Bulgaria Upgrades its Regional Energy Role

By Ioannis Michaletos

For the better part of 2012, Bulgaria has been upgrading its role in regional energy developments, engaging in a multilayer policy regarding multiple projects that will potentially elevate its role in the geo-economic sphere in the mid- and long-term.
Bulgarian-Russian Engagements
Presently, Bulgaria imports around 3 billion cubic meters of natural gas per year from Gazprom, which covers its total domestic consumption.
The envisioned South Stream project is probably the single largest proposed natural gas pipeline project in Southeastern Europe. Designed and directed by Gazprom and Italy’s ENI, it has also attracted collaboration interest from French and German companies. Bulgaria features in two onshore pipeline routes: the first is to Austria (via Serbia, Slovenia and Hungary), the second to Italy (via Greece).

In that case, Sofia has already enacted a plan for acquiring extra benefits, and thus to win as many concessions as possible. First of all, Bulgaria will not finance the construction of the portion of pipeline passing through its territory, leaving all expenses to Gazprom and its consortium partners.
In parallel, Bulgarian Energy Minister Dobrev has recently stated to the local press that by 15 November 2012, new contracts for the supply of Russian gas are going to be signed with Gazprom that stipulate an 11% reduction in import prices. A first agreement was signed in April 2012 and will continue to be enforced during 2013 as well.

In the oil sector, Lukoil has announced that its refinery in Bulgaria will receive a 1.5 billion euro Russian investment for the construction of a hydrocracking plant. It is estimated that 3,000 jobs are to be created and, most importantly, that after this the oil refinery products exports of Bulgaria will be boosted (mostly to Eastern European markets), of course also providing a source of additional revenue for state coffers.
Hydrocracking is a chemical process for converting petroleum crude oils into products such as gasoline, kerosene, jet fuel, and diesel oil. The Southeast European region, including Turkey and the Eastern Mediterranean, may experience a lack of these types of fuel (and especially diesel) in the coming decade, thus opening a market for oil refineries such as Lukoil’s.

In a recent international energy conference in Thessaloniki, organized by the Institute of Energy of South East Europe (IENE), it was cited by specialized working groups of energy experts, that there is great potential for hydrocracking units, and for the time being only the Greek refineries and the Bulgarian one will be capable of reaping substantial benefits due to the coming shortfall of diesel in the nearby markets.