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1 PREVENTIVE ACTION PLAN This plan is drawn on the basis of art. 72(a), para. 1, it. 1 of the Energy Act and in line with the requirement of art. 5, para. 1 of Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC (the Regulation). The state policy in the energy sector is carried out through the National Assembly and the Council of Ministers. The National Assembly passes the Energy Strategy of the Republic of Bulgaria on a motion of the Council of Ministers which defines the main objectives, stages, means and methods for development of the energy sector. The Council of Ministers manage the energy sector in the country in line with the Energy Strategy passed by the National Assembly. On 1 June 2016 the National Assembly passed the Energy Strategy of the Republic of Bulgaria by 2020 with main priorities: ensuring the energy security of supply, achieving the renewable energy objectives, increasing the energy efficiency, development of a competitive energy market and policy aimed to ensure the energy needs and protect the interests of the users. The strategy’s main objective is achieving a high-tech, secure and reliable energy system which shall use modern information technologies and which shall meet the European criteria and at the same time using the maximum available resources in Bulgaria and protecting the Bulgarian users to the highest level. 1. MAIN INSTITUTIONS The Ministry of Energy (ME) is a state institution which carries out the energy policy in the country. The Minister of Energy is the competent body on natural gas security of supplies issues under Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC (ОВ, L 295/1 of 12 November 2010). The Minister drafts and submits to the Council of Ministers the strategic guidelines and programmes for sector development. Also, the Minister functions as an owner regarding the energy undertakings – state owned; adopts short-term, mid-term and long-term general forecasted energy balances of the country in line with the adopted strategy; submits to the Council of Ministers for approval a list of the strategic sites of national importance in the energy sector including those producing local solid fuels; issues an order defining the mandatory parameters for the degree of electricity supply reliability and the measures to cover these parameters etc. (http://www.me.government.bg) The Energy and Water Regulatory Commission (EWRC) is an independent specialized public authority responsible for the regulation of the activities in the energy sector, water supply and sewerage services. The Commission was established in 1999 as State Energy Regulatory Commission. In the energy sector, EWRC performs monitoring of the energy
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Page 1: PREVENTIVE ACTION PLAN - government.bg

1

PREVENTIVE ACTION PLAN

This plan is drawn on the basis of art. 72(a), para. 1, it. 1 of the Energy Act and in

line with the requirement of art. 5, para. 1 of Regulation (EU) No. 994/2010 of the

European Parliament and of the Council of 20 October 2010 concerning measures to

safeguard security of gas supply and repealing Council Directive 2004/67/EC (the

Regulation).

The state policy in the energy sector is carried out through the National Assembly and the

Council of Ministers. The National Assembly passes the Energy Strategy of the Republic of

Bulgaria on a motion of the Council of Ministers which defines the main objectives, stages,

means and methods for development of the energy sector. The Council of Ministers manage

the energy sector in the country in line with the Energy Strategy passed by the National

Assembly. On 1 June 2016 the National Assembly passed the Energy Strategy of the Republic

of Bulgaria by 2020 with main priorities: ensuring the energy security of supply, achieving the

renewable energy objectives, increasing the energy efficiency, development of a competitive

energy market and policy aimed to ensure the energy needs and protect the interests of the

users. The strategy’s main objective is achieving a high-tech, secure and reliable energy

system which shall use modern information technologies and which shall meet the European

criteria and at the same time using the maximum available resources in Bulgaria and

protecting the Bulgarian users to the highest level.

1. MAIN INSTITUTIONS

The Ministry of Energy (ME) is a state institution which carries out the energy policy

in the country. The Minister of Energy is the competent body on natural gas security of

supplies issues under Regulation (EU) No. 994/2010 of the European Parliament and of the

Council of 20 October 2010 concerning measures to safeguard security of gas supply and

repealing Council Directive 2004/67/EC (ОВ, L 295/1 of 12 November 2010). The Minister

drafts and submits to the Council of Ministers the strategic guidelines and programmes for

sector development. Also, the Minister functions as an owner regarding the energy

undertakings – state owned; adopts short-term, mid-term and long-term general forecasted

energy balances of the country in line with the adopted strategy; submits to the Council of

Ministers for approval a list of the strategic sites of national importance in the energy sector

including those producing local solid fuels; issues an order defining the mandatory parameters

for the degree of electricity supply reliability and the measures to cover these parameters etc.

(http://www.me.government.bg)

The Energy and Water Regulatory Commission (EWRC) is an independent

specialized public authority responsible for the regulation of the activities in the energy sector,

water supply and sewerage services. The Commission was established in 1999 as State Energy

Regulatory Commission. In the energy sector, EWRC performs monitoring of the energy

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markets, price and license control regarding the activities on electricity transmission, supply

and distribution; natural gas storage, transmission, supply and distribution; electricity and

natural gas trade, electricity and natural gas public supply, electricity and/or heat production

and transmission. (http://www.dker.bg)

Nuclear Regulation Agency carries out the state regulation of the safe use of nuclear

energy and ionizing radiation, and the safety management of radioactive waste and spent fuel.

The Agency is an independent specialized authority of the executive power, established in

2002 as a legal successor of the former Committee for Peaceful Use of Atomic Energy.

(http://www.bnsa.bas.bg)

Sustainable Energy Development Agency (SEDA) is a legal entity at state budget

support and has the status of an executive agency within the Ministry of Energy, established in

2002 as an Energy Efficiency Agency. Functions: drafting programmes and projects for

increasing the energy efficiency and the use of renewable energy sources, providing funds for

their co-financing and implementation. (http://www.seea.government.bg)

2. BASIC ENERGY PARAMETERS FOR THE COUNTRY

2015 Results*

* Based on the data in the findings of the fuel-energy balance for 2015 drawn up by the ME.

2.1. Natural gas production in the country

The total natural gas local production in the country for 2015 amounts to 84,743 mcm,

namely:

Oil and gas Exploration and Production Plc. – 9,274 mcm;

Petroceltic – 75,469 mcm.

