The System Spill over   By proximity, Bulgaria mirrors Russian autocratic tendencies, including mimicking the state oligarchy model. Unlike Russia, however, the Bulgarian version can’t be sustained on “natural” resources – oil, gas, nuclear fuel-based wealth. Redistribution can be effectuated on added value and GDP growth, or thereafter on the budget accumulated taxed economic output. Bulgaria’s autocracy has limited margins for self-propelled growth and wealth sharing, which implies greater reliance on grand corruption mechanisms.   The Kremlin’s GDP sustains its dynamics even on holidays as the oil and gas industry turns round the clock. Bulgarian GDP, however, must be generated and incomes earned.   In Russia, the population exhibits extreme patience, willing to accept sacrifice in the name of “stability” (note the overlay in the jargon of the ruling


  The need to move beyond the Balkan Gas Hub “Russia-only” or “Russia-mainly” paradigm seems indispensable if the ‘hub’ project – in the broad sense – has any chance.   The talk of billions of cubic meters of natural gas from non-Russian sources deserves a serious look to the north, but mostly to the south – The Southern Gas Corridor.   Yet what seems logical to everyone, does not inspire the management of the TSO of the Bulgarian gas system. The fact that none of these routes – TANAP, TAP or the Greek-Bulgaria Interconnector – contain specific numbers for potential gas flows makes things seem pre-ordained. The BGH essentially seems to be conceived as a redistribution center for Russian gas.   The likelihood of non-Russian gas emerging both at the

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    Quod licet Jovi, non licet bovi.   The Balkan gas hub has become synonymous and in many ways a substitute for Bulgaria’s energy policy in the field of natural gas. In order to avoid speculating about the concept’s different variations, hereinafter is the official project draft, as presented by the national TSO, Bulgartransgaz, with a price tag above USD 2 billion.   Although this might not be the latest update, as it does not fully accommodate developments from Turkish Stream, the map is a fine departure point for an analytical exercise, explicitly demonstrating the virtues and the shortcomings in the conceptual design and implementation phase.     The key question is – what does Bulgaria strive to achieve?   To begin with, the country’s energy policies should not


  Two events overshadowed the geopolitical landscape on the eve of President Trump’s visit to Poland to attend the Three Seas Initiative Summit. The TSIS is a joint Polish-Croatian project, launched in 2016, with the aim of strengthening trade, infrastructure, energy and political cooperation among countries bordering the Adriatic, the Baltic and the Black seas. Twelve countries are members: Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria, Lithuania, Estonia, Latvia, Croatia, Slovenia and Austria.   The fact that the American President will preach the case to CEE leaders for US LNG imports comes as no surprise, yet there is a hidden context and a more complex backdrop against which both the expectations and the deliverables of the visit should be judged.   The Case for US LNG gas   Washington has


  THE NEW US SANCTIONS AGAINST RUSSIA AND THE STRAINS IN TRANSATLANTIC RELATIONS     In a matter of a week, the cards in the geopolitical exchange between the US and Russia have been dramatically shuffled. The new bill, which passed by an overwhelming (97-2) majority in the US Senate, signals potential tectonic moves in transatlantic, EU and West-Russia relations.   Long before the EU public could read into the fine print of the US draft legislation, German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern warned in a joint statement that Europe’s energy supplies were “a matter for Europe, not for the United States.”   It is worth looking deeper into the semantics and the fallout of this bitter exchange.   First, energy supplies and energy security are


  Gazprom again is launching its mothballed project of bypassing Ukraine with Russia’s own version of a ‘Southern Gas Corridor’. On May 4 the Audacia pipe-laying vessel, run by Allseas Group, reached Anapa on the Russian coast of the Black Sea. Ten days later, another vessel of Allseas, the world’s largest pipe layer Pioneering Spirit, also made it to the Black Sea through the Bosporus to join the operation.   Allseas had been contracted by Gazprom in April 2014 to build the second string of the South Stream pipeline project after Italy’s Saipem had been awarded a contract for the first string. After the failure of the South Stream idea, Gazprom severed the contract with Saipem but asked Allseas replace the Italians in building the initial string of the pipeline,

This entry was posted in The Region and tagged , , , , , , by Mikhail Krutikhin.

