Factchecking Euractiv’s “ Pundits: Foul play on the Bulgarian gas market profits Russia
Euractiv – According to the letter dated 21 December seen by EURACTIV, Bulgargaz tells DANS about its fears that in violation of trade secrets, interested parties had disclosed confidential information about its contract with Azerbaijan Gas Supply Company (AGSC) from 2013.
Factcheck – Bulgargaz CEO has written tens of letters in the past several months trying to evade responsibility for denying 4/5 of the contracted volumes of Azeri gas in signed new annexes to the original gas supply contract with AGSC in September 2021. Pavlov’s regular use of trade secrets excuse dates back years. However, the information considered confidential is not a secret to AGSC. The Azeri company could if they wished to take to court Bulgatgaz without the need of public disclosure of article 9.1 in the said contract, which deals with the delivery point. Public knowledge of this confidential information does not in any way impact the likelihood of either contracting parties ending up in an arbitration court. The only difference it made was that it raised public awareness of the behind-scene maneuvres of Bulgargaz’s CEO and his attempts to engage the Bulgarian President in covering up his non-performance under the contract. It is a known fact that the issue has been brought by Bulgargaz to the highest level. At the time of writing the letter of complaint by Bulgargaz’s CEO to DANS, coincides with PM Petkov’s dismissal of the Deputy Director of DANS Venelin Dimitrov. No reason has been given, but sources allege this is directly related to Dimitrov’s covering of Bulgargaz’s CEO Azeri gas affair.
Worth the mention, that Bulgargaz’s CEO has been reluctant to disclose the content of the delivery point article to the previous top level leaders of the country, claiming it is a corporate secret – very much in line with previous tradition not disclosing price or other sensitive details in dealing with Gazprom.
Euractiv – The agreement Bulgargaz has with AGSC is seen as very profitable for Bulgaria, especially considering the current energy price spike. Bulgargaz will also lose the bank guarantee of $73 million if competitors succeed in sabotaging the contract, putting the state-owned company in a tough financial position.
Factcheck – The CEO of Bulgarian TSO Bulgartransgaz – has confirmed that there has never been a problem with the technical capacity to take all the quantities of Azeri gas, which has brought forth the potential for penalizing Bulgargaz’s non-compliance with mandatory take up of Azeri gas – the referred-to-“loss” of $ 73 million bank guarantee. Implying that Bulgargaz’s competitors could sabotage diversification, hence competition, defies even the most basic standard for common sense and market logic. The only area of real concern for Bulgargaz would be if its competitors profit from its reluctance to import Azeri gas and start importing it into Bulgaria instead. This might really imperil Gazprom’s market share as Azeri gas is much cheaper, but it would also threaten Bulgargaz grip on the market – which is its bestselling point when negotiating the new LTC with Gazprom. Bulgargaz’s CEO is desperate it could no longer meet Gazprom’s expectations to secure at least 2/3 of the market.
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Euractiv – Likely, the destabilisation of Bulgargaz would mainly lead to much higher gas prices for Bulgarian consumers. Bulgargaz is in a better position this year as a company with long-term contracts than companies trading on the spot market. Last year, it managed to import small quantities of American liquefied natural gas, which was cheap at the time, but has seen prices skyrocket recently.
Factcheck – Quite on the contrary, the lack of imports of Azeri gas due to the deliberate reluctance of Bulgargaz has contributed to the higher prices of gas in Bulgaria, relative to its neighbors on the Turk Stream route, with the effect being measured in two ways –
a) as the price difference between Azeri and Russian gas, which has varied in 2021 between $380 and $650 per 1000 cubic meters since the start of the import of Azeri gas on January 3,, 2021 or
b) as the difference between the price of Azeri gas and hub spot prices in Italy – where it has been resold by ASGC – which varies between $ 300 and $1200 per 1000 cubic meters. The estimate of Azeri gas not taken in 2021 is above 500 cubic meters for 2021.
Bulgargaz gas never engaged in direct purchase of US LNG, despite many futile attempts by US LNG traders. It has done so in the last two years via privileged intermediaries, one of which is facilitated by the referred to Mrs. Borislavova.
The allegation – that Bulgargaz is in a better position than spot traders is irrelevant as this compares apples and pears, i.e. long-term with spot day-ahead trade. None of the German, French, Greek or Turkish companies buy gas solely on the spot market, where purchases make sense only to meet peak demand. The real comparison is the November LTC price of Russian gas in Turkey and Serbia – where it is $ 270 per 1000 sq.m and in Bulgaria – $510/TCM. Therefore, Gazprom is more than happy with the current management of Bulgargaz, a statement of fact, which finds one more proof in the surprise generous gift by Gazexport’s CEO Burgmistrova, who volunteered November 1, to agree to 600 million cubic meters of gas, not taken under the ToP clause for previous year, to be received at previous lower price. This can hardly pass for a subversion by ‘someone close’ to Gazprom. Moreover, Bulgargaz’s CEO has ‘leaked’ the news that he is already in talks for a new gas supply contract with the Russian gas monopoly.
Euractiv – A “pundit” – the Bulgarian state is not trying to have an active dialogue with Azerbaijan to amend the long-term agreement or protect Bulgargaz’ interests. Instead, there are attempts to remove the company’s management, he claims.
Factcheck – In the last two weeks, the Bulgarian government has independently and actively engaged in direct exchange with the Azeri government, as it has been proven beyond doubt, that the management of Bulgargaz has consistently misled the public and its customers on reason why Azeri gas has not been imported. It is only right for the new team in charge to remove the current management, if it decides so, in the hope that is can get a better deal and more Azeri gas. The article in Euractiv is more of a desperate attempt to preempt any deeper investigation and possible incrimination, as well as additional imports of Azeri gas.
The allegation that new players are pushed by Gazprom borders on the absurd as there is no other option to attain liberalization and diversification of the market than introducing new players. It is true that Gazprom has an influence over some of them. And Bulgargaz is inevitably bound to lose chunks of the Bulgarian market to competitors – but it is an inevitable result of this 95 percent dependency on Gazprom gas and the lost time and golden opportunity to access new clients in adjacent markets with the cheapest gas in Europe – the Azeri gas. Bulgarian industrial consumers have encouraged competition and diversification and imports of cheaper gas – which Bulgargaz has failed to do.
Euractiv – the “pundit’ – “Obviously, the construction of such a large and economically unnecessary plant is rather aimed at artificially creating a larger natural gas market that can serve a specific private commercial interest,”
Factcheck – the ‘pundit’ refers to a potential coal to gas conversion which is the only meaningful way for green transition. To bemoan the loss of market share to Bulgargaz on the ground to new gas-fired generation would entail a loss of market share to Bulgargaz, which is 95 percent dependent on Russian gas, is misplaced at best.
The only plausible explanation for this desperate move by Bulgargaz is the real danger that disclosing the fact that while willfully ignoring the cheaper Azeri gas, it has increased purchases of Gazprom gas by 50 per cent in 2021 over 2020. Now, this could, at least hypothetically raise eyebrows in Baku, as to the intent and long-term commitment to the current management to honor contract obligations. And, concurrently, make them decide on a pre-emptive court action. However, this Is less likely, as AGSC is happy with the price premiums received in selling Bulgargaz gas to Italy. This might not be the case if fortunes change on the gas market and the AGSC’s complaints backlog could start with day one in Azeri gas imports.
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