The natural gas production in 2015 is 53,2% less than the production in 2014. For comparison

in 2014 it was 181 mcm.

2.2 Natural gas import

The total natural gas import for Bulgaria in 2015 is 10.4% more than the import realized in

2014. Currently the import is carried out under contracts with OOO Gazprom Export, the only

supplier for the country.

According to the data from the findings of the fuel-energy balance for 2015 drawn up by the

ME, the total natural import for 2015 amounts to 3 008 mcm, including:

2 595 mcm, under a contract with Bulgargaz EAD /2 558 mcm under a contract

for the country and 37 mcm for Southeastern Bulgaria/;

261 mcm under a contract between OOO Gazprom Export and Overgas Inc.;

152 mcm fuel gas for the transmission network for third countries.

2.3 Natural gas storage

The Natural gas storage activity is performed in the country’s only underground gas storage

facility Chiren (Chiren UGS), owned by Bulgartransgaz EAD. UGS Chiren is a complex of

underground and ground facilities – exploitations wells, gas gatherings (collectors), a

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compressor station of 10 MW total installed capacity, equipment for gas preparation,

treatment, control and metering and other auxiliary equipment. The technological process

related to the natural gas storage activity is seasonal (cyclic) and consists of gas withdrawal

and injection from/to the underground gas storage facility. In 2015, 295 mcm of natural gas

were injected. The withdrawals for the same period amounts to 291 mcm. The mandatory

buffer natural gas quantities are a constant and amount to 750 mcm.

Natural gas withdrawal and injection quantities for 2015 and 2014, mcm

Withdrawal 2015 Withdrawal 2014 Injection 2015 Injection 2014

Total 291 273 295 294

2.4 Natural gas consumption in the country

The total natural gas consumption in the country in 2015 amounts to 2 916 mcm, which is

10.7% more than the consumption in 2014.

Natural gas consumption in the country’s economy sectors, in mcm /according to the

data from the findings of the fuel-energy balance for 2015 drawn up by the ME/

№ Sector 2015 2014 Change

%

1 Energy 911 942 -3%

2 Chemistry 1 012 722 +40%

3 Metallurgy 90 87 +4%

4 Construction materials 44 43 +1%

5 Glass and chinaware 229 195 +17%

6 Distribution companies 452 443 +2%

7 Other 155 179 -14%

Total – in the economy sectors 2 892 2 614 +11%

Total for the country** 2 916 2 635 +11%

** Included are: the consumption in the economy sectors in the country, the technological expenses and own needs

Consumption Structure in % for 2015:

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The expected consumption from the major users in the country in the period 2016 –

2020 is the following:

/ mcm /

Year / Sector 2016 2017 2018 2019 2020

Consumption 3 100 3 300 3 500 3 700 3 800

- Energy 1 000 1 080 1 100 1 110 1 130

- Industry 1 537 1 550 1 681 1 856 1 900

- Distribution companies 463 491 519 524 540

- Other, including public,

administrative, health,

social etc.

100 179 200 210 230

2.5 Natural gas distribution by the distribution companies

In 2015 the gas distribution companies have transported through the distribution networks on

the territory of the country 441 mcm of natural gas. This quantity is 2% more than the

realization in 2014.

Overgas Networks AD, Citigas Bulgaria EAD and Black Sea Technological Company (BSTC) AD

are the gas distribution companies with the biggest market share in the country. Their percent

ratio is shown in the graphics:

Natural Gas Consumption Structure (2015)

3%

8%

2%

35%

31%

5%

16%

Energy, 31%

Chemistry 35%

Metallurgy 3%

Construction 2%

Glass and china 8%

Distribution companies 16% Other 5%

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Пазарен дял на

газоразпределителните дружества

за 2015 г., %

14.14

10.47

16.1359.25

Овергаз Мрежи,59% Ситигаз България,16%

ЧТК,10% Други,14%

The natural gas consumption by household customers in 2015 continues to be very low

resulting in the low share of 3% of the household gas supply in the country.

2.6 Third countries natural gas transmission through the territory of the country

For the reported 2015, 13 505 mcm of natural gas have been transported through the territory

of the country to third countries, which is 8.8% less than the quantities transported in 2014.

The distribution of the transited natural gas by directions shows a decrease in the transited

natural gas to Turkey as the quantities for 2014 amount to 87.31% of the total quantities, and

in 2015 it decreases to 84.31%. There is an increase in the transited quantities in the other

two directions: Greece – 14.68% of the total natural gas transited in 2015, and 11.78% in

2014; in Macedonia direction - 1.01% of the total natural gas transited in 2015 and 0.91% in

2014.

3. MAJOR PARTICIPANTS AT THE NATURAL GAS MARKET IN THE COUNTRY

Bulgargaz EAD – natural gas public supplier in Bulgaria, responsible for ensuring the

natural gas supply at prices and conditions, approved by EWRC;

Bulgartransgaz EAD – combined operator, responsible for the natural gas storage and

transmission activities;

Gas distribution companies – perform activities on natural gas distribution and

natural gas supply from end supplier by delivering natural gas to users connected to their

networks. They are responsible for the gas distribution networks construction and development

in line with the long-term business plans and conditions approved by EWRC

By the end of 2015, on the territory of Bulgaria 25 companies have been licensed for natural

gas distribution and natural gas supply from end supplier. They provide services in 5 gas

distribution regions (Danube, West, Thrace, Mizia, Dobrudzha) and 80 municipalities outside

these regions.

Natural gas traders – conclude deals with for natural gas supply the public supplier,

end suppliers, customers, other natural gas traders, production companies, operators of

natural gas storage facilities, transmission system operators and distribution system operators.

Overgas networks, 59% Citigas Bulgaria, 16%

Others, 14% BLTC, 10%

Market share of the gas distribution

companies for 2015, %

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3.1 Bulgargaz EAD

Bulgargaz EAD is a single joint stock company of the Bulgarian Energy Holding EAD structure,

registered in line with the Trade Act having its registered address and head office in the

Republic of Bulgaria. The company is the sole Public Supplier of natural gas on the territory of

the Republic of Bulgaria.

