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Bulgargaz, Gazprom negotiate direct gas contracts

28 Jul 2011 14:12:30 | esgm

Russia's Gazprom has proposed terms for new gas supply contracts directly to state-owned Bulgarian gas company Bulgargaz without the involvement of intermediaries, the Bulgarian company said on Wednesday.

The terms could kick in once existing contracts have expired at the end of this year and the end of 2012.

Gazprom confirmed the intention to cut out intermediaries, and said: "There is an agreement with Bulgargaz on concluding a direct contract and discussions are taking place on this."

Last year, Gazprom exported 2.2 billion cubic metres of gas to Bulgaria through contracts held with Overgas Inc and Gazprom's wholly owned marketing affiliate, Gazprom Germania (GG).

Gazprom said its contract with Overgas Inc for the supply of 2.5 billion cubic metres/year expired at the end of 2012. Gazprom's other Bulgarian supply contract - through GG - was for 600 million cubic metres/year, and expired at the end of 2011. "No-one intends to break these contracts ahead of their expiry date," Gazprom said.

The gas in the GG contract is supplied to Bulgaria through WIEE (Wintershall Erdgas Handelshaus Zug - owned 50:50 by GG and Wintershall). Bulgargaz confirmed no gas contract negotiations were taking place between itself and Overgas Inc or WIEE.

The Bulgarian government has been complaining for several years about the method of sourcing gas for its market, saying it wishes to eliminate the middlemen and have Bulgargaz buy direct from Gazprom (see ESGM 27.01.11).

Overgas Inc is owned 51% by Gazprom Export and 49% by private individuals. The company is not just a trader but also has shareholdings in a number of gas distributors in Bulgaria, including Sofiagas. It has also built more than 2,000km of pipelines in Bulgaria and plans to build another 65km this year. However, if Overgas no longer acts as the importer for Russian gas, the economics of the company's distribution activities may become less attractive.

WIEE has no gas distribution in Bulgaria, it only supplies Bulgargaz. ES

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