The Bulgarian gas market needs competition for private companies to be able to flourish, Matthew Bryza, board member at the country's gas distributor Overgas and former US ambassador to Azerbaijan has told Argus.
There are over 100 privately owned gas traders in Bulgaria, while more and more gas is entering the country as LNG, Azeri gas and supply from elsewhere, Bryza said. On top of that, the country's gas grid is well connected to neighbouring countries. "You have all the pieces but it doesn't work," he said.
Behind the market's dysfunction is the role of state-owned gas supplier Bulgargaz and the "non-transparent" way in which prices are set, which leads to "all sort of inefficiencies", according to Bryza. "Bulgargaz has the ability to essentially set the benchmark price in Bulgaria" using its regulated gas price, he said. The regulated market is much larger in Bulgaria than in most countries, where it includes only customers in low-income, vulnerable households or government assets such as schools and hospitals.
And the unregulated market is the Bulgargaz-regulated price plus a margin rather than a market-based price, Bryza said. "It is a price that Bulgargaz decides" and can adjust to maintain its market share — the firm can for instance reduce the price "if it wishes to squeeze out competitors, making it impossible for private companies to be able to compete" and then raise the price whenever it later chooses to make up some of its losses, he said.
Bryza also pointed to bottlenecks where places of gas transmission or transit "are effectively blocked by state monopoly players or controlled by them".
The agreement, announced in January 2023, between Bulgargaz, Bulgarian system operator Bulgartransgaz and Turkish state-owned supplier and system operator Botas is a "great example" of this, according to Bryza. The Bulgarian firms have agreed that only Bulgartransgaz and Botas will have access to the Strandzha 1-Malkoclar interconnection point — "they will monopolise it so private companies like Overgas have no ability to simply buy their supply from whomever they wish, whether from a US or other LNG supplier who lands the gas in Turkey or from Azerbaijan".
Overgas was in negotiations with the Turkish side on the possibility of receiving supply at LNG terminals in Turkey, but according to Bryza, "suddenly they told us that is not available and it turns out that this was because of the exclusive deal between Bulgargaz, Bulgartransgaz and Botas". Besides undercutting competition, the agreement hampers Europe's efforts to move away from Russian gas, he argued, because "it obligates Bulgartransgaz to receive and transport whatever gas Botas brings to the Strandzha 1-Malkoclar point without Botas having to disclose the origin of the gas".
Bryza expressed his surprise that Hungary and Serbia have their own supply deals with Azerbaijan with gas moving across Bulgaria, while private firms in Bulgaria are unable to do so.
Overgas had to purchase supply from Bulgargaz last year, similar to other suppliers and traders active in the country, because of limited other options. But the firm plans to import LNG at the soon-to-be-commissioned Alexandroupolis LNG terminal in Greece and receive it through the Interconnector Greece-Bulgaria, while it has booked LNG slots at the other Greek terminal Revithoussa for the coming years.
Bryza acknowledged that governments have a "legitimate need to make sure the gas will be available for the population" but argued that in Bulgaria and some other countries, "the government operates in a way that squeezes out the private sector".
The Bulgarian government should push for the liberalisation of the gas market and higher transparency, Bryza said. If the government is not eager to do that, "then it is up to the European Commission to come in" and enforce its own regulations designed to ensure a competitive market, he said.
Overgas launches transparency initiative
Overgas has recently launched an initiative to increase transparency in Bulgaria and across Europe.
This includes greater availability of data by European system operators and requires working with the European Commission and its directorate-general for competition as well as "talking to other like-minded players", Bryza said.
The private sector needs to push for higher transparency and at the same time can help by bringing to the commission's attention situations like "unfair" state aid to Bulgargaz through two recent loans, he said.
There were "some productive meetings since the beginning of last spring and I am getting the sense that the commission is listening and is pressing the Bulgarian government to undertake either steps towards transparency or fair market behaviour", Bryza said.
With higher transparency all around the EU, "we would see a much stronger private sector and therefore greater efficiency, greater security of supply and lower prices," Bryza concluded.