By the virtue of decision № Р-046 / 29.11.2006 of SEWRC, Bulgargaz EAD was issued a license

№ Л-214-14/29.11.2006 for public supply of natural gas on the territory of the Republic of

Bulgaria, for a period of 35 years.

The sole owner of the Bulgargaz EAD share capital is Bulgarian Energy Holding EAD, which is

100% owned by the state.

EWRC controls the compliance of the license activity performed under the licensed conditions.

Natural gas sell prices for each subsequent quarter of the current year are approved by EWRC

with the respective decisions for the specific quarter:

1. Natural gas marginal sell price of the Public Supplier to customers connected to the

transmission network:

Third quarter of 2016: 281.08 BGN/1000 normal m3 (30.21 BGN/MWh)

Note: Excise duty and VAT, excluded.

2. Natural gas marginal sell price of the Public Supplier to customers connected to low

pressure networks owned by the TSO:

Third quarter of 2016: 288.80 BGN/1000 normal m3 (30.04 BGN/MWh)

Note: Excise duty and VAT, excluded.

The prices shall apply to all customers in the country connected to the respective exit

points/hand-over points of the gas transmission network in Bulgaria and the gas transmission

network for transit transmission for customers of South West Bulgaria.

The company’s activity is influenced by the business environment it operates, and the technical

and financial results are directly dependent on the natural gas market status and trends in

Bulgaria.

Natural gas supply prices and its realization at the domestic market. A comparison of the

weighted average natural gas supply and sell prices in 2015 and 2014.

Period

Weighted average price

to an entry of the gas

transmission system

BGN/1000 m³

Weighted average price,

transmission tax included

BGN/1000 m³

Change

BGN %

2015 475.18 511.44 36.26 7.63%

2014 584.77 611.03 26.26 4.49%

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The information in the table above shows that in 2014 and 2015 there is a positive difference

between the natural gas weighted average sell price and the weighted average supply price.

Transmission fee to the amount of 19.73 BGN is included in the weighted average sell price,

which is not subject to the company’s license.

If transmission fee in the sell price is taken into consideration, the weighted average sell price

shall be:

Period

Weighted average price

to an entry of the gas

transmission system

BGN/1000 m³

Weighted average price,

transmission tax excluded

BGN/1000 m³

Change

BGN %

2015 475.18 491.71 16.53 3.48%

2014 584.77 591.30 6.53 1.12%

Bulgargaz is the sole licensee for natural gas public supply on the territory of the Republic of

Bulgaria. By virtue of the license issued and the obligations in line with the requirements under

Energy Act as amended, the main obligation of the company is to guarantee the public

interests by ensuring continuous natural gas supply on the territory of the country.

The lack of an alternative source of supply makes Bulgargaz EAD directly dependent on the

terms and conditions of the existing contract with OOO Gazprom Export.

The company is in negotiation process on supply diversification through the interconnection

with Greece, the interconnection with Romania and the virtual supply from other traders at

networks’ entry.

3.2 Bulgartransgaz EAD

Bulgartransgaz EAD is owner and operator of the gas transmission infrastructure and the only

underground gas storage facility on the territory of the country. Bulgartransgaz EAD holds a

license № Л-214-09 of 29.11.2006 for natural gas transmission along the gas transmission

network for transit transmission, a license № Л-214-06 of 29.11.2006 for natural gas

transmission along the national gas transmission network and a license № Л-214-10 of

29.11.2006 for natural gas storage. The EWRC controls the compliance of the licensed

activities performed with the licenced issued.

The natural gas transmission and storage prices are approved by SEWRC with a decision № Ц-

001 of 10.02.2005 effective as of 01.03.2005:

Natural gas transmission price through the gas transmission networks to exit points on

the territory of the country - 19.73 BGN/ 1000 m³, VAT excluded. The transmission

tariff is single component – equal for the whole territory on the country and

independent on the distance and at which entry and exit points the gas is off-taken or

delivered;

Natural gas storage price – 2.49 BGN/ 1000/ m³/ month, VAT excluded.

o With regard to an International Agreement (IA) signed with DESFA S.A. for the

IP Kulata/Sidirokastro as of July 1, 2016 with Decision № С-20 of 30.06.2016

EWRC approved the following prices for interruptible services offered along the

gas transmission network for transit transmission:

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Price for the service „interruptible transmission in forward direction“ – 15.78

BGN/1000 m3

Price for the service „reverse flow on commercial base“ – 9.87 BGN/1000 m3

The prices shall apply at the existing points connecting the gas transmission network for

transit transmission to gas transmission networks of neighbouring operators from EU member

states, and shall apply until setting prices for access and transmission in line with the

Methodology for setting prices for access and natural gas transmission through the gas

transmission networks owned by Bulgartransgaz EAD.

The company’s activity is influenced by the business environment it operates, and the technical

and financial results are directly dependent on the natural gas market status and trends in

Bulgaria and the countries from the Balkan region for which natural gas is transited – Turkey,

Greece and Macedonia.

Bulgartransgaz EAD being an operator of the gas transmission network via its Chief

Dispatching Division provides uniform management and reliable operation of the natural gas

transmission through the gas transmission network, and its reporting in compliance with the

quality requirements.

The natural gas supply to users on the territory of the Republic of Bulgaria is realized mainly

through the national gas transmission network. It has a sufficient capacity to meet the current

natural gas consumption. Currently, the annual consumption of natural gas accounts for about

44% of the maximum technical capacity of the system. Natural gas, which is transported by

the national gas transmission network, is provided via imports from Russia (approximately

97%) and by domestic production (approximately 3%).

Bulgartransgaz EAD is an owner and operator of the ring-shaped gas transmission system

and the high pressure branches for natural gas transmission to the major users and

distribution companies in the country. The transmission system includes:

• Gas transmission network for users in the Republic of Bulgaria (technical capacity

~ 7.4 bcm/y) with load factor 0.9:

o Gas pipelines and high pressure branches - 1835 km;

o Three compressor stations with a total capacity of 58 MW;

o 115 automatic gas regulation stations (AGRS), gas regulation stations (GRS) and gas

metering stations (GMS) with 240 points for natural gas delivery, and 8 AGRS and GRS

for gas supply to the Bulgarian market in the regions of South West Bulgaria.

