritsa East Industrial complex;
Gas turbines and gas-piston engines at Toplofikacia Sofia EAD ( a US TDA modernization/cogen project )
Consulting services on the regulatory reforms that will ensure gas will achieve its power-generation potential and compete fairly with power for customers in the heat sector
Market Entry:
Conducting due diligence in searching for a good, reputable local representative is key to http://www.export.gov/bulgaria
Regulations / Registration Process:
The Energy and Water Regulatory Commission (EWRC) is the key regulatory body of the Bulgarian gas market. It regulates gas prices. EWRC, in compliance with EU acquis, has a central role in licensing activities for natural gas transmission and distribution, storage, LNG import facilities and in supplying to consumers. EWRC oversees the performance and compliance of economic operators with terms of issued licenses. The Regulator approves the rules for access to gas transmission and distribution networks as well natural gas storage facilities.
With ongoing implementation of the 2017 EU Security of Supply Regulation, there is an increasing EU support to procure gas deliveries from multiple sources. This could be a forceful influence on the Bulgarian status quo of strong reliance on a single source of supply. https://ec.europa.eu/energy/en/topics/importsand-secure-supplies/secure-gas-supplies .
Local Industry Resources:
U.S. Commercial Service Information:
Phone : +35929395770Email : emily.taneva@trade.gov
