UPDATED: Romania, Bulgaria, Ukraine to test gas flows by end of 2016

Natural gas flows between Ukraine, Romania and Bulgaria will be tested by the end of the year after grid operators of the three countries signed landmark interconnection agreements, a source familiar with the matter has told ICIS.

The deals will allow bi-directional virtual flows spanning the region from Ukraine to Greece, the European Commission and Ukrainian grid operator Ukrtransgaz announced on Wednesday.

Romania’s transmission system operator (TSO) Transgaz, Bulgaria’s Bulgartransgaz and Ukrtransgaz, plan to provide shippers with firm and interruptible transportation capacity from Ukraine to Bulgaria, and interruptible reverse flow capacity from 1 October 2016.

The agreements are an important step towards the opening of the Trans-Balkan pipeline to third parties for the transport and trading of natural gas in the region in line with EU rules.

“Western traders are very interested in the Bulgarian market,” said Sergiy Makogon, executive director of Ukrtransgaz. “We have already received a lot of enquiries about organisation of gas flows from Slovakia to Romania.”

He added that up to 20 billion cubic meters (bcm)/year can be transported from Slovakia via Ukraine to Romania and the same volume in the opposite direction.

Ukrtransgaz said the agreement with Transgaz is for the Isaccea-Orlovka interconnection border point on the Trans-Balkan pipeline. The interconnection point has been used to transport gas from Russia via Ukraine and Romania to Bulgaria.

From 1 January, the exit tariff at Orlovka is $23.12/thousand cubic meters(kcm). The entry tariff in Ukraine is $12.47/kcm.

The Trans-Balkan pipeline had been used by Russian producer Gazprom to supply gas to Eastern Europe and Turkey as part of long-term contracts. Two transit contracts, one with Bulgaria and one with Romania are due to expire this year, freeing up pipeline capacity to private parties.

Earlier in June, the transmission system operators of Bulgaria and Greece signed a similar interconnection agreement, allowing market players to transport gas, including from LNG sources, between the two countries. A private Greek company subsequently sold volumes to Bulgaria in reverse flow for the first time on 1 July.

The interconnection agreements were signed as part of the broader Central and South Eastern European Gas Connectivity (CESEC) initiative launched in 2015 by 15 countries from the EU, the Energy Community and the EC.

“The agreement will also allow Ukrainian traders to buy gas in Greece and flow it to Ukraine,” Makogon said but added that this transport route has seen little interest from traders yet.

Ukrainian producers can also potentially use the agreement to export gas to Bulgaria. Previously, some producers active in Ukraine told ICIS they would be interested in exporting gas in the future.

However, in order to flow gas from Ukraine, Ukrainian companies must receive export quotas, according to Makagon. This has been viewed as an obstacle by traders so far. aura.sabadus@icis.com and ekaterina.kravtsova@icis.com