Bulgaria on track to permanent gas supply diversification after importing two cargoes of LNG via Greece, signing FSRU deal and launching construction of a new interconnector

Once admonished by the European Commission for lacking political will to push ahead with EU plans for supply diversification, Bulgaria has emerged as Europe’s latest buyer of LNG whilst also pushing ahead with interconnector expansion, offshore developments and establishing a long-term LNG import channel.

Heavily reliant on gas imports

Bulgaria has been and is set to remain heavily dependent on gas imports, even under an optimistic outlook of future production growth from its relatively small gas assets in the Black Sea. According to Bulgartransgaz, Bulgaria’s gas network operator, domestic production covered no more than 0.1% of annual demand in 2018 – which is expected to have only risen to 0.2% in 2019 – as existing onshore fields become increasingly depleted and offshore fields remain to be fully developed. Consequently, the country is keen to diversify its gas supply, which until recently derived entirely via Gazprom’s pipeline network routed through Ukraine, Moldova and Romania out of Russia.

LNG offered quick solution

Bulgaria has thus become Europe’s latest buyer of LNG after completing a string of two LNG imports in May and September last year. Whilst the country still lacks its own domestic LNG terminal, it has turned to neighbouring Greece to share the Revithoussa facility close to Athens as an LNG market access point.

Two cargoes from the United States and Trinidad & Tobago

The Marvel Falcon, carrying a 0.08mmt cargo supplied through Cheniere’s contingent at Corpus Christi LNG arrived on 29 May 2019 whilst the BP-controlled Hispania Spirit delivered the second cargo amounting to 0.06mmt from Atlantic LNG on Trinidad & Tobago on 15 September 2019. The delivered gas was subsequently transferred via the existing Kulata/Sidirokastro interconnector and stored in Bulgartransgaz’ Chiren underground gas storage (UGS).

LNG imports not a one-off, buyer status to be consolidated with stake in FSRU

Last week, Bulgartransgaz agreed to take a 20% stake in Gastrade, part of energy company Copelouzos, to participate in the development and operation of an FSRU off Alexandroupolis in Greece. The facility is planned to have an annual capacity of roughly 4.5mmt LNG, though completion is not expected before 2023.

New gas interconnector this year to aid future LNG imports

According to the plan, regasified LNG would be sent into Bulgaria via the Gas Interconnector Greece-Bulgaria (ICGB) pipeline, a €240mln project to be commissioned in September 2020, which will also serve to facilitate supplies from Azerbaijan. ICGB is co-funded by the Commission’s European Energy Program for Recovery and the Bulgarian government, which awarded to the construction of the ICGB pipeline to a Greek consortium.

Potential to become gas hub for Balkan region

Longer-term, the country could benefit from its geostrategic location to become a gas trading hub for the Balkan. It borders Romania, Serbia, Greece, Macedonia and Turkey whilst having a gas network roughly lined in a circle through which gas could be re-exported to neighbouring markets. The Chiren UGS also benefits from continued expansion by network operator Bulgartransgaz. Nevertheless, Bulgaria’s gas market still operates on a fixed unit price of roughly US$8.5/mmBtu year-round – a remnant of long-term gas supply contracts with Russia. Whilst potentially providing good margins for LNG traders at the moment, the domestic gas market would have to be liberated first before becoming a hub.