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The Bulgarian Natural Gas Market:

The TSO’s point of view

Angel Semerdjiev, Executive Officer, Bulgartransgaz EAD

30 January 2009, Sofia

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Development of the gas market in Bulgaria

1963

1974

70 - ties

1993

End of 2006

September2008

Discovery of Chiren - gas field with limited resources

Transformation of the depleted gas field into an UGS

Construction of the main gas pipeline from the former USSRto Bulgaria and the national gas transmission system

Establishment of Bulgargaz EAD – successor of the “Oil and Gas” state owned company. Activities: production, transportation, distribution, storage and sale of natural gas

Unbundling of Bulgargaz in compliance with Directive 2003/55/EC. Establishment of Bulgartransgaz as a TSO

Establishment of Bulgarian Energy Holding (BEH) with 100% state ownership. Bulgartransgaz part of BEH.

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Bulgarian Energy Holding EAD

BEH EAD subject of activities is generation, production, transmission, transit, storage, management, distribution, sale and/or purchase of natural gas, electricity, thermal power, coals, as well as any other type of energy and raw materials for energy production.

The Holding includes the following companies:

● Mini Maritsa East EAD ● Maritsa East 2 TPP EAD ● Kozloduy NPP EAD ● NEK EAD ● Electricity System Operator EAD ● Bulgargaz EAD ● Bulgartransgaz EAD ● Bulgartel EAD.

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Bulgarian Energy Holding EAD

With the establishment of BEH, Bulgaria has one of the largest

energy companies in the region with:

assets EUR 4.3 billion

consolidated revenue EUR 1.8 billion

number of employees 21 000 people.

All companies of the holding structure preserve their operational

independence and licenses, as they are all owned and directly

subordinated to the corporate centre BEH EAD.

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Present situation of Bulgarian gas market (1):

Main players:

Public supplier (Bulgargaz) – imports gas from Gazprom

(through contracts with three trading companies: Overgas Inc., Gazpromexport,

WIEE)

TSO (Bulgartransgaz) – natural gas transmission

SSO (Bulgartransgaz) – storage of natural gas

Producer (Melrose Resources) - Galata field

Five gas distribution regions

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Present situation of Bulgarian gas market (2):

One source and one route of natural gas – full dependence

on Russian-Ukrainian conflicts;

Contract for transmission only between the TSO and the

Public supplier: Public supplier holds all the contracts with

different customers and represents their interests - No direct

contact of the TSO with individual customers, no contracts

for balancing with individual customers;

Transmission Tariff – Post stamp.

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The licenses of Bulgartransgaz EAD:

The gas companies carry out their activity as per licenses,

granted by the State Energy and Water Regulation

Commission (SEWRC).

SEWRC has granted to Bulgartransgaz the following licenses:

License on natural gas transmission: the only one for the territory of the country;

License on transit transmission of natural gas;

License on natural gas storage.

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Bulgartransgaz EAD is owner and operator of:

Domestic gas transmission network in Bulgaria

1700 km of gas pipelines

4 compressor stations with total installed capacity 60 MW

Transit network in Bulgaria to Balkan region 945 km of gas pipelines:

40-48’’- 740 km; 20-28’’ - 195 km

6 compressor stations with total installed capacity 214 MW

Underground gas storage

the only one within the territory of Bulgaria.

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Chiren UGS

Legend:Main gas pipelineGas pipeline branchTransit gas pipelineCompressor stationGas reduction station

CS Kardam 1

CS Kardam 2

CS Lozenetz

CS Strandja

SevlievoLovech

Zlatna Panega

Roman

Botevgrad

Elin Pelin

Pleven

Sofia

Pernik

Vratza

MontanaRusse

Razgrad

IsperihKubrat

Turgoviste

BialaLevski

Varna

Dobrich

Gen. Toshevo

Burgas

DebeltIambol

Sliven

Rakovski

PlovdivPazardjik

Asenovgrad

Parvomaj

Stara Zagora

Dimitrovgrad

HaskovoCS Petrich

ROMANIA

SERBIA

GREECE

TURKEY

CS Polski Senovetz

CS IhtimanNova Zagora

CS Provadia

MACEDONIA

CS Valchi dol

Gas Transmission Infrastructure in Bulgaria:

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Organizational Structure of Bulgartransgaz

The structure of Bulgartransgaz EAD includes headquarter in Sofia

and regional offices in Botevgrad, Stara Zagora, Chiren, Ihtiman,

Valchi dol and BTRV and Repair.

Main divisions of the headquarter office:

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Gas transmission for domestic Market:

Capacities and utilization of the pipelines

The transmission of natural gas for domestic use during the last five

years shows a slight increase.

At the time the main system was built there were more working

facilities using natural gas and at present there is a lot available

capacity.

Natural gas transmission in Bulgaria in 2008:

3.65 bcm (44% of the capacity of the pipeline)

Although there is a lot of free capacity in the domestic pipelines a future

congestion near the town of Varna is expected.

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Gas transmission for Transit:

Capacities of the pipelines and real use

Bulgartransgaz transits natural gas to Turkey, Greece and Macedonia.

Total transit in 2008 – 16.7 bcm.

Transit by counties:

Turkey 13,71 bcm (81.5% of the capacity of the pipeline)

Greece 2.85 bcm (61.4% of the capacity of the pipeline)

Macedonia 0.12 bcm (12.4% of the capacity of the pipeline)

There is a long-term contract for the quantities of natural gas to the

three countries and a reasonable change in these quantities in the next

five years is not expected.

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National gas storage: Status quo plans 2011

One storage with total volume of working gas 560 Mcm 850 Mcm

Number of injection-withdrawal wells: 22 40

Maximum injection capacity daily: 4 Mcm 8 Mcm

Maximum withdrawal capacity daily: 4.3 Mcm 10 Mcm

In year 2008:308.4 Mcm of gas were injected and 246.6 Mcm were withdrawn.

Present production field near Galata is expected to become also a storage facility after year 2010.

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Construction of about 150 km gas transmission pipelines

Dobrich-Silistra and UGS Chiren–Kozloduy–Oryahovo.

To be accomplished by the middle of 2012 with own resources

and financing from Kozloduy International Decommissioning

Support Fund.

Additional drillings and over-ground facilities aiming at

expanding the UGS Chiren working gas volume, injection and

withdrawal capacity.

Investment activities - domestic:

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Lessons drawn from Winter crisis 2009

There is an urgent need of diversification:

Bulgaria is the most vulnerable European country, with full

dependency on Russian gas and only one supply route through

Ukraine;

Negotiations and agreements for new volumes and capacities in order

to differentiate the routes and sources of supplies;

Interconnections to neighboring countries;

Expanding UGS Chiren capacities and speeding up the conversion of

Galata gas field into second Bulgarian underground gas storage;

Research of opportunities related to natural gas production and LNG

terminal(s) construction.

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Other tasks of Bulgartransgaz for the near future:

1. Application for new Tariffs before SEWRC Tariffs for transmission and storage;

Tariffs for access and connection to network;

Tariffs for balancing.

2. Elaboration of Network code.

3. Work on transparency requirements: On-line booking and publication of available capacities in

transmission system and UGS, etc.

4. On-line protocol for communication with customers

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Thank you for your attention!