• Gas transmission network for natural gas transit transmission (technical capacity

~ 17.8 bcm/y).

o Main gas pipelines of 930 km total length and maximum capacity to:

Turkey ~ 14 bcm/y

Greece ~ 3 bcm/y

Macedonia ~ 0.8 bcm /y

o Six compressor stations with total capacity of 225 MW;

• UGS Chiren with one compressor station with capacity of 10 MW.

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As of January 1, 2013 capacity for reverse flow is provided at the IP with Greece (IP

Kulata/Sidirokastro) in line with the requirements of art. 6 and art. 7 of Regulation EU No.

994/2010 of the European Parliament and of the Council of 20 October 2010 concerning

measures to safeguard security of gas supply. The capacity in Bulgaria direction is up to 3

mcm/d, of which 1 mcm/d firm and 2 mcm/d interruptible.

As of July 1, 2016 following the conclusion of an Interconnection Agreement (IA) with DESFA

S.A. transmission services in reverse flow at IP Kulata/Sidirokastro have been provided. As of

July 1, 2016 there are transport contracts in reverse direction (virtual transport, backhaul)

with a new network user.

4. RISK ASSESSMENT METHODOLOGY

The applied Risk Assessment Methodology is based on a coherent analysis on the following

elements:

Assessment of the situation

Description of the system

Defining the criteria for risk

assessment

Risk identification

Source

Duration

Risk analysis

Possible scenarios

and consequences

Risk assessment

Measures for mitigation

of the consequences

The aim is to adequately present the situation in Bulgaria by taking into account the specific

features associated with the use of natural gas in the country and the expected significant

changes related to the implementation of various infrastructure projects which will contribute

to changes in the natural gas demand and supply in the medium and long term, and hence the

associated risks in ensuring the security of the supplies in the country. According to the

forecasted fuel-energy balance of the Republic of Bulgaria for the period by 2030,

with a horizon set by 2050 - two scenarios have been reviewed: basic – this is the

basic version, according to the Energy Strategy of the Republic of Bulgaria by 2020 adopted on

01.06.2011, and a target scenario based on 50% reduction in the GDP energy intensity by

2020 compared to 2005.

5. MEASURES, VOLUMES, CAPACITIES AND TIME REQUIRED FOR THE

IMPLEMENTATION OF THE INFRASTRUCTURE AND NATURAL GAS SUPPLY

STANDARDS

5.1 Measures for implementation of the infrastructure standard (N-1)

According to Article 6 of the Regulation, the formula N-1 describes the ability of the technical

capacity of the gas infrastructure to satisfy the total gas demand in the area of calculation, in

case of disruption in the single largest gas infrastructure during a day of exceptionally high

demand which occurs with a statistical probability once every 20 years.

In the event of disruption of the single largest gas infrastructure, the capacity of the remaining

infrastructure should be able to deliver the necessary gas quantities to satisfy the total gas

demand within the calculation area for one day of exceptionally high gas demand occurring

with a statistical probability of once in 20 years, i. e., N – 1 ≥ 100%.

Two basic scenarios have been developed for the implementation of the infrastructure

standard - basic (existing infrastructure and infrastructure to be commissioned by

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01.01.2015) and a base assessment of the expected local production rates (on the basis of the

capacity of the fields operating in 2015) and a target scenario (construction and

commissioning of the Projects of Common Interest (PCI) pursuant to Regulation No 347/2013

of the European Parliament and of the Council on guidelines for trans-European energy

infrastructure) and a optimistic assessment of the expected local production rates (on the basis

of issued decisions and concessions for exploration and production).

The formula for implementation of the infrastructure standard is as follows

,100max

maxmaxmax(%)1

6

1 xD

IPSEPmN m

N-1≥100 %

Where:

EP1 Technical capacity of GMS Negru Voda 1, mcm/d

EP2 Technical capacity for import through the interconnector Bulgaria-Serbia, mcm/d

EP3 Technical capacity for transmission from the gas transmission network for transit

transmission – GMS Ihtiman/GMS Lozenets, including Kulata/Sidirokastro, mcm/d

EP4 Technical capacity for import through the interconnector Turkey-Bulgaria, mcm/d

EP5 Technical capacity for import through the interconnector Bulgaria-Romania,

mcm/d

EP6 Technical capacity for import through the interconnector Greece-Bulgaria, mcm/d

Smax Withdrawal from Chiren UGS - the maximum possible withdrawal, mcm/d

Pmax National gas production - maximum possible withdrawal, mcm/d

Dmax National consumption - peak consumption, mcm/d

Imax=EP1 The single largest gas infrastructure - GMS Negru Voda1, mcm/d

The results from the formula N-1 for the basic scenario during the next five years are as

follows:

Year Pmax Smax EP2 EP3 EP4 EP5 EP6 Dmax* EP1=I

max N-1

2016 0,17 5,0 0,0 3,08 0,0 1,37 0,0 19,0 20,27 50,6

2017 0,78 5,0 0,0 3,08 0,0 1,37 0,0 21,0 20,27 48,7

2018 1,04 5,0 0,0 3,08 0,0 1,37 0,0 21,6 20,27 48,6

2019 1,30 5,0 0,0 6,00 0,0 4,10 0,0 22,8 20,27 72,0

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2020 1,83 10,0 0,0 6,00 0,0 4,10 9,1 22,8 20,27 136,1

*Peak national consumption in line with the 2014 -2023 Ten Year Network Development Plan

(TYNDP) of Bulgartransgaz EAD.

