Bulgaria: All Fracked Up

It wasn’t a Happy New Year for international shale gas explorers in Bulgaria when the January moratorium on hydraulic fracturing went into effect.

The hydraulic fracturing ban in Bulgaria can’t be attributed to pro-Russian interests, domestic political opposition, or a few months of protest – but can be attributed to all three – that was the verdict of Analyst Zachary Rothstein, who monitors Central and Eastern Europe for business risk consultancy Control Risks.

In his talk to delegates at the Unconventional Gas & Oil Summit in Warsaw, Poland, Mr. Rothstein recalled that there had been months of protest in Bulgaria against shale gas exploration, which had started near the city of Novi Pazar but had eventually spread across the country.

“The government initially blamed the opposition Bulgarian Socialist Party for inciting the protests,” he said. “Once protests spread the government couldn’t ignore them. Prime Minister Boyko Metodiev Borisov said he would impose a six month moratorium; two days he later he backed a full scale moratorium.”

According to Rothstein, this episode showed how the government in Sofia operated. He said the “flip flop” position was not surprising.

He said: “Prime Minister Borisov is obsessed with his public image and that of his party and could not stomach the protests outside his office. He was worried about how the Socialist party would use shale gas as a core issue at the national level.”

That meant it was not a knee-jerk decision, but a calculated one by the PM and his party. Borisov’s decision, said Rothstein, undermined the Government’s strategic goals in favor of its short-term interests – populism and getting re-elected.

“The energy sector is deeply politicized in Bulgaria,” he explained. “Decisions are not always made by strategic calculus. Meetings behind the scenes include very powerful interests that remain regardless of the political party in power. Maintaining the energy industry as it is is in their interests.”

He gave the example of the proposed Belene nuclear power plant in Bulgaria, when an agreement was signed with Russian energy companies back in 2008. After elections in 2009, the new government has swung from support to opposing the project on a week-by-week basis.

Mr. Rothstein said the Prime Minister had very strong influence over members of Bulgaria’s Citizens for the European Development of Bulgaria(GERB) party and the country’s energy sector.

“The Government blamed the protests on foreign interests. It’s quite clear that some of these groups have been formed or sponsored by the Bulgarian Socialist Party and by foreign interests.

“These groups are functioning in parallel with functioning civic groups in Bulgaria,” he continued, “who have refused to cosponsor rallies, and refused to be infiltrated.”

Rothstein said such groups tend to be comprised of young people in their 20s and 30s: green environmentally friendly activist groups that lack a central organization.

“Events are planned on social media platforms; that’s how they share information and coordinate their actions.”

The protests and the Government’s decision, he said, had sparked an active public debate, in the media as well among the environmental concerns, and on the merits of shale gas exploration and production as well.

“Events have affected public opinion: currently 68% of the population agrees with the moratorium; in mid 2011 most of the population were in favor of shale gas exploration in the country. The industry has underestimated the scope of the protest in Bulgaria and haven’t implemented an information campaign to combat it,” said Rothstein, who added that the activists were now calling for a similar moratorium on coal bed methane (CBM) and oil sands.

“This suggests the sector faces an uphill battle.”

Still, he said it was not as bad as it sounded, noting that a committee of industry representatives was being assembled to calculate the effects of shale gas development; a public referendum on the matter was also possible.

Mr. Rothstein concluded: “The Government could throw its support behind unconventional gas in Bulgaria, but not before the next round of elections in 2013. It’s a real possibility afterwards, because shale would be a convenient bargaining chip with Russia.”