Construction of a gas hub in Bulgaria (PCI 6.25.4)

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Construction of regional gas hub in Bulgaria – Balkan Gas Hub (PCI 6.25.4.)

 

The concept for the establishment of a gas distribution centre (hub) on the territory of Bulgaria is based on the idea of significant natural gas quantities from various sources entering at certain real physical points for further transportation. At the same time, a gas trading point - hub is also being established, where each market participant carries out transactions in natural gas on a market-based principle.

The idea for the building of a regional gas centre is supported by the strategic geographical location of Bulgaria, the well-developed existing gas transmission and storage infrastructure and the interconnection projects with Turkey, Greece and Serbia, as well as the completion of the infrastructure with Romania.

Project Importance

  • In the context of the European objectives for establishing an interconnected and single pan-European gas market, the realization of the gas hub concept is in line with the Southern Gas Corridor development projects and in full compliance with the plans for development of the European gas infrastructure towards enhancement of security of supply and diversification of natural gas supply sources.
  • The project corresponds to the needs of the region, identified by the High Level Group on Gas Connectivity within the framework of the initiative on Central and South-Eastern European Energy Connectivity (CESEC), as well as the European Strategy for Energy Union.
  • The project for the building of infrastructure that will enable the development of a Bulgarian gas centre - the Balkan Gas Hub, has the status of a project of "common interest" within the meaning of Regulation (EU) No 347/2013 and is part of the published by the European Commission on 23 November 2017 Third list of projects of common interest (PCI 6.25.4), priority corridor: North-South gas interconnections in Central Eastern and South Eastern Europe (NSI East Gas).
  • At national level, by Decision No. 312 of 10 May 2018 of the Council of Ministers of the Republic of Bulgaria, the project for construction of a gas hub in Bulgaria has been declared as a site of national importance within the meaning of §5, point 62 of the Additional Provisions to the Spatial Development Act and a national site within the meaning of §1 of the Additional Provisions to the State Property Act.

Project description and objectives

The gas hub infrastructure will connect the natural gas markets of Bulgaria, Greece, Romania, Hungary, Serbia, Croatia, Slovenia, Austria, Germany, Italy, Ukraine, Moldova and others. As main sources of the hub, there are expectation for natural gas from Azerbaijan and other sources from the Southern Gas Corridor (through TAP and TANAP), Russian natural gas, local production from Bulgaria and Romania, natural gas from existing and under construction liquefied natural gas terminals in Greece and Turkey that will provide natural gas from the United States, Qatar, Algeria, Egypt, etc. The gas hub concept includes several key elements which together form the project:

  • New natural gas sources;
  • Optimal use of the existing gas transmission networks and Chiren UGS;
  • Modernization and expansion of the existing infrastructure;
  • Construction of new interconnections with neighbouring countries;
  • New infrastructure for the gas hub;
  • Establishment of a commercial and regulatory environment through a liquid gas exchange and the necessary amendments and additions to the current regulatory framework of the Republic of Bulgaria.

Project development

  • In December 2015, the Bulgarian government and the European Commission set up a joint working group to support the development of the trade concept, business model and financial plan of the Balkan gas hub. The working group, led by Deputy Prime Minister Tomislav Donchev (on behalf of the Bulgarian government) and Mr. Klaus-Dieter Borchardt, Director of Internal Energy Market (on behalf of the European Commission), examined the technical, regulatory, normative and financial aspects of the project. It also focused on identifying solutions to the main challenges in developing a stable regulatory framework and commercial environment, aimed at facilitating the connection between Bulgaria and the rest of South Eastern. Last but not least, the working group had as its priority the proposition of a concept for the management business model of the Balkan Gas Hub.
  • In the period 4 - 6 September 2016, an investor round table was held in the city of Varna, during which “Bulgartransgaz” EAD presented to the interested parties the concept for building the Balkan gas distribution centre on the territory of Bulgaria.
  • With regards to the identified next step of project implementation, relating to the necessity of carrying out a detailed feasibility study, the required application forms and documents needed to apply for co-funding under the Connecting Europe Facility (CEF) Call-2016-2 have been prepared with a draft proposal "Feasibility study for the Balkan gas hub project", which were submitted within the stipulated deadline, namely 8 November 2016, after an approval by the management of “Bulgartransgaz” EAD and the Minister of Energy.
  • In February 2017, the results from the second CEF call were announced. In the list of projects, approved for funding by the Coordination Committee, was Action 6.25.4-0015-EN-S-M-16 "Feasibility Study for the “Balkan” gas hub project".
  • In May 2017, “Bulgartransgaz” EAD signed Grant Agreement No. INEA/CEF/ENER/M2016/1290649. The amount of the grant under the agreement is 50% of the value of the Action - up to EUR 920 500 (nine hundred and twenty thousand and five hundred euros).

