Bulgarian media report triggers speculation about South Stream gas project revival

Bulgarian media report triggers speculation about South Stream gas project revival
By Dimitar Koychev in Sofia January 11, 2016

Bulgarian prime minister Boyko Borissov is preparing to revive the halted South Stream natural gas pipeline project, designed to transport Russian gas to Europe bypassing Ukraine, according to a January 11 report in local daily Standart, which quotes sources close to Borissov. Experts have reportedly informed the daily that work on the project is set to resume in several weeks.

Both the Bulgarian government's press office and the Russian energy ministry denied having any information or documents regarding a potential change in the project, which was frozen personally by Russia's president Vladimir Putin in December 2014 in favour of a potential Turkish Stream pipeline. South Stream’s cancellation was a heavy blow to Bulgaria, which currently imports almost all its natural gas from Russia through Ukraine.

Although Moscow’s official reason for the scrapping of the project was Bulgaria’s failure to provide its consent to the construction, the real hurdles are believed to have been related to a legal and political conflict which prevailed over the economic rationale.

The key legal issue was related to EU energy market regulations that require third party access (TPA) to gas infrastructure on EU territory, meaning that Russian state-owned natural gas export monopoly Gazprom should provide access to its pipelines for other companies on a competitive basis. However, Gazprom wanted to book and utilise the full capacity of the onshore extension of the South Stream pipeline, which would have reached Bulgaria under the Black Sea, then continued to Serbia, Hungary, and Austria.

Bulgaria did not stop work on South Stream after Putin scrapped it, claiming it had orders that had not been cancelled officially. Under the initial South Stream proposal, the 63bn cubic metre capacity pipeline was estimated to cost $29.3bn, well above Turkish Stream’s price tag of $11.4bn.

Bulgaria's deputy prime minister Tomislav Donchev revealed in December that Bulgarian and European Commission officials have been in talks for several months over the possible resurrection of the project.