Region, Bulgaria and Serbia could sign short-term agreements on Russian gas supplies

, SEE Energy News

The governments of Bulgaria and Serbia could sign short-term agreements on the supply of Russian gas while both countries develop new alternative routes, according to participants in the Balkan market.

The current short-term contract between Serbia and Russia’s state supplier Gazprom expires on June 30th. Bulgaria’s current long-term contract with Gazprom for 2.9 billion cubic meters (bcm) per year expires at the end of 2022.

Bulgarian Prime Minister Kiril Petkov said on March 25th that Russian gas could be part of Bulgaria’s supply mix in the future, while the European Commission could negotiate on behalf of all interested EU countries when buying gas from third countries.

This would change the negotiating position and provide better conditions and lower prices. That would be especially important for Bulgaria, whose contract with Gazprom expires this year, Petkov pointed out.

Serbia announced in February that it plans to start negotiations on a new ten-year gas contract with Gazprom by the end of March.

“For now, gas delivery is normal. We receive six million cubic meters (mcm) of gas per day from Gazprom. There are various scenarios and crisis plans and we are maintaining communication with both Bulgaria and Russia, and in the coming years anything is possible, especially the proposal of the International Energy Agency to EU countries not to sign new agreements with Gazprom when existing ones expire, “she said on March 22. Minister of Energy Zorana Mihajlovic.

Market overview

Participants in the Balkan market expect that both Bulgaria and Serbia will sign short-term agreements with Gazprom this year to ensure that gas supplies continue uninterrupted during the next winter season.

Given the European Union’s plans to phase out Russian coal, oil and gas by 2027, both countries could sign short-term gas contracts with a maximum length of five years, the source said.

Both countries should sign flexible agreements with Gazprom and avoid take-or-pay clauses, another source said, suggesting a mix of oil and gas price indexations.

A third participant said that Gazprom’s potential agreements with the two countries would be very different. Bulgaria is a member of the EU, and Serbia is not, which already makes a difference in the negotiation strategy on the side of Gazprom.

In accordance with the current short-term contract, which expires in June, Serbia paid 270 dollars per thousand cubic meters.

The source said that the two countries could negotiate the reduction of Russian quantities by 2027, while they would develop alternative routes and gas infrastructure in the same period.

Alternative supply

Since the beginning of 2021, Russia has been supplying 20 billion cubic meters of gas a year to Bulgaria and Serbia via the Turkish Stream 2 gas pipeline through Bulgaria’s national gas transmission system.

Both countries want to diversify their gas supplies in the coming years by commissioning a new Bulgarian-Serbian gas interconnector (IBS) with a capacity of 1.8 billion cubic meters per year, which should start operating in October 2023.

IBS will increase access to LNG from Greece, Azerbaijani gas from the Southern Gas Corridor via the 10 billion cubic meter Trans-Adriatic Pipeline (TAP) and potential quantities from the United States, Egypt, Qatar, Algeria, Israel and Cyprus.

According to the ICGB project company, more Azerbaijani gas and LNG could come from the Greece-Bulgaria (IGB) interconnector, with a capacity of 3 billion cubic meters a year, which should be available on July 1st.

The IGB is crucial for the diversification and security of gas supply in Southeast Europe, as it will provide access to Azerbaijani gas through TAP and potentially LNG at the planned Greek terminal in Alexandroupolis, which should be available by the end of 2023.