Bulgaria: Goodbye nukes, hello Russian gas

Bulgaria has scrapped two of its three Russian-backed energy projects. Plans to build the 2,000MW Belene nuclear power plant on the Danube River were cancelled last week, and the Burgas-Alexandroupolis oil pipeline was dropped in December. Usually saying ‘no’ to Russian President-elect Vladimir Putin carries a heavy price.

However, the government of Bulgarian Prime Minister Boyko Borisov is now trying to show renewed enthusiasm for the third project, the South Stream gas pipeline that would carry Russian gas to Europe under the Black Sea via the Balkans.

“The South Stream project is moving according to schedule, with recent announcements of an FID (final investment decision) being made as early as November 2012,” Maria Yegikyan, oil and gas analyst at Moscow’s Alfa Bank, told New Europe on 5 April. “Bulgaria is one of the major players in the South Stream project, with the pipeline expected to go through the Black Sea to Bulgaria and off to other countries.”

Bulgaria gets about 90% of its natural gas from Russia. It may have scrapped Belene but gained gas assurances from South Stream and the EU-backed Nabucco gas pipeline project. Bulgaria’s Economy and Energy Minister Delian Dobrev flew to Moscow days after the Belene cancellation. Instead of being told off by the Russian authorities, he returned with an 11.1% discount on Russian gas exports to Bulgaria, reducing the price from $600 to $534 per 1000 cubic metres, according to preliminary data. In turn, Dobrev promised that Sofia will respect the roadmap of South Stream.
Meanwhile on 4 April, the Bulgarian government at the Council of Ministers named the Nabucco project an “object of national importance”.

Managing Director of Nabucco Gas Pipeline International GmbH Reinhard Mitschek hailed this “momentous decision by the Bulgarian Government and its renewed commitment to the Nabucco pipeline project. Nabucco is the flagship project in the southern corridor because it is the best commercial and strategic option to diversify gas supply of Bulgaria, and Europe. The object of national importance’ priority status will allow rapid implementation and construction of the pipeline on Bulgarian territory.”

However, some analysts say that South Stream, which unlike Nabucco has a guaranteed gas supply, might undermine Europe’s political favourite pipeline. Putin and Russian gas monopoly Gazprom are eager to build South Stream to bypass Ukraine, and last week began rerouting some supplies to Europe through the Nord Stream pipeline and another across Belarus as it tries to end reliance on Ukraine after disputes over prices. Yegikyan said that South Stream would come into place “regardless of the outcome of Ukrainian negotiations, with the capacity of the pipeline being the only variable. At the same time, South Stream plans acceleration may likely put some further pressure on Ukraine”.

So what will happen to Belene? The Bulgarian government had said it would review the possibility of constructing a gas-fired plant at Belene and Gazprom noted last week it was interested in participating, Dobrev said. Moreover, Bulgaria may install the nearly-completed reactor built by Russia’s Atomstroyexport, a subsidiary of Rosatom, for Belene at the site of Kozloduy – the country’s sole nuclear station to this day. Previously, Atomstroyexport had threatened to sue Sofia for €1bn if the Belene deal collapsed. But last week it agreed that it would only demand payment for its costs to date – estimated at $180m by local press.

But some analysts and politicians note that Bulgaria’s decision to scrap two of the three Russia-backed projects was political. Bulgaria’s Socialists claim that the decision to cancel plans to build the Belene plant is a big mistake, taken under US pressure.

At a bilateral meeting with Foreign Minister Nikolay Mladenov in Istanbul, US Secretary of State Hillary Clinton welcomed the decision of the Bulgarian government to scrap the Belene NPP, adding that she is well aware how tough this decision has been to take. “It’s not a secret that the United States tries to press on Bulgaria,” Konstantin Simonov, head of Russia’s National Energy Security Fund (NESF) in Moscow, told New Europe two weeks ago on the sidelines of a conference in Athens, Greece. “It’s a former territory of influence of Russia. Now, of course, we see the decline of our influence but the United States in trying to have a very restrictive policy and to press on these Balkan countries,” he said. “You can remember the visit of Hilary Clinton to Bulgaria where she was speaking about shale gas technologies,” he said, referring to US suggestions that shale could help Bulgaria lessen dependence on Russian supplies and cut its gas bill. “For us it was very strange to see the prohibition of fracking in Bulgaria,” Simonov said. Bulgaria has banned fracking for shale oil and gas following widespread protests and cancelled an exploration permit it had granted to US major Chevron. “For us it was a serious surprise that Bulgaria sometimes can make not so pro-American decisions. But still it’s a problem because they want to say ‘goodbye’ to Russian gas.”

However, Dobrev said last week that the case of shale gas development cannot be considered closed in Bulgaria. The Bulgarian Energy Minister explained that the ban on hydraulic fracturing could be revoked if the ad hoc committee declared the technology harmless. “If it turns out that shale gas is not harmful to the environment and the environmental impact assessment (EIA) comes out positive, then we should really take advantage of it,” Dobrev told the Bulgarian National Television (BNT).

He acknowledged that the talks with Russia had been “neither easy, not that much difficult”. Bulgaria wishes to steer clear of long-term gas supply contracts with Moscow so as to avoid a prolonged dependence on Gazprom, he said. But Simonov told New Europe that Sofia also realised that South Stream could benefit Bulgaria, turning the Balkan country into an energy hub. “It was very difficult to finish this story of joint venture with Bulgaria. We spent a huge amount of time and resources but we found a solution with the Bulgarian government so we can understand that sometimes it is also possible to explain benefits because it’s not only benefits for Russia, it’s also for Bulgaria. Bulgaria will have another source of gas, Bulgaria will be a transit country, Bulgaria will earn money,” Simonov said.

By Kostis Geropoulos

New Europe, April 5, 2012