The ambitions of the Kremlin to start by year-end the construction of gas pipeline South Stream led to unprecedented pressure on the Bulgarian government. The situation is extremely delicate for the small Balkan country as the outcome of those negotiations is important not only for the financial and economic benefits that Sofia will have from the project, but also for the price at which the country will receive natural gas over the next few years. According to many experts, in play come also the compensations that Russia will ask from Bulgaria for the termination of the Belene project.
What is actually the problem?
Until now it was thought that everything about South Stream in Bulgaria goes smoothly. The work on the feasibility of the facility has already been completed. Already in October 2011 the environmental ministry started the formulation of the scope and content of the assessment of environmental impacts of the project.
However, the procedure is lengthy and nobody hast yet been chosen to carry out this task. For the preparation of study no statutory period has explicitly been specified, and experts argue that it can be prolonged for months. But according to Bulgarian legislation, the availability of the document in question is a necessary condition for proceeding with the signing of definitive investment agreement. The agreement itself also requires the government to put on the table the necessary funding for the construction of the pipe. And as there is no money, it seems that the government will seek to defer that point in time as long as possible.
Economy Minister Delian Dobrev told reporters the final investment decision for the South Stream would be taken on 15 November this year. There are still open issues between shareholders in South Stream and Bulgaria. They need to be clarified before we take a firm commitment and say – yes. Then we will take a final investment decision and will receive a discount of 11.1% (Editorrquote s Note: for the delivery of Russian natural gas to Bulgaria), calculated from 1 April. We are work in a very positive way and there are no topics on which we can not reach an agreement with our Russian partners, said. Mr. Dobrev.
And a little later last week in a BNT interview
Minister Dobrev finally spilt the beans
that the country needs to know now how much money it will have to pay for the tube so that the Belene case is not repeated: to start the construction without having secured the funding.
In practice, it is namely the cost of the pipeline on Bulgarian territory that is still the big question in the project. It will depend on the choice of its route and the distribution of natural gas volumes transported through it. According to information acquired by the BANKER, the Bulgarian Energy Holding and Gazprom (participants in the project company South Stream – Bulgaria) have reviewed and refined several alternative routes, taking into account the total capacity of the pipe at the entrance of the country (which is expected to be 63 billion cubic meters per year at full load) and the distribution of the fuel segment. On the west – to Serbia, Hungary and Austria and on the south to Greece and Turkey. Of course, much more clarity about the price will be reached after the requirements for design are known following the evaluation of the facilityrquote s environmental impact, but certainly the overall cost will exceed 1 billion euro. This amount currently is beyond the capacity for financing of the Bulgarian Government, even more so after just a few days ago the Parliament voted for the issuing of 950 million euro worth of bonds to cover payments on the countryrquote s foreign debt.
Gazprom has allegedly expressed readiness to finance the construction of the pipe in exchange of the transit fees in the next 10 to 15 years. In the remaining period of the 30 years of the piperquote s life the income will be for Sofia, but this will make sense only in case the full capacity of the facility is utilized, which is uncertain.
The BANKER