The results from the formula N-1 for the target scenario for the next five years are as

follows

Year Pmax Smax EP2 EP3 EP4 EP5** EP6 Dmax* EP1=

Imax N-1

2016 0,17 5,0 0,0 3,08 0,0 1,4 0,0 19,0 20,27 50,8

2017 2,4 5,0 0,0 3,08 0,0 1,4 0,0 21,0 20,27 56,6

2018 4,2 5,0 0,0 3,08 0,0 1,4 0,0 21,6 20,27 63,3

2019 4,2 5,0 4,9 6,00 0,0 4,1 9,1 22,8 20,27 146,1

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2020 4,2 10,0 4,9 6,00 9,1 4,1 9,1 22,8 20,27 207,9

*Peak national consumption in line with the 2014 -2023 Ten Year Network Development Plan

(TYNDP) of Bulgartransgaz EAD

**The capacity is when providing the necessary technical conditions on the territory of the

country.

The calculations by using the N-1 formula for the infrastructure standard in the basic scenario

illustrate that in the event of a disruption of the single largest gas infrastructure (from Russia

through Ukraine), the capacity of the existing infrastructure is not able to deliver the necessary

quantities of gas to satisfy the total natural gas demand in the Republic of Bulgaria during a

day of an exceptionally high demand for natural gas.

At the same time, when implementing the PCIs, Bulgaria will fulfil the infrastructure standard

possibly by the end of 2018.

A possible interruption in the supply could be offset, to some extent, by implementing

appropriate measures to reduce the consumption of natural gas.

In order to achieve the infrastructure standard, several major projects have been envisaged:

modernization of the national gas transmission infrastructure;

modernization of compressor stations by integrating low-emission gas turbine

compressor units;

projects for construction of gas interconnections.

The heat production in most cases is accompanied with electricity production within the

framework of the co-generation installations in operation. Pursuant to Ordinance

11/10.06.2004 on the fuel reserves when the thermal power plant’s basic fuel is natural gas,

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the energy producer shall build up and hold a liquid fuel reserve in such a quantity as to

ensure the operation of the plant for the respective forecast and/or contracted regime,

including plant’s own needs, for a period of 5 days. This rule shall not apply to electricity and

heat producers in a combined manner, using gas turbines and/or piston gas engines. Thermal

power plants which operate using solid fuel and heat boiler plants which operate using natural

gas are obliged to hold alternative fuel reserves (fuel oil) to ensure the heat production in case

of crises. The technological requirements and the 2009 crisis show that in such situation when

applying restrictive regime, the heating sector can secure the normal heat supply with a

limited natural gas consumption up to 30% (using fuel reserve) and the expected monthly

consumption to amount to approximately 115 mcm of natural gas, which is 3.8 mcm of natural

gas on a daily basis. In some of the combined electricity and heat production plants there are

hot-water boilers designed to operate both on gas and liquid fuel which is an additional

security of the heat supply in case of potential gas supply suspension. Within the mandatory 5

days reserve in line with the regulatory requirement these companies could arrange logistics to

supply additional quantities of liquid fuel which would secure the energy supply after the set 5

day period. It should be taken into consideration that in compliance with the requirement of

the existing complex permits for big fuel installation, issued in line with the Environment

Protection Act, the heating companies can use boiler fuel (oil fuel) for no more than 10 days in

one calendar year.

5.2 Measures for implementing the supply standard

According to Article 8 of Regulation (EU) No. 994/2010, the natural gas companies shall take

measures to ensure the gas supply to protected customers in the member state in the

following three cases:

o extreme temperatures over a period of seven days occurring with a statistical

probability once in 20 years;

o any period of at least 30 days of exceptionally high gas demand occurring with a

statistical probability once in 20 years;

o for a period of at least 30 days in the event of disruption of the single largest gas

infrastructure under statistically average winter conditions.

According to Art. 2, §1 of Regulation (EU) No. 994/2010, defining the concept of "protected

customers" in addition to all domestic customers connected to the gas distribution network,

each Member State may decide whether to include in the scope of the concept the following

industrial users:

a. Small and medium-sized companies connected to the gas distribution network and

essential social services provided that they are connected to the gas distribution or

transmission network and these customers do not exceed 20% of the end gas

consumption;

b. District heating installations if they provide heating to households and to the customers

referred to in "a”, provided that these installations are not able to switch to other fuels and

are connected to the transmission or distribution network.

The approach, adopted in the Republic of Bulgaria, is to consider all of the above customers

“protected”. The customers from group a shall be treated as protected only if their total

consumption does not exceed 20% of the end consumption (calculated on the basis of the last

official data of the National Statistical Institute of the Republic of Bulgaria). The evaluation

whether the condition is met shall be made by the competent authority every year based on

the data from the natural gas companies providing supply (including the public supplier)

and/or natural gas supply (including end suppliers).

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No significant increase of natural gas consumption is expected in the country in the coming

years that might cause a collapse resulting from a suspension of the delivery of the nominated

quantities for the protected customers compared to the available resources.

The peak level of consumption by this group during the winter of 2014/2015 is between 3.1 to

3.3 mcm/day and the average figure during a typical winter day is 2.2 mcm. The capacity and

the quantities in Chiren UGS enable keeping a maximum daily natural gas withdrawal of 3.3

mcm for a period of seven days and 2.2 mcm/day for 30 days, which actually confirms the

objective possibility to ensure supplies to the protected customers in the country during a

possible disruption of the supplies from Russia from independent local source - withdrawal

from Chiren UGS.

Companies which supply natural gas to customers with *fluctuating consumption, shall be

obliged to ensure the natural gas quantities to compensate the * fluctuating consumption of

their customers.

Companies supplying natural gas to customers with *fluctuating consumption, shall be obliged

to store in Chiren UGS at the beginning of the winter period (withdrawal period) natural gas

quantities between 10% to 20% of the annual supply nominations of their users to

compensate the seasonal fluctuation. Companies shall withdraw these quantities in the winter

season (withdrawal period) at such rates so as to compensate the *fluctuation by the end of

the season.

Companies supplying natural gas to customers with fluctuating consumption shall be obliged to

keep in Chiren UGS at the beginning of the winter season natural gas – indicative volume 290

mcm total.

