Every investigation by the European Public Prosecutor's Office (EPPO) in Bulgaria has so far started with a lot of noise, but true results are still being awaited. Last week, representatives of EPPO opened an investigation against state-owned gas transmission system operator Bulgartransgaz. It began according to the familiar scenario - police searching offices, vague media reports and lack of official explanations. The question is how it will end.
After the initial fog cleared, it is now known that the inspection is related to the project for expansion of the Chiren underground gas storage facility, which is financed with 78 million euro in grants from the EU. This is precisely where the competence of European Chief Prosecutor Laura Kovesi lies.
The expansion of the gas storage facility in northern Bulgaria is one of the largest infrastructure projects in the country in recent years, with a total budget of 600 million levs. It is of great importance for Bulgaria and the region, as the storage capacity will be doubled and the facility will be completely modernized, in order to be able to provide flexible services to the market. The project will also provide an opportunity for greater diversification and security of supply. It has priority status in the Three Seas initiative.
But during the preparation and conduct of the tender procedure, there were quite a few delays, changes, controversial moments and complaints, which may have become the reason for the current investigation.
Why this investigation?
Work on the expansion of the Chiren gas storage facility was supposed to run already at the end of 2022, but shortly before the start Bulgartransgaz, then managed by the current caretaker energy minister Vladimir Malinov, stopped the procedure due to a change in the parameters and the inclusion in the project of an additional gas pipeline to the village of Butan that would connect the storage site to the national gas transmission network.
But, apart from technicalities, the project was also hindered administratively, as the public procurements were launched and stopped several times, and when the winners were announced, the losers began to appeal before the Supreme Administrative Court.
In the end, the three tenders for the implementation of the project looked like this: the above-ground part, which includes the construction of a new compressor station, with an estimated value of 300 million levs (approx. 150 million euro); the underground part would cost an estimated 133 million levs, and the gas pipeline to the village of Butan will be built for 84 million levs. The contractors for all the three sites are consortiums of Bulgarian construction sector leader Glavbolgarstroy (GBS) - Tech Energy Expansion, UG ES Drilling Chiren and Stroygassystem. The contracts signed in the spring of 2023 for all the three components of the project have a term of 500 - 600 days.
During the tenders, the loudest complaint came from Czech consortium Generalel and Emendi Gas (formed by two companies - DS Invest and KB System, which publicly announced that the existence of three separate orders was illogical and could lead to corruption because all three parts of the project are connected and must be worked upon together with the other contractors. According to the Czechs, it was impossible for them to win a tender for the order because of the connection between the three procedures and the requirement to work together with Bulgarian companies even if they did not want to. In this way, foreign companies were actually not admitted to the auction, and at that time there was a notification that the European Prosecutor's Office would be contacted.
However, during a briefing on the inspections at Bulgartransgaz held on August 14, energy minister Malinov hinted that the signal that provoked the investigation had come from the Bulgarian Energy and Mining Forum, a non-governmental association of energy professionals. The signal was sent already at the beginning of the year, and the specific reason was the implementation of the underground part of the extension, in which the main work of the contractor is the drilling of 13 wells (10 operational obliquely directed and 3 observational vertical). According to the signal, the awarded contractor has no expertise in the organization and execution of wells and therefore relies on subcontractors "with questionable professional experience in the drilling of operational inclined wells". The biggest problem, according to the complaint, is related to the replacement of the 10 exploitation wells with 10 vertical wells, which will save the contractor 80-90 million levs. A vast amount of money for a project of this size.
The Capital Weekly asked GBS to comment on the subject of drilling, the subcontractors and the reasons for the change in the type of wells.
"The main drilling solutions implemented in the technological part are based on Halliburton's experience, technical solutions for oblique directional drilling, elastic cement and high-strength steel of the highest class have been selected and implemented. Project management, including drilling supervision, is assigned to the American company Hill International, who are global and leading experts in drilling," stated the company. And then added that the public procurement procedure was not organized with a requirement for a specific type of directionality of the drilling, but as an order for a complete engineering including updating the model, determining the locations and type of wells, supply of materials, construction and commissioning of the wells with the following objectives - increasing the storage capacity, increasing the daily productivity and increasing the reservoir pressure.
