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    South Stream in Bulgaria: Closing the Gap



The Bulgarian Socialist Party's Tasko Ermenkov say there is no distinction between onshore and offshore pipelines in Bulgaria and that mandates a legal change.

by: Drew S. Leifheit

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Natural Gas & LNG News, News By Country, Bulgaria, Pipelines, South Stream Pipeline, Top Stories, Balkans/SEE Focus

South Stream in Bulgaria: Closing the Gap

Clearly, lawmakers in Bulgaria would like the South Stream pipeline to be built, as evidenced by their recent amendment to the country's Energy Act, which, if it passes a second reading, would reclassify the offshore marine section of the pipeline in the Black Sea as an interconnector, a move that some have seen as an effort to sidestep conditions placed upon the project as stipulated by the European Union's Third Energy Package in regards to 3rd party access.

“It appears that the Energy Law amendment has introduced a new category of 'sea gas pipeline' which appears to be an attempt to make a legal distinction between that type of pipeline and 'transmission' as defined by EU law,” observes Katja Yafimava, Senior Research Fellow at Oxford Institute for Energy Studies, who adds that “sea gas pipeline” would not fall under the scope of the Third Package as all transmission does.

“The Third Package does not define a 'sea gas pipeline' but defines an 'upstream pipeline,' and the Third Package does not require third party access to upstream pipelines,” she explains. “The Energy Act amendment definition of 'sea gas pipeline' may thus be seen as an attempt to award this section of pipeline a treatment similar to 'upstream' pipeline. This may or may not be OK under EU law but the lack of clarity in the EA amendment definition is bound to raise objections from the Commission.”

Critics, like the Center for the Study of Democracy, have also pointed out that the Bulgarian government may be circumventing EU rules and introducing a questionable legal norm in its attempts to reclassify South Stream.

But some in Bulgaria, like the Bulgarian Socialist Party's Tasko Ermenkov, a member of the Energy Committee, contend that there is a gap in the existing Bulgarian legislation concerning the difference between off- and on-shore pipelines, something which mandated a change.

“It is very important in our situation, when an off-shore pipeline is intended to be built legally to define the difference,” he explains. “As a matter of fact, the Third Liberalization Package deals only with on-shore pipelines, though in South Europe there are at least three off-shore gas pipelines, connecting Algeria with Italy and Spain, and these are not obliged to follow the regulations of the Package. As you see there are precedents in Europe and we are just following them.”

Moreover, he says, the off-shore part of South Stream would be on the bottom of the Black Sea, which is under international, not EU, jurisdiction. According to Mr. Ermenkov, the legislative amendment has been received positively in Bulgaria, but the opposition parties, he contends, started rumors that South Stream would not be in compliance with European laws.

“There is no exemption of any pipeline part, starting from the Bulgarian coast and ending elsewhere in Europe. Anyone who intends to bring natural gas to the receiving compressor station on the Bulgarian coast near Varna will be granted the possibility to transport the gas through the whole on-shore section of the South Stream pipeline, starting from this point to the point of delivery,” he says.
Brussels, he explains, has been mislead; Mr. Ermenkov says he's pledged to meet with Energy Commissioner Guenther Oettinger to reassure him of Bulgaria's compliance with the Third Package regarding South Stream.

He adds that Bulgaria is no position to reject the natural gas pipeline project.

“The reason is that we nowadays have very limited choice for gas supply in considerable volume. The only existing pipeline is crossing Ukraine.

“We all remember 2009," he recalls, "when due to the political crisis between Russia and Ukraine the gas supplies to Bulgaria were stopped and the Bulgarian economy suffered losses of about EUR 300 million, not to speak about the risks for the population and environment. These losses were never compensated by anyone. Bulgaria was left alone to deal with this critical situation. We do not want a repetition of such crisis,” explains Mr. Ermenkov.

Meanwhile, last week, parliamentary opposition leader Boyko Borisov of Citizens for European Development of Bulgaria also pledged his support for South Stream, but within the confines of EU legislation, according to the FOCUS News Agency.

