by Shahmar Hajiyev

The Russia-Ukraine war has changed the traditional energy map in Europe, and the EU countries seek options to ensure energy security on a long-term basis. Bulgaria as the EU member state is interested in various energy projects to ensure its energy security and become a regional energy hub to supply natural gas to neighboring countries. Analyzing the natural gas market of Bulgaria, Sofia is among the countries, which are in the Ukraine regional risk group for natural gas supply from the East. In 2021, Bulgaria's natural gas import dependency rate was 96%, and Sofia has been almost totally dependent on imports from Russia. The domestic consumption of natural gas in 2021 exceeded 3.3 bcm/year, and the country intends to receive half of that volume from Azerbaijan via the IGB, and also through deliveries of liquified natural gas (LNG) from a coastal terminal in Greece.

Thus, as can be seen, Bulgaria is not the largest EU natural gas consumer, but the major share of natural gas comes from Gazprom, and the main partner of “Gazprom Export” in this country is the state-owned energy company “Bulgargaz”. The Russia-Ukraine war is having a negative effect on energy market of Bulgaria. On the background of such developments the Bulgarian government revised its energy priorities, and one of the major steps is to import natural gas from Azerbaijan, close cooperation with Greece to receive LNG from the Greek regasification plants and LNG shipments from the United States as Sofia has secured one cargo shipments from US company Cheniere to ensure gas inflows in the winter.

In fact, that Sofia has already received the first US LNG cargo in June 2019.  In general, by increasing the supply of LNG, the country wants to achieve diversification of natural gas sources. In this regard, the Bulgarian government has already approved the participation of the country's main energy company "Bulgartransrgas" in the LNG gas terminal in Greece. According to the agreement, Bulgaria will have a 20% share in the terminal located in the north of Greece, which will start operating in 2023. The mentioned project consists of an LNG storage facility, a gasification plant and a 28 km long pipeline. In particular, it should be noted that this terminal will receive LNG from Qatar and the US.  Bulgaria is also buying ships for LNG transportation.

Touching upon the US LNG shipments, it should be noted that the US has already increased LNG exports to Europe. Almost 70% of the cargoes, or 4.37 mt, headed to Europe, up from 56% and 63%, respectively, during August and September. U.S. energy firms sent 11.5 billion cubic feet per day (bcfd) of gas to the country's seven big liquefaction plants in September to be turned into LNG for export during growing concerns over a gas provision in Europe.

Another important source of energy for Bulgaria is natural gas from Azerbaijan, which will be exported via the European leg of the Southern Gas Corridor (SGC) - Trans Adriatic Pipeline (TAP) to Greece and from Greece via the IGB pipeline to Bulgaria. The official inauguration ceremony of the IGB pipeline took place in Sofia on October 1, 2022. The EU supported this project and allocated around EUR 250 million for its realization. The project is very crucial for the Bulgarian system as it currently relies almost exclusively on a single source (95% of the whole market) and on a single North to South route for its supply and market needs. The IGB pipeline is the first Bulgarian Cross-Border route that will be at the disposal for new-entry Shippers as well as diversification of imported gas through Greece with complementary supply sources from the Caspian Region, Middle East, East Med and LNG (through existing/new terminals in Greece and/or Turkey). The IGB project is supported by the Trans-European Networks for Energy, and it is a project of common interest and a priority project under the Central and South Eastern Europe Energy Connectivity High-Level Group.  Speaking about the project, the President of the European Commission Ursula von der Leyen emphasized – “This pipeline is a game changer. It is a game changer for Bulgaria and for Europe's energy security. And it means freedom. It means freedom from dependency on Russian gas. Indeed, the interconnector could cover the entire gas consumption of Bulgaria”.

Bulgaria had already signed an agreement to import 1 bcm/year of natural gas from the SGC which is approximately one-third of Sofia’s natural gas consumption. As the capacity of the pipeline is to be 3-5 bcm/year, Sofia is interested in increasing the volume of Azerbaijani gas soon. Sofia has even offered to export electricity to Azerbaijan in exchange for expanding gas supplies via SGC.

The IGB project, which connects the Greek-Bulgarian gas systems, is a very strategic project for Southeast Europe. The IGB project plays an important role in strengthening the energy security of Europe and diversification of gas supplies. For Bulgaria, the IGB project ensures direct access to the Southern Gas Corridor and also provides access to the LNG terminal near Alexandroupoli. But since European countries are not totally equipped to receive sufficient LNG to meet energy demand, Azerbaijan’s partnership plays a crucial role in this sense. Azerbaijani natural gas is crucial for the diversification of supplies and routes, especially for South-Eastern Europe and Western Balkans.  

Today, European energy consumers support the idea that the TAP pipeline enhanced regional energy security through the diversification of supply sources and routes that would further increase regional gas market integration and competitiveness. In addition, the pipeline also creates favorable conditions for countries to support energy security by developing gas interconnectors. One of the best examples is the IGB project and the planned Ionian Adriatic Pipeline (IAP) to link to the markets in Croatia, Albania, Montenegro and Bosnia and Herzegovina. 

In the end, the SGC, with all its segments is a very important energy project, which supports ambitious transformation of the EU energy system. TAP is the first pipeline supplying Caspian gas directly to Europe. For Europe, the TAP project is a diversification of gas sources and supply routes. In addition, the project supports the development of natural gas interconnectors in Europe. Azerbaijan has proved itself as a reliable energy partner for Europe for many years, and now the Azerbaijan-EU energy cooperation enters a new phase after signing “MoU on Strategic Partnership in the field of energy between the Republic of Azerbaijan and the European Union”. A total of 10 bcm of natural gas from Azerbaijan entered Europe via the TAP pipeline, and until the end of this year around 11.5 bcm of gas will go to European consumers. Baku will increase gas supplies to Europe and by 2027 the capacity of the TAP pipeline will be doubled to reach 20 bcm/year. Towards this end, the Bulgarian government sees an effective mechanism by expanding energy cooperation with Azerbaijan. In this sense, the launch of the IGB pipeline will enable Bulgaria to achieve diversification of both energy supply sources and routes.

Shahmar Hajiyev, a senior advisor at the Center of Analysis of International Relations (AIR Center), and Narmin Musayeva, an intern at the AIR Center, especially for News.Az