The Turkish gas operator Botas (BOTAŞ Petroleum Pipeline Corporation (BOTAS) warns of serious consequences for Bulgaria if it does not pay under the 13-year agreement.
The deal could result in Bulgargaz paying more than $2.3 billion for reserved capacity, whether it uses it or not.
The Bulgarian Parliament has called on Bulgargaz and Botas to review the terms of the deal amid concerns about the Bulgarian operator's financial situation.
This is stated in an ICIS analysis, reported a BGNES reporter.
Turkish gas operator Botash has rejected calls to renegotiate a controversial deal with its Bulgarian state partner Bulgargaz.
In a letter Botas sent to the Bulgarian state-owned company last month and seen by ICIS, the Turkish company said any failure by Bulgargaz to make multibillion-dollar payments as part of a 13-year deal would have "serious consequences".
Botas said the proposed amendments to the term sheet signed by both sides on December 30, 2022, would "disrupt the fundamental dynamics of the agreement and make its implementation unworkable for Botash".
The terms of the controversial deal, which were first revealed by ICIS in July 2023, require Bulgargaz to reserve and pay for transmission capacity on the Bulgarian side of the Strandja-Malkochlar border crossing with Turkey.
Under the deal, Bulgargaz expects to secure gas through Turkish pipelines or LNG terminals, which the Turkish operator Botash will deliver to Bulgaria at the Strandja-Malkochlar border point along the Trans-Balkan route.
The capacity to enter the border amounts to 106.4 GWh/day on the Bulgarian side of the Strandja-Malkochlar connection point and will be split in half for the duration of the 13-year deal.
Half of the total available capacity, or 53.2 GWh/day, will be reserved by Bulgargaz for it, regardless of whether it uses it or not. The remaining half belongs to "Botas", which can sublease it to third parties based on non-transparent criteria.
Under the deal, Bulgargaz is expected to pay $2.34 billion for the capacity, even if it does not use it.
Bulgargaz has requested a review of the fixed-term contract with Botas from December 2022 following a parliamentary inquiry into the deal, due to concerns that the terms will put the company and the Bulgarian energy sector in a precarious financial position.
Changes in the market?
In the letter, Botash also rejected claims by Bulgargaz that the renegotiation would be necessary to comply with "market changes", saying the Bulgarian operator's arguments were without merit.
"We would like to note that there have been no radical changes in the market that go beyond what the parties would reasonably expect upon entering into the Term Sheet," said Botas's letter dated July 17, 2024.
Botas stated that it "tried to comply to the maximum extent with the requests of Bulgargaz for additional financial and operational flexibility during the execution of the Term Sheet".
"A common understanding has been reached on certain mechanisms that can be achieved and that can improve Bulgargaz's ability to manage its supplies and finances without disrupting Botash's overall revenue expectations," the Turkish company said.
She also reported that Bulgargaz's demands for negotiations, presented in the July 4, 2024 letter, "do not take into account the extensive discussions and mutual efforts that are taking place between our companies and ministries."
Deputies point out that Bulgargaz must reserve capacity of 1.8 billion cubic meters per year and pay $180 million for it annually, but the 14 supplies of liquefied natural gas provided under the contract amount to 1, 3 billion cubic meters, which means that Bulgargaz has an excess capacity of 0.5 billion cubic meters per year, which it cannot serve. As a result, they have asked Bulgargaz to negotiate both supply and capacity based on seasonal needs, rather than following a fixed daily profile.
Finally, the MPs want Bulgargaz to be able to terminate the contract with reasonable notice without paying penalties. If it wants to terminate the contract, Bulgargaz will have to pay a 100% penalty on the value of the reserved capacity.
Neither Botas nor Bulgargaz have responded by the time of publication. | BGNES
