What’s in a name? That which we call a Bulgarian hub

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Bulgaria and the European Commission have recently been announcing, with much fanfare, the country is investing in a natural gas hub. Or the Balkan Gas Hub, to give it its formal title.

The crescendo of statements about this Balkan hub reached their zenith last week at a roundtable over which Bulgaria’s prime minister Boyko Borissov presided.

At that meeting, Klaus-Dieter Borchardt, who heads up the energy directorate in Brussels, said:  “If we manage to attract considerable amounts of natural gas supplies the Balkan gas hub will become competitive with the already existing hubs in Germany, Austria and the Netherlands.”

Quite a statement. Especially for those gas shippers looking to tap into a market and region which has historically been slow to introduce the third energy package and therefore difficult to trade.

The timing, in theory, couldn’t have been better. The Western Line – the transit pipe which runs through the country and carries gas from Ukraine to Turkey – was having some of its capacity publically sold for the first time. Here was proof the market was really starting to open up.

But looking a little closer, details of the Balkan concept appear to be thin on the ground. Repeatedly, talk of grid investment were made. Possibly in the Black Sea city of Varna, which is not on the current transmission network.

While investment and interconnection clearly are important for the creation of a hub so that supply can be diverse, more fundamental foundations for a hub are found in a network’s grid code and in the wider regulation surrounding that gas market. Shippers, after all, really build a hub. Not politicians.

So is the Balkan project even really a hub in the real sense of the word? The public details remain limited, and ICIS can find no reference to entry-exit models, or virtual points in any of the statements put out by operator Bulgartransgaz, regulator EWRC, Borissov himself, or even from the EU. Not even to a state-mandated exchange, as is typical for governments that what to appear to be championing competitive spot gas trade.

Just brief references of investment in projects that have long been mooted.

The commission told ICIS: “Interested parties and investors now acknowledge that gas hub project is real and concrete”, but when asked to elaborate was unable to shine much light on the matter, adding that it was only providing assistance on infrastructure financing to keep it in line with EU law.

Bulgartransgaz has said it presented the “prerequisites for the realization of the construction of a gas hub” at the roundtable, but other than mentioning “the modernisation of the network and the gas storage facility in Chiren” did not go into specifics.

The EU’s list of key projects of common interest already houses a plethora of Bulgarian gas grid plans, so it seems unlikely there could be yet more bids to reinforce the grid further.

If then the Balkan hub concept is actually little more than a public relations exercise in promoting a grid development programme, why not name it as such? And why then has the commission been so keen to support it?

ICIS can’t help but think that it may have something to do with Russian supply. In August, a leaked letter from the commission indicated it was looking at how new gas supply infrastructure from Russia to the Balkans could be compatible with EU laws.

The letter from commission president Jean-Claude Juncker to Borissov suggested the previously planned Russia to Bulgaria South Stream pipeline, or a part of it, may be revived in the Black Sea with the backing – or tacit approval – of Brussels.

And if this pipeline, which was meant to beach in Varna, was simply part and parcel of a wider Balkan hub designed to diversify supply routes, perhaps the commission could save-face having previously blocked the plan, and allow Bulgaria to actually maintain its gas market status quo.

A status quo which, as it happens, is still being investigated by the commission’s competition directorate for suspected market abuse by the parent company of the state-owned grid operator.

Win-win for Brussels and Sofia. No such luck for the traded market.

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