Bulgarian private gas company eyes west Balkan expansion after stake sale to US firm

LONDON (ICIS)–Bulgaria’s largest private gas trader is looking to expand into west Balkan gas markets after a US company bought a 50% stake.

Yuliya Georgieva, gas origination and trading manager at Overgas, said the share sale to Linden Energy earlier this month will put Overgas in the ideal position to expand in markets such as Albania and Kosovo, while also taking advantage of new sources of gas entering the region.

Until last year, the company was 50% owned by Gazprom, but the Russian producer divested its stake, reaching a final settlement earlier this year.

Linden Energy already holds a 10% stake in the interconnector Greece-Bulgaria (IGB), which will allows it to use 276 million cubic metres (mcm) of annual capacity when the link is completed next year.

This means Overgas will be able to tap Caspian gas shipped via the Trans-Adriatic Pipeline (TAP) or LNG imported in Greece once the interconnector is ready.

Georgieva said the company was researching the possibility of potential partnerships for a new LNG terminal in Albania, at Vlore, on the Ionian coast.

“Two interesting things are happening in Albania – first TAP will be launched in 2024 and will bring some 0.7 billion cubic metres/year of Caspian gas to the market.

“The second good news is that we’ve done some studies to have an LNG terminal close to Vlore and that would absolutely make sense to us with the infrastructure of TAP and IGB which would allow possible swaps or reverse flows.”

REGIONAL EXPANSION

She said Bulgaria was a small market with demand hovering around 3-3.2bcm/year and having a long-term potential to increase to 5bcm/year.

“However, if you put it in a regional context, it appears more attractive. If we take the surrounding countries we get a regional demand of around 25bcm/year, which could increase to 35bcm/year. This includes Romania.”

Georgieva said Overgas was in the process of receiving its final permits to become active in Romania.

The company has been importing natural gas sourced as LNG via Greece in 2020, which means the company could continue similar arrangements if prices are attractive to import LNG and sell it regionally.

She said the company was expecting the Bulgarian transmission system operator Bulgartransgaz to sign an interconnection agreement with its Turkish counterpart, BOTAS, to allow companies to book capacity at the Strandja-Malkoclar 1 border point. The exit point had been historically used by Gazprom for exports into Turkey via the Trans-Balkan line.

However, since deliveries were diverted to TurkStream in 2020, the Strandja-Malkoclar 1 border point has been underused, with only one company booking capacity and importing volumes in December 2020.

Georgieva added it was equally important for Bulgaria and North Macedonia to free up capacity on the Kyustendil-Zidilovo interconnection point which would help both countries to further diversify their supplies.

NEW SOURCES

Bulgaria had been almost entirely dependent on Russian gas imports but in recent years, Gazprom’s share of the market fell, hovering around 81% in 2019 and dropping further to 76% in 2020.

“It would be naïve to think Russia’s Gazprom would lose monopoly in the long term but there will be plenty of new sources,” Georgieva said. “We feel neither defeated nor under threat from that dominant player because we have other sources of supply,” she added

Gazprom is likely to regain this year some of the lost market share as its price of gas sold to the local incumbent Bulgargaz is cheaper than hub prices. The Russian gas imported into Bulgaria is indexed to a hybrid formula which includes several hubs as well as an oil linkage.

“It is no secret that this year we [Overgas] are buying from Bulgargaz, but last year we didn’t buy any from them,” she added.

EXCHANGE TRADING

Georgieva said a total of 45 companies were active on the local exchange Balkan Gas Hub, which meant that they were looking to source volumes from alternative sources.

The number of companies may change from 1 October as a new licensing regime comes into force, which means not all outfits would have a license.

She noted that a new exchange, the Bulgarian Energy Trading Platform, was established in May, which has eight registered members.

Overgas had challenged Gazprom and its decision to sell gas only to Bulgargaz.

Georgieva said the new partnership with Linden Energy, which has a track record in trading LNG, would help the company expand regionally but added that Overgas would continue to build on its core, namely the Bulgarian distribution sector, where it remains a leading company.