There is a consensus in the Bulgarian parliament on proceeding with the project, according to energy analyst Ivaylo Naydenov, presently a PHD Student at Technical University of Sofia, who says even the former government supported South Stream as long as it fit into the Third Energy Package.

He comments, “I believe South Stream could find its place in Bulgarian infrastructure, but only if we have a more connected network with other countries, so we can receive natural gas from different suppliers and negotiate the best price for it. Currently, Bulgaria pays one of the highest prices for Russian gas and don't have any room for price negotiations as they are our only supplier.”

More developments on the Energy Act amendment are likely in June, when Bulgarian Energy Minister Dragomir Stoynev will once again meet with European Energy Commissioner Günther Oettinger.

"Europe needs new gas connections and its legal act must contribute towards them, and not to be an impediment," says Mr. Todor Dimanov, former energy advisor to Bulgarian Prime Minister H.M. Simeon Saxe-Coburg-Gotha (from 2001-2005). "In connection with this are the last changes in the Bulgarian Energy act, which is aiming to ensure the necessary supply of Russian gas for Bulgaria." 

South Stream is very important for Bulgaria, says Mr. Dimanov, but the issue has become overly politicized. He explains, "Because of the Ukraine crisis we can see political animosity between Russia and the West, and that these disagreements have been transferred over to the construction of South Stream and they are portrayed in the press.

“This is not a political project, it's an economic project, and it has to be understood by everyone. It's not only an energy project but a classical investment one too, which puts EUR 3.5 billion of direct foreign investments into the Bulgarian economy. This is of an exceptional importance for every Bulgarian citizen, but unfortunately, not all our politicians share this sentiment.” he observes.

"European law, and in particular the Third Package, create regulations to balance the needs and the interests of every country member of the EU in the area of the energy supply. These regulations should not be ends in themselves, but should be in the interest of the needs of European citizens. South Stream obviously is very beneficial for fulfilling the needs of a regular and reliable gas supply, which goes around Ukraine."

When talking about energy independence, he argues, the guaranteeing of the security of possible supplies must be a short-term priority when weighing the various alternatives.

“Obviously, the pipeline that goes through Ukraine is unstable and brings instability to European consumers of natural gas,” he continues. “South Stream guarantees regular supplies to Europe, reducing the influence of Ukraine.”

South Stream does not increase Bulgaria's dependency on Russian gas, argues Mr. Dimanov. “It will just make supplies more certain,” he says. “When speaking of energy independence, we must speak of the alternatives: Nabucco, which resembles South Stream, failed and there is no other realistic project in which we can participate; shale gas is a possibility, but Bulgarian society doesn't support the production techniques; so Bulgarian economic interests need Russian gas and we need to secure these supplies – South Stream does exactly this.”

As for how much private interests are influencing policy decisions like the one to build South Stream, he admits that corruption is a big problem in Bulgaria. “This pertains to every kind of project, but it's nonsense to say that one big project will bring more corruption. While we have problems with our laws and legal system, which is well known to the European Commission, the realization of a big project like South Stream could actually provide more transparency as it will draw more attention and will be scrutinized more closely,” he explains.

In maintenance of this thesis, he recalls that following action by environmental organizations a more expensive but safer place was chosen for where South Stream lands on-shore in Varna, showing that transparency can take precedence.

Furthermore, spanning over 11 districts and 38 municipalities throughout Bulgaria, Mr. Dimanov says involving of so many people cuts down on the possibility of corruption. “If we say that this project will affect directly or indirectly around 200,000 people in these areas and will create more than 2,500 jobs, and will put EUR 3.5 billion into the Bulgarian economy, this is an extremely big investment which will provide an opportunity for the Bulgarian politicians to do something in people's interests.”

Mr. Dimanov recognizes that the Ukrainian crisis has worsened relations between the European Union and Russia, but says making South Stream a victim of that makes no sense because it would be too high a price to be paid by everyone that has an interest in the project, and even more for Bulgaria.

Drew Leifheit is Natural Gas Europe's New Media Specialist.