• Natural Gas News

    Bulgaria Signs on to South Stream

    old

Summary

The negotiating dance between Bulgaria and Gazprom came to a conclusion today with the signing of the Final Investment Decision to build the Bulgarian section of South Stream pipeline, together with a new gas supply contract.

by:

Posted in:

Natural Gas & LNG News, News By Country, Bulgaria, , South Stream Pipeline

Bulgaria Signs on to South Stream

The negotiating dance between Bulgaria and Gazprom over the pricing of long-term gas deliveries came to a conclusion today in Sofia with the signing of two contracts.

The two parties signed the Final Investment Decision to build the Bulgarian section of South Stream pipeline, together with a new gas supply contract which provides for a a 20% discount effective as of January 1, 2013.

Bulgaria’s Cabinet had last week approved the framework FID on South Stream, but linked the issue to a new long-term gas contract with Gazprom.

Bulgaria was seeking greater savings than the reported 11% discount (approx US$ 534 per 1000 CM) that was applied to the period April-December 2012.

“We’ve agreed on very preferential prices for Bulgaria,” Gazprom Chief Executive Officer Alexey Miller told reporters. “With South Stream, Bulgaria becomes the biggest transit country for Russian gas in Europe.”

The new ten year contract to supply 2.9 billion cubic meters of gas,reportedly maintains oil-indexed gas prices, with an 80 percent take-or-pay obligation according Energy and Economy Minister Delyan Dobrev. The contract is open to price renegotiation after the sixth year.

The agreement with Bulgaria for South Stream follows signed final investment decisions with in Hungary, Slovenia and Serbia.

“The South Stream project implementation in Bulgaria strengthens our bilateral relations and maintains energy stability throughout Europe. A 538-kilometer section of the gas pipeline will provide Bulgarian consumers with continuous and uninterrupted natural gas supplies over a long term,” said Miller,

Gazprom will finance the participation of Bulgarian Energy Holding in the South Stream Bulgaria AD joint venture that will build the Bulgarian section of the pipeline, with loaned funds to be repaid by the future dividends received via transit fees.

At a projected cost of EUR 16 Billion, the 3,600-kilometer South Stream pipeline project plans to be operational in 2015, with a capacity of 63 billion cubic meters a year.

South Stream is a partnership between Gazprom with 50%, Eni SpA with 20% and Wintershall Holding (a unit of BASF SE) and Electricite de France SA with 15% each.

The entity responsible for the undertaking of the project, South Stream Transport B.V, has stated the minority partners can exit the project if certain conditions aren't "satisfied in the future." There was no further elaboration on this statement.