View: Bulgaria-Turkey gas deal should be monitored by EU

LONDON (ICIS)–Turkey’s announcement earlier this year that Bulgargaz would be allowed to use Turkish LNG terminals and transmission infrastructure to secure additional supplies for the next 13 years was touted as an important achievement for the Balkan country.

While any new sources of supply entering Europe are welcome, this deal should be closely monitored by the EU.

Firstly, in an ideal scenario, any deal would allow companies on both sides of the border to access capacity and compete for it based on regular tenders.

Data published by the European network of transmission system operator for gas (ENTSOG) indicate that 53.2GWh/day of capacity has been booked at the Strandzha-Malkoclar border point until October. According to Bulgarian transmission system operator Bulgartransgaz, there is no interconnection agreement for this border. An interconnection agreement clarifies, among others, details related to the allocation of border capacity and is necessary when there are more companies active on the border.

When the deal was unveiled at the start of 2023, it immediately drew concerns from the European Federation of Energy Traders (EFET), which warned it might be in breach of EU competition rules and bypass transparency requirements.

Secondly, on the Turkish side, BOTAS remains a vertically integrated company, acting both as grid operator and energy trader. This may pose challenges under EU law, on the basis that it may restrict non-discriminatory access to networks.

Furthermore, contrary to earlier suggestions, sources told ICIS that the purported deal will not allow Bulgargaz to access Turkey’s LNG terminals and gas transmission infrastructure.

Arguably, a scheme to ensure Bulgargaz takes receipt of physically delivered gas exclusively on its side of the border leads to greater complexity. But BOTAS can source the volumes anywhere. Currently, Turkey imports LNG, pipeline gas from Azerbaijan, Iran, Russia and has its own Black Sea gas production.

It would also be possible for BOTAS to order Bulgargaz to sell and deliver cargoes anywhere in Europe on its behalf as well as sublet its capacity to third parties. In exchange, BOTAS would deliver a similar amount of gas to Bulgaria.

ICIS believes it would be difficult for European consumers to pinpoint the source of their gas deliveries, the costs and the arrangements that underpin these transactions.