After years of procrastination, Bulgarian national gas supplier Bulgargaz and its Turkish equivalent Botas signed a major agreement on January 3rd for access to Turkey's gas transmission infrastructure until 2035. From Bulgaria's viewpoint, the deal represents a serious diplomatic breakthrough, and one never brokered by any of the previous cabinets. This does not mean that Bulgaria's gas supplies issues are now resolved. However, it does show that gas trade relations with Turkey are now possible for the EU and that Erdogan's government is trying to wield more power over those Eastern European markets that are now deprived of Gazprom.
In recent years, attempts at similar agreements were made both by the government of GERB and that of Kiril Petkov. Only now, however, has one been officially inked.
The agreement involves the Bulgarian gas supplier using the Turkish gas infrastructure and it essentially books transmission capacity of up to 1.5 billion cubic meters per year. The contract's length is 13 years.
It is very likely that, if imports are made, the gas will come via the LNG Turkish terminals. However, there is no real intersystem connectivity, since Bulgartransgaz (the operator of the Bulgarian transmission network) had to sign for this purpose on the Bulgarian side. This means that other gas traders, apart from state-owned Bulgargaz, will not be able to use the Turkish infrastructure.
It is important to specify, however, that the contract does not fix a specific import, but only gives the possibility to use capacity through the gas transmission network. This means that in order for Bulgaria to be able to import 1.5 billion cubic meters of gas through Turkey, it will first have to secure the corresponding quantities with LNG traders, as it is doing now.
From Turkey's point of view, however, this agreement opens the possibility for the country to become an important gas distribution hub for the entire Balkan Peninsula, and even Ukraine. Azeri gas now passes through Turkey, but it gets distributed to the EU from Greece. As for the Russian Turkstream pipeline, the Botas currently does not have the opportunity to trade the gas there.
A long-awaited deal
Last month there was talk of this deal between Bulgaria and Turkey. President Rumen Radev even visited Istanbul where he met Turkish leader Recep Tayyip Erdogan. We should also note that the director of the Russian gas giant Gazprom was also in a meeting with Erdogan on the same day.
According to Kapital sources, the Bulgarian president takes personal responsibility for the gas agreement. Previous attempts have been made before. Kiril Petkov personally visited Turkey last summer, but apparently the changing geopolitical situation and other details, which will remain confidential, were key to the agreement being reached now.
Only months ago, some of the LNG arranged by the Petkov government in the early summer of 2022 was brought through Turkish terminals without an intersystem agreement, but with an agreement at the highest political stage.
"Last month, our presidents met in Istanbul. Even before a month has passed, the issues that were discussed are already turning into concrete steps. The contract will develop cooperation in the field of natural gas between the two countries, and is also important for increasing the security of supply in the Balkan region. Our 5 terminals will contribute to this success. This is an important step towards Turkey becoming a gas supply hub, and capacity can be increased in the future," said Turkish Minister of Energy Fatih Dönmez at the signing in Sofia.
From the public announcement, it is not yet clear why the agreement is for a period of 13 years. At first glance, there may be a link with the EU's net zero goals, but it has already become clear that a number of countries are entering into long-term contracts for the supply of liquefied gas with traders, mindful of the need for more predictability and low cost. An example is that of Germany with Qatar. It is possible that the deadline was demanded by the Turkish side and that Bulgargaz simply agreed.
The deal's financial parameters have not been publicized so it is unclear how much Bulgargaz will pay for access and also whether it owes indemnity if it does not use the booked capacity. The latter is a common practice in the gas environment, and if so, the costs will definitely affect the price of gas for the Bulgarian market, as the company will have to cover them.
What is changing?
Bulgargaz will be able to use the Turkish liquefied gas terminals similar to the Greek Revitusa and the one currently in construction at Alexandroupolis. Turkey has 5 terminals, while one in Saros, according to Turkish media, is due to be launched in a matter of days. In addition, Botas states that it will now start working with Indonesia, which is among the largest depths in the entire world.
All this is on the premise that Turkey becomes a regional energy power, as only two of the terminals have a regasification capacity of 14.2 billion cubic meters per year (4 times more than Bulgarian needs). The other three have a smaller capacity, as they are floating - of the FSRU (floating receiver terminal) type, but they allow serious flexibility of the gas transmission network. The country also has serious political influence in Azerbaijan, which many European leaders have seen as a gas safe haven in the last month following the outbreak of war in Ukraine.