If there are prerequisites for a gas crisis, companies supplying natural gas to customers with

fluctuating consumption are obliged to take measures to increase the quantities they hold,

consistent with their ability to supply and the technical capabilities of Chiren UGS.

Bulgartransgaz EAD shall be obliged to ensure injection and storage capacity of the quantities.

In this respect the operator shall define an injection capacity of these quantities by months,

nomination rules and capacity allocation rules by company. The injection capacity of these

quantities by months and by suppliers shall be set by the Operator who shall publish on its

webpage the procedure on fulfilling the obligations by the companies supplying natural gas to

customers with fluctuating consumption.

The companies supplying natural gas to customers with fluctuating consumption shall be

obliged to inform the competent body and Bulgartransgaz EAD on the exact natural gas

quantities which shall be stored prior to the beginning of the injection season but no later than

15 March of the current calendar year. If a company fails to submit the necessary information

to the competent body and Bulgartransgaz EAD within the indicated deadline, Bulgartransgaz

EAD shall announce the capacity needed for injection and storage of these natural gas

quantities as available.

For this purpose by the beginning of the injection period but no later than 15 March of the

current calendar year, the companies supplying natural gas to customers with fluctuating

consumption shall be obliged to submit information on contracts for natural gas supply with

customers having fluctuating consumption.

The supply seasonal fluctuation shall be determined by fluctuation factor (КН) as follows:

КН = Vл / Vз Vл – amount of the nominated quantities for supply for the respective year for the months

from April to September;

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Vз – amount of the nominated quantities for supply for the respective year for the months

from January to March and from October to December;

When КН is less than 0.6 the supply shall be deemed as fluctuating, and in all other cases as

even.

To verify the information under signed contracts for natural gas supply with customers having

*fluctuating consumption, the companies supplying natural gas to customers with fluctuating

consumption shall submit an excerpt of their contracts with commercially sensitive information

deleted. Bulgartransgaz EAD submits a summary to the competent body on the booked

capacities for storage and injection by the companies in line with the information given.

In case of failure to fulfil the specified obligations which result in endangering the gas

transmission system’s integrity and safety operation, Bulgartransgaz EAD undertakes

measures in line with the provisions of Section VI of “Gas transmission networks management

and technical rules” of 3 September, 2013 approved by SEWRC.

In order to ensure that the envisaged withdrawal quantities of Chiren UGS will reach to the

companies of the protected consumers group and the companies from the industry especially

those with continuous production cycle and respectively being potentially dangerous

technology companies, the Operator Bulgartransgaz EAD has developed flexible schemes and

preliminary estimates imposing a temporary restriction – natural gas supply

restrictive regime. The daily withdrawal from the underground gas storage is directly related

to the availability in it. If there is less availability of active natural gas, the available volumes

per day progressively decrease.

The transmission system operator (TSO) Bulgartransgaz EAD has developed calculations at 7

levels of natural gas supply rstriction in case of natural gas shortage for all users in such a way

enabling the stage restriction and/or suspension of specific user groups, namely:

Unprotected with alternative fuel;

Unprotected without alternative fuel;

Protected non-households, services and households.

The highest restriction levels provide for the natural gas supply to be guaranteed

only for protected users and respectively companies having continuous production cycle which

need additional technological time to temporary decommission the production facilities so as

not to allow manufacturing or industrial accidents in compliance with the potential possibilities

for natural gas withdrawal from Chiren UGS.

The highest restriction levels (from 5th to 7th) in line with the calculations envisage supply

only to households; the refinery – producing alternative fuel for the heating companies,

heating households; and specific companies with continuous production cycle which need

additional technological time to temporary decommission the production facilities.

The preliminary schemes and calculations, approved by the TSO Bulgartransgaz EAD on

introducing staged restriction and staged suspension of the natural gas supply for the specific

user groups take into consideration both the supply seasonality/the natural gas

consumption from these users, i.e. summer/winter regime of operation (respectively

summer/winter day consumption) and mandatory the potential risk of possible occurrence of

manufacturing or industrial accident in case of natural gas supply suspension, and also the

necessary technological time to switch to alternative fuel for those users

(companies/production companies) who have such a technological possibility envisaged and

availability of the required alternative fuel reserves.

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When developing the preliminary calculations and schemes on introducing a stage limitation

and staged suspension of the natural gas supply for the specific user groups, developed by the

TSO Bulgartransgaz EAD the historical experience and the TSO reaction possibilities, the

institutions and the companies during the gas crisis in the country in the period 6-21 January,

2009 have also been taken into considerations.

Measures for implementation of the security of supply standard are: the projects for

infrastructure development, including the interconnections with the neighbouring countries, the

expansion of storage capacity, modernization, rehabilitation and expansion of the existing

natural gas transmission and storage infrastructure.

History, probability, season, frequency and duration

The only gas crisis over the lifetime of the gas transmission system with disruption of gas

supplies to the Balkan region, Bulgaria in particular, during the period 1974 - 2015 was in

January 2009 and lasted between the 6th and the 21st January 2009, due to disruption of the

Russian natural gas supplies through Ukraine.

Possible consequences from the risk assessment scenarios

In order to calculate the indicative amount of damage to the economy of Bulgaria in a new

crisis ensuing from the disruption of gas supplies – similar to the one in 2009 - a detailed

analysis has been performed of the structure of natural gas consumption in the country and

the possibilities for its replacement (to a certain extent) with alternative fuels

As regards the public sector and the household consumers of natural gas, practice shows that

in an emergency, switching to electricity or solid fuel (firewood) is most easy and fast. It can

be assumed that the public sector that switching completely to electricity would mean an

additional consumption of more than 5.5 million kWh/day. Concerning the household

consumption will switch significantly to electricity and firewood. In this case additional costs

will generate for these users, associated with switching to alternative fuels for both the

households and the public users.

The prevailing gas consumption is realized mainly by the industry and the energy sector.

