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Bulgaria to get price cut in Gazprom deal

Nov. 19, 2012 at 12:05 AM   |   Comments

SOFIA, Bulgaria, Nov. 19 (UPI) -- Bulgaria will receive a 20 percent discount on Russian natural gas supplies under a new, 10-year contract with Russian supplier Gazprom, the two sides say.

Bulgarian Prime Minister Boyko Borisov and Gazprom Chief Executive Officer Alexei Miller signed the deal Thursday in Sofia -- the same day Gazprom and Bulgarian holding company signed final investment decisions on the South Stream gas pipeline construction through the country.

Bulgaria pays the Russian monopoly $520 per 1,000 cubic meters of gas. The new deal includes the usual Gazprom provisions of tying prices in its long-term deals to oil price indexes along with take-or-pay obligations.

The deal was hailed by Gazprom as a breakthrough for the expansion of natural gas-powered projects in Bulgaria.

"This mechanism has set the conditions for gas consumption increase in Bulgaria," Gazprom Export Chief Executive Alexander Medvedev said in a statement.

Bulgaria will have an opportunity to renegotiate the price and the quantity of gas supplies after the sixth year of the contract, the Sofia News Agency's Novinite.com website reported.

The lower gas prices are to take effect Jan. 1, Dimitar Gogov, chief executive of state-owned gas supplier Bulgargaz, told Bulgarian National Television, asserting that once the wholesale price discount makes its way to end-consumers it will result in price cuts of least 5-7 percent.

He said the biggest winners in the deal would by the country's industrial users.

But Bulgaria's Socialist Party opposition was skeptical, saying the deal was unlikely to result in actual price decreases for consumers, Novinite.com reported.

Petar Dimitrov, a Socialist member of Parliament and former minister of Energy, said lower prices were already locked in before the deal thanks to an 11 percent price reduction negotiated in April and low price of oil, to which the gas prices are tied.

He said the real impetus behind the deal was to tie Bulgaria to long-term dependence to Russian gas and the need for Gazprom to get the holdout country onboard as a transit nation for South Stream, which envisions carrying up to 63 billion cubic meters per year of Russian gas across the Black Sea through Bulgaria to the Balkans and to northern Italy.

"Regarding South Stream, our fears were confirmed that Bulgaria will lose the gas delivery route through Ukraine and in the future will get Russian gas only via South Stream," Dimitrov said, calling it a blow to gas diversification for the country.

Borisov was also present Thursday when Miller and Mihail Andonov, executive director of the South Stream subsidiary Bulgarian Energy Holding, inked the final investment decision on the route through Bulgaria -- the lone Eastern European holdout after Serbia, Hungary and Slovenia already signed FIDs for their sections of the pipeline.

Analysts told the Financial Times Bulgaria had been holding out to extract gas price concessions from Russia, but Miller told ITAR-Tass the signing of the final investment decision and the gas price reduction were unrelated.

"As regards price revisions, all necessary changes have already been made to the contract for this year," he said.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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