Gazprom, Bulgaria to Sign Pipeline, Gas Supply Contracts

Bulgaria and OAO Gazprom (GAZP), Russia’s gas-export monopoly, agreed to conclude an investment contract in November on constructing the South Stream pipeline project.

Bulgaria and Gazprom will also sign a new gas-supply agreement, which involves an 11 percent price cut for the second half of 2012, Energy and Economy Minister Delyan Dobrev told Bulgarian National Radio in an interview in Sofia today.

Gazprom will begin underwater construction on Dec. 1 of the pipeline, which will run from Russia along the Black Sea floor to Bulgaria, Dobrev said. The Moscow-based company will finish construction of the first line, which will be able to handle 15.75 billion cubic meters of a year, at the end of 2015, Gazprom said.

“We’ll be able to complete all the contracts with Gazprom by Nov. 15,” Dobrev said. Bulgaria wants to reduce the amount it needs to pay to participate in the pipeline joint venture, estimated at around 1 billion lev ($642 million), he said. He did not elaborate.

Gazprom pumps 17.8 billion cubic meters of gas a year to Bulgaria, about 2.8 billion cubic meters of which was consumed in 2011 there. The rest goes on to Turkey, Greece and Macedonia under a 30-year contract signed in 2006.

South Stream

South Stream will carry 63 billion cubic meters of gas by 2019, when all four lines are operational, according to Gazprom. The link will run through Serbia, Hungary, Slovenia and northern Italy with offshoots to Greece, Croatia and potentially Montenegro and Macedonia, according to Gazprom.

Bulgaria imports all its gas from Russia and is seeking to diversify supplies after they were cut for two weeks in 2009 following a price dispute between Ukraine and Russia. Bulgaria spends as much as 1.4 billion euros ($1.8 billion) a year on gas imports.

Bulgaria also backs the OMV AG-led Nabucco pipeline project, which is aimed at bringing gas from the Caspian Sea region to Austria via Turkey and cutting Europe’s reliance on Russian fuel.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net