Big Energy Dreams Revived

Now, the NPP project and the gas pipeline project are being considered in Bulgaria again - albeit in somewhat modified versions. While discussions focus on the costs, the government has yet to come up with clear answers to two fundamental questions: does Bulgaria need a second nuclear power plant in addition to its sole, 2000 MW Kozloduy NPP, and can the country afford to become a distribution center for transit of Russian and Caspian natural gas to Europe with the resurrection of the South Stream project in the form of Balkan gas hub?

Looking for investors in Belene NPP

On June 7, the parliament gave the government a mandate to explore the interest of potential strategic investors towards the unfinished Belene NPP project. The decision does not mean that the construction of the power plant which began in the 1980s is being resumed. The government will have the final say. Bulgaria will also have to guarantee that the project originally designed by Russia's Rosatom complies with the European Atomic Energy Community (Euratom) treaty and other European regulations on nuclear safety, radiation protection, radioactive waste management and security of supply.

The parliament set 31 October 2018 deadline to probe potential investor interest, to structure a new project company and to prepare a tender procedure. New consultants will also be recruited. While the parliament explicitly stated that the construction of the Belene NPP should not entail any financial obligations of the government, it may later be decided that the state will still have to provide some financial guarantees to the potential investor.

The government motivated the fast-track return to the Belene topic with investor interest from state-owned China National Nuclear Corporation (CNNC), which has been studying projects in Bulgaria for a number of years. However, Moscow and not Beijing was the destination of the May visits of the Bulgarian heads of state and government. First, President Rumen Radev met with his Russian counterpart Vladimir Putin, and a few days later, Borissov held such a meeting as well. The visits revealed that the resumption of the project necessarily implies Russian participation, at least as a builder. Meanwhile, CNNC said it expects to receive some state support if it joins the Belene project as an investor. Another potential candidate, France's Framatome (formerly Areva NP) said that it is interested in the project only as a supplier of equipment, not as an investor or a shareholder.

At this stage, a number of questions remain unanswered (at least publicly) - how much will it cost to build the power plant, who will pay what for the works, does Bulgaria need the project at all, will it be competitive on the electricity market, what is the risk to the environment and the people, what will happen with the radioactive waste...

What is certain, however, is that public spending on the project, which has exceeded 4.5 billion levs since its start in the early 1980s, is far from over. And even if the project fails to materialize once again (this seems to be the most likely outcome at this point), Sofia is once again entering the Russian orbit with a big energy project - a development which has always led corruption and strengthening of Moscow's political influence in Bulgaria, as evidenced from past experience.

Pipelines to nowhere

Since the idea to set up a gas trading platform in Bulgaria, Balkan gas hub, popped up after the cancellation of South Stream, Prime Minister Borissov has not been hiding his ambition to make Bulgaria a key player in the distribution of natural gas flows in the region.

"Our compressors are being modernized to work in reverse-flow mode, we can transport gas in all directions. The total volume of Russian gas which will come to Bulgaria through Ukraine and through TurkStream, tops 30 billion cubic meters. Now we need to find an appropriate formula how much of that quantity we will transit and how much will be traded," he said during a briefing after his meeting with the Russian president in May.

However, in order for Bulgaria to become a gas distribution center and the investment in Balkan hub to be profitable, it is necessary first to find customers who would like to buy natural gas. Only then come the negotiations, the provision of supplies and finally the connectivity of transit networks.

That is why the Russian president was quick to make clear that "the supplied volume will depend on the demands of the consumers of Russian gas." It may turn out that Russia's Gazprom has no interest in transiting additional gas volumes through Bulgaria, since the market in the region is changing.

Romania is expanding its own natural gas production in the Black Sea and plans to become an exporter and stop imports from Russia. The country has already signed a preliminary contract with Hungary to deliver 4 billion cubic meters representing 40% of annual consumption from 2021 on, which will reduce imports from Russia. Austria, where the European gas hub closest to Bulgaria is located, is in talks to receive gas from Nord Stream 2,

the planned export gas pipeline stretching from Russia to Europe across the Baltic Sea.

To the south of Bulgaria, Turkey has secured direct supplies from Russia through the TurkStream and will not need Bulgaria as a transit country. Turkey has also gained access to Caspian gas after Azerbaijan released the first quantities from its Shah Deniz II field along the Southern Gas Corridor, which brings together the South Caucasus Pipeline Expansion (SCPX), the Trans-Anatolian Natural Gas Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP). The plans provide that in a year and a half TAP will start transiting 10 billion cubic meters of natural gas across from Greece via Albania and under the Adriatic Sea to Italy.

Gazprom has a contract with Bulgarian gas transmission system operator Bulgartransgaz, which requires it to pay for transit even if it does not transport the specified quantities until 2030. No contract foresees payments of more than 1.5 billion euro as of 2019. Bulgaria can sue Gazprom if the Russian company stops the transit through its territory altogether.

In order to avoid potential legal action, Gazprom is seeking a way to keep the volume of its gas transit but instead through Romania from the north, to transport the gas from the south to Serbia and then through Hungary and Austria to Italy. However, to do this, Gazprom needs infrastructure that is currently unavailable. And here we are not talking about interconnections, which serve rather to ensure the security and diversification of supplies, but for an entirely new pipeline from the border with Turkey to the border with Serbia, whose value Bulgartransgaz estimates at 2.8 billion levs.