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Bulgaria's New Gas Deal Talks with Russia Grind to a Halt

Date: 27.04.2010

The negotiations between Bulgaria and Russia for a new natural gas contract have come to a standstill, announced Dimitar Gogov, CEO of Bulgargaz.

According to Gogov, the talks which were supposed to eliminate the intermediaries between Gazprom as a natural gas supplier and the Bulgarian state monopoly Bulgargaz as a recipient, have stalled because Gazpromexport, a Gazprom subsidiary, is procrastinating.

At the end of 2009, the energy ministers of Bulgaria and Russia Traicho Traikov and Sergei Shmatko agreed to eliminate the notorious intermediaries in the gas trade between the two states.

In February 2010, Traikov announced the Bulgarian government was holding conversations with the Russians in order to start talks on amending the gas contracts.

Currently, Bulgaria gets Russian natural gas through three intermediaries - Overgas Inc, Wintershall, and Gazpromexport. In February 2010, Gogov explained that Bulgaria was going to fulfill its contracts with them until they expired in 2011-2012 but that by the end of 2010 Bulgargaz was going to negotiate new gas supply contracts with Gazprom or its subsidiary Gazpromexport thus eliminating the other two companies.

On Monday, Bulgargaz CEO Gogov told journalists in Sofia that he had appealed to the Gazprom CEO Alexei Miller in order to accelerate the holding of a new round of talks.

At the same time, the contract of Bulgargaz for the delivery of 1 billion cubic meters of natural gas per year with intermediary Overgas is expiring at the end of 2010.

However, Gogov has assuaged fears that the Bulgarian economy will not suffer even it there is no contract with Gazpromexport or Gazprom to replace the deal with Overgas because Bulgaria’s natural gas consumption has dropped substantially.

In 2008, Bulgaria consumed a total of 3.5 billion cubic meters of natural gas but in 2009 its consumption dropped by 25 % as a result of the economic crisis.

Of the three intermediaries in the Russian-Bulgarian gas trade, Gazpromexport offers the cheapest prices but at the moment holds the smallest share.

In addition to eliminating the two other intermediaries, Bulgaria insists on additional changes in its gas supply contracts with Russia including a revision of the rates for the transit of Russian gas to Turkey, Greece, and Macedonia.

Under the existing agreement, the Bulgargaz subsidiary Bulgartransgas gets paid USD 1.7 for transporting 1 000 cubic meters at a distance of 100 km.

Bulgaria is also demanding the introduction of bank guarantees in the event of a failure of some of the contractual parties to carry out their obligations, and to be granted the right to re-export negotiated but unused gas deliveries that it receives from Russia which currently governed by a “take or pay” clause of the supply contract.

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