Bulgaria-Turkey gas deal may break market principles – EFET

LONDON (ICIS)–The European Federation of Energy Traders (EFET) has raised concerns about potential discrimination against gas users following a 13-year agreement between Bulgaria and Turkey for access to the Turkish gas grid.

In a letter addressed to the European Commission and Bulgarian state supplier Bulgargaz, seen by ICIS, EFET said the terms of the deal between Bulgargaz and the vertically integrated Turkish gas company BOTAS would offer “suboptimal market conditions” to other licensed gas traders.

Bulgargaz signed a deal on 3 January to have access to the Turkish gas grid or LNG terminals, which are entirely or partially operated by BOTAS and import volumes of up to 1.5 billion cubic metres (bcm)/year.

The full terms of the agreement were not disclosed but EFET fears only Bulgargaz would have access to volumes sourced in Turkey, preventing other companies active in the region from entering the Turkish market.

EFET CONCERNS

EFET also raised several other major concerns related to:

– the absence of an interconnection agreement between Bulgaria and Turkey for the Strandzha 1-Malkoclar interconnection point, where the gas is expected to be exported from Turkey to Bulgaria;

– a lack of transparency about the exchange of information between BOTAS and the Bulgarian gas transmission system operator Bulgartransgaz;

-a lack of procedures and rules for operation that BOTAS and Bulgartransgaz should have commonly agreed;

– BOTAS’ delays in implementing key technical protocols needed for the correct operation of flows, including the implementation of the Edig@as communication protocol for data exchanges, the offer of interruptible capacities on the Strandzha 1-Malkoclar border point, the introduction of renomination cycles, the use of energy units and the redefinition of the gas day in Turkey to facilitate capacity allocation and nominations on the border.

MARKET VIEW

The exclusive right of Bulgargaz to access the terminals in Turkey was an example of state aid and against market principles, several sources told ICIS.

One source queried “why other companies were not allowed to sign similar deals or at least let the Turkish infrastructure to be open to all participants”.

Sources said Bulgartransgaz and BOTAS must sign an interconnection agreement to allow cross-border flows at the Strandzha 1-Malkoclar border point.

A second market participant said a lack of transparency regarding any such agreement was extremely worrying, saying: “why on earth would you sign a long-term deal and not tell the world you have all the regulations and grid in place?”

The border point has not been used since January 2020, as Turkish volumes were diverted to the newly commissioned 15.8bcm/year TurkStream2 pipeline.

A third source said the European Commission could look at the Bulgargaz-BOTAS deal and rule it broke market principles.

“Allowing only two players to use one grid is against the EU free market rules,” said the same source.

BOTAS ACTIVITIES

BOTAS has been operating in isolation from the European grid, as cross-border trade with neighbouring Bulgaria or Greece has been very limited.

Traders reported possible imports of gas sourced as LNG via one of the Turkish terminals at the end of May, but the information was never officially confirmed by BOTAS or Bulgartransgaz.

However, Russia recently said it would seek to establish a hub in Turkey.

Turkish sources said BOTAS may buy volumes from Russia and sell them on to Europe.

The gas could be imported either as pipeline gas or as LNG into Turkey, which is due to bring its fifth LNG terminal online on 22 January, when the 180,000 cubic meter floating storage and regasification unit Vasant is commissioned.

Neither BOTAS nor Bulgargaz commented on the EFET letter by publication time.

Additional reporting by Luka Dimitrov