Further information on the funding received, can be found on the website of the funding institution - Innovation and Networks Executive Agency (INEA), here.

  • In September 2017 an open procedure was announced for the award of a public procurement contract under the Public Procurement Act (PPA), named "Feasibility study for the Balkan gas hub", part of the project of "common interest" 6.25.4.

More information about the conducted public procurement procedure can be found here.

  • On 15 March 2018, Contract No. 3211/15.03.2018 was concluded with the Bulgarian-Swiss consortium DZZD “AF-EMG Consult”, selected as a contractor of the feasibility study within the announced public procurement. The purpose of this Feasibility study was to evaluate in detail the commercial and technical viability of the project; identify the specific business model for its implementation; enable the finalization of the regulatory framework and funding structure; analyse the target markets, demand and supply of natural gas, as well as to prepare a road map for implementation of the project.
  • In April 2018, the Contractor submitted an Interim report on implementation of the Feasibility study.
  • On 12 June 2018 in the European Commission building in Brussels, “Bulgartransgaz” EAD presented the interim results of the Balkan gas hub Feasibility study.

Potential investors and interested parties worldwide - mining companies representatives, TSOs, ACER, EBRD, EIB, investment funds, investment banks, international financial institutions, financial consultants, energy experts, representatives of EC and INEA etc. were invited to participate in this event, which is important for the realization of the project for establishing a regional Balkan Gas Hub.

Draft route options for gas infrastructure on the territory of the Republic of Bulgaria and summary of all sections drafted so far, were presented at the meeting.

According to the experts, Balkan 1 sets out as the preferred route option for the hub implementation, the realization of which is planned in two phases. The first phase provides for a new entry capacity from Turkey and a new exit capacity to Serbia, and the second phase - an entry point near Varna and a new exit capacity to Oryahovo. Greece and Turkey (existing and new infrastructure) are being considered as other entry points.

Map of the examined possible sources of gas and markets for the Balkan Gas hub:

BGH

More information about the expert meeting can be found here.

  • The Feasibility study for the Balkan Gas Hub was completed at the end of November 2018. The final report for the funded action is being prepared and will be submitted to the Innovation and Networks Executive Agency.

Realization of the Balkan Gas Hub concept continues in two main directions:

  • Establishing a trade and regulatory framework including a gas exchange

With a view to establishing a liquid market for natural gas trading in Bulgaria, pursuant to the decision adopted by the Council of Ministers and the National Assembly to amend and supplement the 2020 Energy Strategy of the Republic of Bulgaria and having regard to the realization of the concept for the establishment of a gas distribution centre on the territory of Bulgaria, on 18 January 2019 “Bulgartransgaz” EAD registered the subsidiary “Balkan Gas Hub” ЕAD.

Currently, 100% of the shares are owned by “Bulgartransgaz” EAD and at a later stage up to 49% of the shares will be made available to other natural persons and legal entities. The company will be operating trading platforms servicing the needs of the natural gas markets within the Balkan gas hub.

The first liquid physical and trading gas hub in the region of South East Europe - based in Bulgaria, will have the necessary prerequisites for its establishment in synergy with the physical infrastructure of the gas distribution centre.

  • Construction of the necessary infrastructure of the gas hub

Information on the Company's plans with regards to the implementation of the Balkan gas hub concept, related to construction of the necessary infrastructure (optimization of existing infrastructure, modernization and expansion of the existing network, construction of interconnections with neighbouring countries, etc.) can be found in Section 5 of the latest Ten-Year Network Development Plan of “Bulgartransgaz” EAD, published here

Information concerning the public and planning of public discussions:

  • Information on discussions and consultations with the public, will be published in accordance with the applicable normative rules, of the particular stage of project implementation.

 

Project Promoter:

Bulgartransgaz EAD

1336 Sofia, p.o. box 3, residential district Luilin 2

№ 66 Pancho Vladigerov Blvd.

Head office: (02) 939 63 00

Fax: (02) 925 00 63

e-mail: info@bulgartransgaz.bg