Provided that gas consumption is due mostly to sectors with a continuous production cycle

where the suspension of supplies could lead to emergencies and serious losses - it is assumed

that these users do not have any effective and economically sound alternatives for replacing

the fuel they normally use. Moreover, they have no legal obligations to accumulate stocks of

other fuels, i.e. these users should have a guaranteed supply of gas within the required

volumes at least within the limits of the obligatory technological minimum.

It should be noted at the same time that the quantities produced from Chiren UGS laid down in

the analysis could be possible for 90 - 120 days at maximum volume of 550 mcm of natural

gas initially injected in the gas storage facility.

Analysis and Risk Assessment - mitigation measures

Projects for the modernization of the national gas transmission infrastructure;

Temporary suspension or imposing restrictions on producers and consumers of

natural gas - a restrictive regime.

A restrictive regime imposed on the supplies of natural gas will be enforced in cases of a

necessity to restrict or interrupt supplies for a period longer than 48 hours throughout the

country or a part thereof as a result of

o Force majeure;

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o The occurrence of or the prevention of breakdowns of production facilities,

transmission or distribution of natural gas;

o Long-term shortage of energy capacities or energy;

o Regulatory measures of the state authorities related to preparations for military

activities;

o Terrorist acts.

The competent authority with the right to take decisions for enforcing a restrictive regime in

the country is the Minister of Energy or his/her authorized deputy-minister. Mayors may set up

a restrictive regime on the use of natural gas in their municipality after consultations with the

Minister of Energy.

The enforcement of a restrictive regime or conditions is announced by the Minister of Energy in

the mass media.

The transmission system operator or the operator of the distribution network may order the

temporary interruption or restriction of the production or supply of natural gas without prior

notification to producers and consumers:

o In case of an occurrence of, or for preventing an accident;

o In case of possible dangers to the life or health of people;

o In the case of an established threat to the integrity of the gas transmission

system;

o In the case of possible significant material damages to the system, the network

or injuries to consumers;

o In the case of a possible danger of excessive environmental pollution;

o When the supplies of natural gas are limited due to reasons beyond the

competence of the transmission company.

Operators must notify beforehand producers and consumers of the time and duration of the

interruption or reduction during repair works, operational switchovers, commissioning of new

facilities and other similar activities, subject to planning.

The duration of the interruption or restriction must not exceed 48 hours.

The procedure for enforcing a restrictive regime, temporary suspension or limitation of the

production or supply of electricity, heat and natural gas is determined by Ordinance No 10 of

09.06.2004 on the “Order for enforcing a restrictive regime, temporary suspension or

limitation of the producers and consumers of electricity, heat and natural gas”.

6. Obligations, imposed on natural gas undertakings and the national authorities

linked with the security of supply, including the safe operation of the gas system.

Information on all obligations involving the public services, linked with security of

gas supply.

In line with Chapter Six „Obligations to the public” of the Energy Act, energy undertakings are

liable to carry out their activity in the interest of the public and the customers in line with the

requirements of this Act and any other legal documents, guaranteeing the security of supply,

including the protection of sites, which represent critical infrastructure in the energy sector,

the continuity and high quality of electricity, heat energy and natural gas, the efficient use of

fuels and energy, the protection of the environment, the lifes, health and property of citizens

(article 69 EA).

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The Act provides (article 70, para 1 EA) that the Minister of Energy imposes to energy

undertakings additional obligations to serve the public linked with:

o Continuity of supply of electricity, heat energy and natural gas;

o Protection of the environment – agreed upon with the Minister of Environment and

Waters;

o Protection of sites, which represent critical infrastructure in the energy sector.

Additional obligations imposed by virtue of an Order, including:

o The entity upon who it is imposed;

o The contents of the obligation;

o The deadline and conditions at which the obligations is to be carried out;

o Other conditions.

Obligations to the public are envisaged to be clearly determined, transparent, non-

discriminatory, and verifiable and guarantee equal conditions for access of the EU gas

undertakings to national users.

Any additional costs incurred by energy undertaking shall be acknowledged to be costs under

article 35 of EA.

Energy undertakings have the right to apply to EWRC to compensate for their costs, arising out

from the obligations to the public that were imposed on them, including obligations involving

the security of supply, the protection of the environment and the energy efficiency.

The Energy Act (article 71) provides that energy undertakings transporting electricity, heat

and natural gas or distributing electricity, heat and natural gas, offering services of public

interest and have a dominant position on the market in the meaning of the Competition

Protection Act to obey its provisions, inasmuch as they do not prevent in factual or legal way

the performance of the obligations that were imposed on them.

In line with article 181, item 1 EA, natural gas contracts are entered into at regulated prices of

services of public interest involving the transmission, distribution and supply of natural gas.

The requirement of transparency of the general terms and conditions of contracts for the

supply and transport on natural gas through the distribution network, provided for in the EA,

has been introduced by article 38(а) – 38(h), article 183(a) and 183(b) of EA and Ordinance

no.3 of 21 March 2013 on licensing Activities in the Energy Sector.

The requirement allowing users to have the opportunity to switch to a new supplier has been

introduced by article 180 of EA and entails from the regulated access to the gas transmission

and gas distribution networks for all users.

Additional measures to protect users are also in place, provided by Directive 2009/72 and

Directive 2009/73, applicable in fully liberalized energy markets: public suppliers are expected

to carry out the functions of end suppliers with electricity. The end supplier is a licensed

energy undertaking, supplying customers with electricity or natural gas, who have not used

their right to choose the entity from which to buy electricity or natural gas. End suppliers are

liable to supply in line with general terms and conditions made publicly known installations of

customers, connected to the gas distribution network in the respective licensed territory, when

such customers have not chosen any other supplier. In such instances prices remain regulated

by EWRC.

The continuity in supply is thereby guaranteed for these categories of users, who have not

used their right to choose their supplier.

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Furthermore due to the lack on the gas market of factual prerequisites to create competitive

environment, EWRC continues to regulate the price at which the public supplier Bulgargaz EAD

sells natural gas to users, connected to the gas transmission network. In order to prevent the

abuse of factual dominant position on the natural gas market when negotiating prices the NRA

– EWRC approves price caps at which Bulgargaz EAD sells natural gas to users, connected to

the networks, property of the combined operator Bulgartransgaz EAD. In line with article 30,

para 2 of Energy Act, such regulation will continue until EWRC establishes the existence of a

competition, which creates the prerequisites to freely negotiate the prices at market

conditions.

