Bulgargaz: Three companies responded to our invitation for urgent supplies of natural gas after the suspension of imports from Gazprom

The payment mechanism proposed by the Russian side implies real risks for the Bulgarian side from unilateral and uncontrolled termination of supplies without the possibility to seek responsibility from the Russian supplier

Energy / Bulgaria
3E news
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Source: Bulfoto, archive

Bulgargaz urgently sought out natural gas traders in Bulgaria on April 26 with an invitation to sign a contract for the supply of natural gas. This is happening at a time when it is clear that the state-owned supplier will not be able to reach an agreement on payments with Russia's Gazprom Export. Only three gas suppliers in Bulgaria responded to the invitation and their bids were ranked on the "lowest price" criterion. This is clear from a statement sent by Bulgargaz today. "The ranking of the offers was carried out according to the conditions of Bulgargaz EAD and until the necessary quantities are provided, in order to fulfill the binding applications submitted by Bulgarian customers for May 2022 and ensure security and continuity of supply," explained the state gas supplier. They do not say how many of the tenders have been approved, nor do they provide information on the agreed quantities and prices.

We remind you that in recent days the name of the gas supplier Met Energy Trading has been mentioned in the public space as a company that supplies LNG fuel to Bulgargaz from the Greek Revitusa terminal. The current director of Bulgargaz, Lyudmil Yotsov, held a leading position in the private company before joining the management of the state-owned supplier.

Here is the whole message sent to the media today:

In connection with the ongoing speculations regarding the supply of natural gas after their unilateral termination by OOO Gazprom Export, Bulgargaz EAD informs:

After the notification of Gazprom Export LLC dated 26.04.2022 that the deliveries for Bulgargaz EAD are suspended, despite the fulfilled obligations to the Russian supplier for April 2022, as of 07.00 on 27.04.2022, Bulgargaz EAD took immediate action to provide gas to its customers under supply contracts.

Until the day of suspension of deliveries, Bulgargaz EAD, as a bona fide trader, initiated correspondence with Gazprom Export LLC in order to clarify specific details of the proposed new mechanism for making payments under the contract concluded between the two parties. As a result, Gazprom Export LLC was reluctant to engage in trade dialogue in order to reach mutually acceptable solutions in order to fulfill its bilateral obligations under the agreement and to suspend the supply of natural gas to Bulgaria.

In view of this, on April 26, 2022 Bulgargaz EAD sent a written request to natural gas traders operating on the Bulgarian and regional gas markets to submit bids that include specific conditions for the supply of natural gas by the end of April and May 2022. Inquiries regarding the possibility of supplying natural gas in volumes necessary to satisfy the consumption of the Bulgarian consumer after the termination of those under the long-term contract with Gazprom Export were sent to 12 active traders on the market in Bulgaria and neighboring countries.

Within the deadline for submission of bids provided by Bulgargaz EAD, some of the invited companies informed that they were not able to submit proposals for the specified period. After an analysis of the submitted proposals, seven offers from three suppliers were ranked under the criterion of "lowest delivery price". The bids were ranked in accordance with the terms of Bulgargaz EAD and until the necessary quantities are provided, in order to fulfill the binding applications submitted by Bulgarian customers for May 2022 and to ensure security and continuity of supply.

In order to provide additional quantities in April 2022, Bulgargaz EAD implements transactions for the purchase of quantities on the organized stock market in the country.

Regarding the allegations that intermediaries are used, it should be clarified that in the current situation, Bulgargaz EAD provides alternative quantities of natural gas through suppliers - companies, such as Gazprom Export. Usually the producers are separate companies from the suppliers, with clearly distinguished activities - extraction and production, resp. trade and delivery. The quantities are provided by established companies operating not only on the Bulgarian and neighboring gas markets, with proven good commercial reputation and wide portfolio.

Regarding the speculations about the prices at which these transactions were realized, it should be borne in mind that even if Bulgaria had accepted the request of the Russian side to use a mechanism to pay for natural gas supplies other than the one agreed in the contract, the price it would probably undergo unpredictable changes, given the lack of clarity on the exchange rate and the lack of ability of the Bulgarian side to exercise control over the currency conversion process set out in the proposal of Gazprom Export.

The proposed mechanism implies real risks for the Bulgarian side from unilateral and uncontrolled suspension of supplies without providing the appropriate opportunity to seek liability from the Russian supplier. The new method of payment is set as a process that includes control over the financial assets of Bulgargaz EAD, intended for payment of supplies under the contract, to be controlled by a financial institution related to Gazprom Export, and not by an independent third party.

In order to limit the consequences of the actions of Gazprom Export, Bulgargaz EAD has taken all necessary actions, not contrary to Bulgarian legislation, to ensure the integrity of the country's gas transmission system and continuity of supply to Bulgarian domestic and industrial consumers.

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