Minister Malinov: Renegotiation of the contract with Botash will not be easy

According to the Minister of Energy, due to the deficit in the Electricity System Security Fund, there is a potential for a serious increase in the price of household electricity, but the necessary mitigation measures are already being taken

Energy / Bulgaria
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The renegotiation of the contract for access to the Turkish gas network with the state-owned company Botash will not be easy. This was announced in the program "The Day Begins with Georgi Ljubenov" by the Acting Minister of Energy Vladimir Malinov, specifying that he is moderately optimistic about the renegotiation. The minister commented on his expectations for gas from Azerbaijan, as well as for household electricity prices from July 1 of this year.

"I have learned, being a lawyer, that every decision of the National Assembly must be implemented. There is a decision to renegotiate the contract with Botash. I immediately held a meeting with the Turkish Energy Minister Alparslan Bayraktar and stated our firm position. On the other hand, I will not is easy because the Turkish side has achieved a certain economic effect from this contract, but we fully understand that this contract was signed in a different economic environment," said Malinov.

In particular, he explained that the contract with "Botash" was concluded under other conditions - sporadic gas prices, Russia's invasion of Ukraine and interrupted Russian supplies, requiring the immediate finding of replacement capacities.

"Turkey, apart from this contract for natural gas, has an interest in good neighborly relations with Bulgaria, but also other interests in the energy sector. So, I think that yes, it will be a difficult process, but I would say that I am moderately optimistic about the possibility of renegotiation and I think that in the short term in a future framework for gas flows for the whole region and in terms of transmission disruption of Russian natural gas from January 1, 2025 through Ukraine with this contract and the Turkish interest can be balanced, and we will be able to protect the national interest".

At the end of April, the National Assembly obliged the Ministry of Energy to renegotiate the contract with "Botash", which is for 13 years and envisages that Bulgaria will pay more than 2.2 billion dollars under it. According to the contract, our country is obliged to pay 500,000 dollars each day for access and transmission of gas through the Turkish gas system, regardless of whether it transfers quantities or not.

Minister Malinov did not bother to go into the details of the contract.

It is known that the main argument of the official government of Galab Donev for the contract to be concluded is the lack of sufficient alternative routes for the supply of blue fuel on the part of Bulgaria. According to the contract, our country can receive liquefied gas at the terminals of Turkey, while "Botash" delivers the same quantities to the border from its natural gas.

Minister Malinov refused to go into details of the contract. At the same time, he explained that every reserved capacity on the territory of the European Union, regardless of its use, is paid for. In this regard, he explained that perhaps precisely the passive policy of "Bulgargaz" under the terms of this contract, i.e. insufficient utilization were also the reason for the dismissal of the head of the company, Denitsa Zlateva. "I would not like to get into political topics, but for me it is somewhat bewildering, within the previous 1 year after the conclusion of this contract, both at the political and purely managerial level in Bulgargaz, why nothing has been done, even for renegotiation, due to entering a new economic environment, in the new gas environment. Why has nothing been done, and the National Assembly should have entered into this topic?".

"Bulgargaz" in the last two years has been not only at an accounting, but also at a financial loss, Malinov also said, and expressed expectation that the new management will take the right actions.

The Minister of Energy also gave details of his visit to Azerbaijan and the negotiations on increasing the supply of blue fuel to Bulgaria, including through Turkey, and not only through Greece.

"At the moment, the natural gas supplied to the Bulgarian market from Azerbaijan occupies a significant role in the entire portfolio of the Bulgarian market. More than 35% of the natural gas consumption in Bulgaria is covered by Azerbaijan. It passes along the Southern Gas Corridor and enters through the Greece-Bulgaria interconnector," said Vladimir Malinov, adding that "There are additional quantities that the state oil and gas company Sokar sells on the free gas market, and they enter through Turkey, through the gas transmission lines networks of both countries". The Minister of Energy explained that a long-term agreement between Turkey and Azerbaijan is expected to be signed for the physical provision of additional quantities of Azeri gas to Europe. "We expect, and this is our goal, that these quantities through our gas transmission network will reach the markets of Central and Eastern Europe and in fact increase the volume that Sokar sells on the Bulgarian market," he said.

Such talks the caretaker energy minister had with his Azerbaijani counterpart during his visit to Baku this week. Then he was part of the delegation led by President Rumen Radev in the Azerbaijani capital.

The Minister of Energy confirmed Azerbaijan's desire to participate in gas and oil exploration in the Bulgarian waters of the Black Sea. "In the next week, we are re-launching a concession procedure for one of the blocks of the Khan Tervel field, and this was one of the topics of our discussions. Indeed, "Sokar" is showing interest," he said, adding that within the past month he had also held meetings with other companies and expressed the expectation of serious interest in this concession.

Malinov also explained that Bulgaria is also conducting negotiations with South Korea for joint purchases of natural gas by the two countries, and not for deliveries. "South Korea is in the top three among the largest importers of natural gas," explained the energy minister in response to a question from the presenter regarding the meeting with the ambassador of the Asian country. "They don't have their own resources or natural gas deposits. But whenever you negotiate with large producers or suppliers of natural gas, the advantage is when you have one large consumer, since the Bulgarian market and Bulgaria as a whole is relatively small on a global scale in terms of natural gas consumption," said Malinov. He explained that all major natural gas producers prefer to have long-term contracts with serious volumes. "It's much easier to negotiate when you have someone to lead the process with," he added.

We remind you that a Korean company is expected to build the new units of the Kozloduy NPP.

In response to a question from the presenter, Vladimir Malinov also explained the process of liberalization of the electricity market, and accordingly, the expectations for the price levels of the regulated market from the beginning of the new price period on July 1 of this year. In this regard, he also reminded of the preservation of the current system with a public supplier in the person of NEK, but also gave details of the status of the Electricity System Security Fund (FSES), including the decision of the National Assembly on the return of BGN 1 billion.

"The situation is very difficult," he said, explaining that three meetings have already been held with the management of the Fund. "The accumulated deficit in the Fund is serious. At the moment, it is over BGN 450 million, and it is expected to reach over BGN 550 million by the end of the regulatory period. There is no way that this accumulated deficit will not affect the price of household electricity, because in the next regulatory period, if the regulator strictly complies with its legal basis, this accumulated deficit must be compensated. We are talking about a serious potential of an increase in the price of electricity from July 1, 2024," said Vladimir Malinov. According to him, measures are already being taken to compensate for this blow and it is expected that the necessary measures will be taken next month.

Not long ago, the Ministry of Finance assured that money to the fund will be directed and is provided. This happened after the Council of Ministers canceled the decision of the previous regular cabinet, which transferred BGN 1.6 billion to the Ministry of Energy, and from there to BEH, to be donated to the Energy Security Fund.

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