According to the company, there are enough technical reasons to make the technological change. "Based on the specialized studies carried out over the years, Glavbolgarstroy - in cooperation with recognized international experts in the field - has developed a three-dimensional computer model to identify the most productive areas for gas storage.
"Based on the results, the observations, the simulations and the conclusions drawn from the 3D modeling, the recommended trajectories of the new drillings - vertical - have been determined. For the final decision regarding the choice of vertical wells, a key role was also played by the significantly higher levels of safety in the implementation, as well as by the low costs of their maintenance in the future. It should also be noted that 20 out of the total of 24 already existing boreholes in the Chiren gas field are vertical, and it is they that give the best indicators in terms of productivity".
Where is the problem?
The management of Bulgartransgaz did not give details about the inspection by the EPPO. At an emergency briefing, executive director Kiril Ravnachki stated that the company has provided full assistance, and due to the huge volume of documentation, the inspection at the company's office lasted about ten hours.
Caretaker energy minister Vladimir Malinov announced that by his order the contract with GBS will be suspended until the inspection is completed. He called for it to be carried out in the shortest possible time so that there is no delay in the implementation of the overall project.
No activities have been carried out under the contract, and no requests for payment have been made (except for an advance payment in the amount of 65 million levs), Malinov said.
GBS, however, says in its answers to the Capital Weekly that on Lot 1 and Lot 3 most of the works under the contract have been completed. Namely, on Lot 1 (Chiren - above ground part) the delivery of main equipment and construction of the above ground part have already been carried out, and on Lot 3 (Chiren - Butan pipeline), the company is finalizing construction works for putting into operation the entire length of the 41 km. long gas pipeline. Regarding Lot 2 (Drilling Fund), which consists of boring 10 new operational wells and 3 new observation wells, "for one of the operational wells, a construction permit was received less than a month ago and documents were submitted for the others, as we expect it is up to a month for us to receive approval for the rest of the drillings as well".
Interestingly, Malinov directly spoke about a deliberate delay and foreign interference aimed at discrediting the project and hindering the diversification of natural gas supplies to Bulgaria, expressing hope that this angle will be investigated during the inspection.
What did he have in mind? Without specifically naming Russia and Gazprom, Malinov gave an answer. "You yourself can answer the question of who has interest in Bulgaria not diversifying and not having security of its supplies given the dependence in previous periods on specific sources and supplies," he told journalists.
The Chiren project
The expansion of the Chiren underground gas storage facility is of critical importance to Bulgaria's gas transmission network, as it would double storage volumes and allow operation in reverse mode so as to respond quickly in the event of a need for gas injection in winter or storing fuel in summer.
Until now, only one of the functions has been possible, and to a large extent this is the reason why the work in Chiren during the calendar year is divided into two - 6 months of injection and 6 months of mining.
After the modernization, it will be possible to reach 8-9 million cubic meters of injection capacity and 10 million cubic meters of production with average daily winter needs of 13 million cubic meters (currently the capacity is half that amount). Thus, Chiren will generate more interest on the part of gas suppliers and stimulate trade, especially after the launch of the gas interconnection with Greece.
Bulgaria's natural gas consumption is about 3 billion cubic meters per year, two-thirds of which is used in winter by heating utilities and several large manufacturing plants. After the expansion, the storage facility will be able to cover half of the country's winter consumption.
Every investigation by the European Public Prosecutor's Office (EPPO) in Bulgaria has so far started with a lot of noise, but true results are still being awaited. Last week, representatives of EPPO opened an investigation against state-owned gas transmission system operator Bulgartransgaz. It began according to the familiar scenario - police searching offices, vague media reports and lack of official explanations. The question is how it will end.
After the initial fog cleared, it is now known that the inspection is related to the project for expansion of the Chiren underground gas storage facility, which is financed with 78 million euro in grants from the EU. This is precisely where the competence of European Chief Prosecutor Laura Kovesi lies.
