site.btaBulgargaz Makes Proposal to Turkiye's BOTAS to Re-negotiate LNG Deal

On July 4, Bulgarian state-owned natural gas supplier Bulgargaz sent an official proposal to Turkish energy company BOTAS to re-negotiate the two companies' agreement which gives Bulgargaz access to liquefied natural gas terminals and the gas transmission network of BOTAS. The draft of a supplementary agreement was attached to the letter, Bulgaria's caretaker Minister of Energy Vladimir Malinov said during a parliamentary hearing on Thursday. 

The hearing focused on long-term securing and diversification of gas supplies, the results of the actions taken to renegotiate the agreement between Bulgargaz and BOTAS, and the measures to overcome obstacles to the commissioning and operation of the terminal for liquefied gas in Alexandroupolis, in which Bulgaria is a co-shareholder.

Deputy National Assembly Chair Rositsa Kirova presided over the meeting and indicated that more information could be discussed at a meeting behind closed doors, if the MPs allow it.

Radoslav Ribarski (Continue the Change-Democratic Bulgaria) requested that the entire hearing be held in a closed session. However, his proposal was not accepted.

In its proposal to BOTAS, Bulgargaz says that the agreement of January 3, 2023, should be updated to reflect the current market price levels for the services provided by BOTAS in the region while at the same time keeping some of the advantages of the agreement such as ensuring the security and diversification of gas supplies.

On April 19, the Bulgarian National Assembly assigned the Minister of Energy to take action for re-negotiating the agreement between Bulgargaz and BOTAS. Critics of the deal argue that, under the take-or-pay agreement, the Bulgarian company undertook to pay nearly USD 500,000 daily to the Turkish supplier for reserving 1.850 billion cu m capacity on regasification terminals in Turkiye for natural gas provided by Bulgargaz and its delivery to the Bulgarian border. For the 15-plus months during which the agreement had been in effect, Bulgargaz had delivered less than 250 million cu m of gas under it but was obliged to pay some USD 250 million for the booked capacity despite using a tiny fraction of it, the critics claim.

During Thursday's hearing, Energy Minister Malinov also said that the official proposal to BOTAS stipulates streamlining the gas capacity booked by Bulgargaz, cutting the prices for the services provided, defining permanent and variable price components, providing for the possibility of Bulgargaz terminating the agreement unilaterally, and envisaging an option for a full transfer of the rights to third parties. Malinov expects that the re-negotiation process will be completed by the end of July.

In the letter, Bulgargaz says it cannot continue to fulfill its financial obligations under the present financial conditions and cannot utilize the capacity it has booked. Therefore, the payments due from Bulgargaz for July have not been made, Malinov noted. According to him, over 2 million MWh of natural gas owned by Bulgargaz is stored in Turkiye at present. Before July, the Bulgarian company paid for the capacity as agreed. The June payment was smaller by BGN 12 million because of a discount provided by BOTAS. Nothing has been paid for July.

The Energy Minister said he will submit all parameters of Bulgargaz' proposal to BOTAS to the classified information registry of the National Assembly, so that the MPs can obtain information about the tentative financial and economic conditions. He expressed a willingness to discuss the proposal with the MPs.

Malinov has written to his Turkish counterpart to express his hope that the re-negotiation process can be stepped up and completed by the end of July.

A meeting between Bulgargaz and BOTAS representatives took place at Malinov's initiative with his Turkish counterpart Alparslan Bayraktar on April 27. There Malinov informed his Turkish colleagues about the decision of the Bulgarian National Assembly for renegotiating the deal with BOTAS and expressed his position that the contracts needs to be revisited due to the significant change that occurred in the natural gas market from the time of its signing until the decision was made at the Bulgarian Parliament.

The two energy ministers have instructed the management of the two companies to start work towards renegotiation of the agreement.