Bulgargaz: The concluded agreements with the Azerbaijani company are entirely in the interest of the Bulgarian side and exclude the possibility of activating a penal clause

Bulgargaz continues to assert its right to supply Azerbaijani gas in the way it was done. The company is also adamant that the extension of the agreements with the Azerbaijani side is entirely in the interest of the Bulgarian side. The temporary supply agreements with the Azerbaijani country expire on June 30, 2022, and in case the IGB gas pipeline is not put into operation by then, the risk will arise again for the Azerbaijani company to activate the penal clause and use the one provided by Bulgargaz EAD and "Bulgarian Energy Holding" EAD a bank guarantee in a significant amount ", says in a statement of the company, which we publish below without editorial intervention.

Regarding the agreements for the production of Azeri gas on a temporary alternative gas pipeline in Greece, which are being discussed in public, Bulgargaz EAD considers it necessary to inform the public as follows:

After the agreed delivery route, the Greece-Bulgaria gas connection (IGB gas pipeline), was not built as of the starting date of deliveries from Azerbaijan (31.12.2020), Bulgargaz EAD was put in a position not only unable to receive gas under the Treaty, but also to pay penalties under a penalty clause. Bulgargaz EAD had no choice but to negotiate with the Azerbaijani side and seek the best possible interim solution. In the negotiations, Bulgargaz EAD, Bulgarian Energy Holding EAD and the Ministry of Energy managed to negotiate and reach an agreement with the Azerbaijani supplier Bulgargaz EAD to temporarily receive gas on another gas pipeline through the Greek gas transmission network of DESFA until 30.09.2021 After the next postponement of the commissioning of the IGB gas pipeline, Bulgargaz EAD was again in a position to seek negotiations and consent from the Azerbaijani side to extend the interim agreements until 30.06.2022 (the last announced date by the project company building the IGB gas pipeline for its commissioning is 01.07.2022).

The concluded agreements are entirely in the interest of the Bulgarian side. By signing them, the possibility for the Azerbaijani country to activate a penal clause under the Treaty is excluded, taking into account the lack of a contractual supply route (IGB gas pipeline). In the event that such interim agreements were not signed, Bulgargaz EAD would have paid sanctions (tens of millions of dollars per month) under the penalty clause equal to the value of the agreed quantities without receiving them.

The agreements enabled Bulgargaz EAD and the Bulgarian market to receive natural gas from Azerbaijan from the first day of supply under the Treaty and for Bulgaria to become one of the first countries in Europe to supply Azeri gas.

The position of the Azerbaijani side has always been that the supply route under the Treaty is only one - the IGB gas pipeline. If the Treaty provided otherwise, the Azerbaijani side would not enter into long and difficult negotiations and from the very beginning of the supply (31.12.2020) it would deliver the full contracted volume through the Greek gas network, as it would be advantageous for it - during this period, the price of Azerbaijani gas was higher than that of gas from other sources.

For the correct interpretation of the Agreement to which foreign law applies, Bulgargaz EAD, Bulgarian Energy Holding EAD and the Ministry of Energy rely on the opinions of highly qualified specialized legal advisers on this foreign law. The issues of the delivery route have been analyzed for months, and the opinions received have been confirmed by an additional independent legal analysis. The signing of the agreements is not a sole decision of Bulgargaz EAD, but the result of continuous in-depth professional analysis and assessment together with Bulgarian Energy Holding EAD and the Ministry of Energy for the most advantageous decision for the Bulgarian side for delivery on the temporary route in the context of the situation with the delay of the IGB gas pipeline.

Any postponement of the commissioning of the IGB gas pipeline puts Bulgargaz EAD and Bulgaria in an increasingly unfavorable position in possible new negotiations for the supply of the alternative gas pipeline with the Azeri company. To this day, Bulgargaz EAD has not been informed by the project company building IGB when exactly the Greek gas connection will be ready.

The temporary supply agreements with the Azerbaijani country expire on June 30, 2022 and in case the IGB gas pipeline is not put into operation by then, the risk will arise again for the Azerbaijani company to activate the penalty clause and use the one provided by Bulgargaz EAD and Bulgarian Energy Holding EAD bank guarantee in a significant amount.

Bulgargaz EAD expects the Greece-Bulgaria gas connection to be put into exploitation without further delay, no later than 01.07.2022, in order to be able to receive the quantities of gas under the Contract in full.

In the event of another delay in the construction of the IGB pipeline, urgent negotiations will be needed with strong political support for a new extension of the temporary agreements on natural gas supplies from Azerbaijan until the Greece-Bulgaria gas connection is completed.