About Mikhail Krutikhin

Analyst and consultant on the oil and gas industry and politics in Russia; co-founder of and analyst with the RusEnergy consultancy in Moscow; editor-in-chief of The Russian Energy weekly newsletter. He previously served as editor-in-chief for the Russian Petroleum Investor and as associate editor for the Caspian Investor monthly magazines. Between 1972 and 1992, he worked for the TASS news agency in Moscow, Cairo, Damascus, Tehran, and Beirut, rising from correspondent to chief of bureau. Krutikhin graduated from Moscow State University majoring in Iranian linguistics, but later obtained his Ph.D. in modern history.

  As the Bulgarian government is expected to comment on Gazprom’s draft commitment to the EC regarding the commission’s statement of objections on the Russian gas giant’s abuse of its dominant position, the issue of price formula and the choice between spot and oil-indexed price loom high. The Russian company strives to settle the case out of court and avoid reviews of the current price formula and the merits of linking the gas price to oil derivatives.   The divergence of opinions on the issue is immense. They cover the whole range of choices of specific derivatives, their relative “weight” and overall relevance as benchmarks in the natural gas trade.   The price formula is a separate issue that warrants a snap review of oil-indexation. What might work as trade


  Recent weeks have provided exemplary cases of the impact of Bulgaria’s high political risk on major projects and gas prices. The caretaker government exacerbates the situation; there is no parliament to control and preempt shady deals, and the gravity of public life and media attention is focused on the elections. Few if any would notice a change at the top of state companies or projects or an unprecedented gas price hike – almost 30% – a record in Bulgaria’s modern history.   The perpetrators of such backdoor policies understand that under open, transparent and functioning market conditions such drastic price swings would be impossible. Even if oil moves up or down in an unpredictable manner, and this is not the case, the interplay between the multitude of gas traders


The unusually cold winter renewed the dispute on the real accomplishments in energy security and diversification of routes and sources of natural gas. However, the energy system’s shortfalls exhibited during sustained high demand levels require a deeper analysis than the usual blend of suppliers’ blues and consumer grievances.  The same adage applies to the interconnectors that should have already brought alternative gas supplies to southeastern European customers – enhancing resilience of gas and energy markets to abrupt shock curves.   Experts’ talk hovers around Gazprom’s evolving strategy, adapting to EC policies, using bilateral levers and price dumping, and the impact of inter-governmental agreements that underwrite its supply and transit contracts in CEE countries.   Whereas Romania, Greece and Turkey have already diversified supply sources, including indigenous gas production and flexible


  The new Russian pipeline projects – Nord Stream 2 and Turkish Stream – are designed to kill Ukrainian gas transit. However, there also is a collateral damage – the diversion of gas flows would significantly reduce transit volumes and hurt operators’ revenues in Slovakia, Romania, Bulgaria and Austria. Keeping Ukrainian transit alive is beneficial for all parties, except contractors of Gazprom.     Revenue of Slovak Eustream is already affected by higher utilization of the OPAL pipeline capacity recently permitted by the European Commission. In early January 2017, Gazprom and European operators reported record daily volumes of Russian gas delivered by Nord Stream. The flow reached 168 million cubic meters per day (mmcmd, at +20°C) compared with the average of 126 mmcmd of the first half of December[1]. Cold

This entry was posted in Europe, The Region and tagged , , , , , , , , , by Mikhail Korchemkin.

About Mikhail Korchemkin

Dr. Mikhail Korchemkin is the founder and managing director of East European Gas Analysis, a consulting company that specializes in cost-benefit and financial analysis of natural gas projects in the former Soviet Union. His previous experience includes performing numerous feasibility studies for the USSR Gas Ministry, predecessor of Gazprom. Prior to going into full-time consulting Mikhail taught at the University of Pennsylvania. He has also had visiting scholarships at Harvard University and Erasmus University in Rotterdam. Mikhail has consulted numerous corporate and governmental clients including ABN-AMRO Bank, Amoco, BP, British Gas, Chevron, Conoco, Ernst & Young, ExxonMobil, Gas Strategies, Gasunie, Neste Oy, Osaka Gas, OTA of the U.S. Congress, Ruhrgas, Shell, Statoil , Swedegas, Total, Vattenfall and The World Bank. He has acted as expert witness in arbitration cases concerning natural gas business in Russia and Eastern Europe.