Carrying out its activity in the interest of the public and the users the energy undertakings

guarantee the security of supply, the continuity and quality of the electricity, heat and natural

gas, the efficient use of fuels and energy, the protection of environment, the life, health and

property of citizens, and are at the same time entitled to conclude transactions at freely

negotiated prices on the unregulated market.

In 2013 a second trader entered the natural gas market – Overgas Inc. АD, carrying out

import and sales of gas to gas distribution companies and end customers, however as of

01.01.2016 and to date this company terminated natural gas supply to its customers, who

currently receive their required supply from Bulgargaz ЕАD.

In line with the existing national legislation (Ordinance no.11 of 10.06.2004 on fuel reserves),

stations, using as main fuel natural gas are required to keep on their sites reserves of

alternative main fuel (fuel or gas oil) to continue the production in case of a cut-off in gas

supply. The amount of reserves is calculated by months in line with approved requirements

approved by the Minister of Energy for a period of 15 months. In case of complete cut-off in

natural gas supply reserves of alternative fuel are able to secure the continuous operation of

the stations for an about 5 up to 15 days while the actions required for the long-term supply

shall be made, if required.

7. PREVENTIVE MEASURES

7.1 Maintenance of technically safe and reliable infrastructure

The provision and maintenance of technically safe, reliable and efficient main and auxiliary gas

infrastructure is a guarantee for the safe and good quality performance of the services

involving the transmission and storage of natural gas in the country. The following activities

are regularly carried out to that effect:

Planned verifications, preventive works and maintenance of technological equipment

and equipment in line with the requirements of the Ordinance on the construction

and safe operation of gas transmission and distribution pipelines and the

instructions of the manufacturers;

Current inspections, repairs and diagnostics of technological equipment and

equipment in compressor stations;

In-line inspections and current repairs of gas pipelines;

Strength and tightness tests of gas pipeline sections and equipment thereof;

Surveys of gas pipeline route to monitor erosions, landslides, leakages, unlawful

construction and other activities in gas pipelines servitudes, etc. and risk areas

monitoring;

Anti-erosion and hydrological activities;

Cathodic protection monitoring;

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Verifications, tests of metering lines, GRS and AGRS;

Maintenance of emergency reserve of pipes and provision of spare parts for the

technological equipment – gas turbine compressor units, control systems,

instrumentation, etc.

7.2 Projects for the modernization of the existing gas transmission

infrastructure

A project for the rehabilitation, modernization and expansion of the existing gas transmission

infrastructure on the territory of Bulgaria is underway, consisting in the performance of

different activities, including:

Modernization and rehabilitation of compressor stations;

Inspections to establish and characterise gas pipelines state;

Repair and replacement of sections of gas pipelines as a result of inspections;

Expansion and modernization of the existing network;

Implementation of systems optimizing the control of the network technical state

(PIMS and GIS).

The activities and sites, connected with this project realization, are expected to be carried out

in stages by 2020.

The modernization, rehabilitation and expansion of the existing gas transmission infrastructure

will secure the safe and reliable transport of natural gas, improve the efficiency, reliability and

flexibility of the transmission system and will secure the required capacities and pressures. The

realization of the planned activities will secure the technical possibilities for transport of

additional natural gas quantities through the territory of the country, fed from existing and

new entry and exit points and possibilities for diversification of the directions of transport

depending on market interest; they will optimize the gas flow control.

The projects for the modernization, rehabilitation and expansion of the existing gas

transmission infrastructure in Bulgaria are projects of common interest for the EU in the

meaning of Regulation 347/2013, and bearing in mind their interconnection with the projects

for interconnections IGB, ITB, IBS and IBR, in 2015 they were included in the list of priority

projects of the High level group for the gas interconnections in Central and South-eastern

Europe - Central and South Eastern Europe Gas Connectivity (CESEC) and in CESEC Action

Plan.

The Republic of Bulgaria is interested and will take part in the realization of strategic initiatives

of the European Union (the ЕU) for the construction of the required infrastructure and

diversification of energy supply to the EU, namely – the Southern gas corridor, access to

liquefied natural gas, gas interconnections along the axis North – South, the new Vertical gas

corridor, etc. Considering the high gas dependency and the unsatisfactory energy

infrastructure in the country these initiatives are of particular importance both to Bulgaria and

the entire region of South East Europe. It is therefore required for Bulgaria to establish in the

short- and mid-term competition between different sources and producers of natural gas to the

country, the so called „gas to gas competition". Тhis will encourage the negotiation of

competitive prices for the Bulgarian economy.

7.3 Projects for the construction of interconnections

Interconnection Bulgaria - Greece

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The planned route of construction of the interconnection Bulgaria – Greece (IGB) is Komotini –

Haskovo – Dimitrovgrad – Stara Zagora with a length of 182 km. The project is implemented

by a joint company with the involvement of Bulgarian Energy Holding EAD and IGI Poseidon

(50% Depa and 50% Edison). In line with EC decision a grant has been awarded within the

European Energy Program for Recovery amounting to up to EUR 45 million for the construction

of this interconnection, the total construction costs of which totals to about EUR 220 million.

The direct impact of the realization of the project are achieving real diversification of natural

gas sources to Bulgaria, provision of the possibility to supply natural gas from the Southern

gas corridor and LNG sources, turning Bulgaria and its gas transmission system into a major

part of the regional infrastructure for gas supply from alternative sources for the region of

South East and Central Europe.

The construction includes the construction of a gas pipeline DN 800 mm (32”) with a capacity

up to 3 bcm/y in case of confirmed market interest and development of the neighbouring

systems the capacity could be increased to 5 bcm/y by means of constructing a compressor

station.

The project has been acknowledged to be a project of common interest for the EU. It has been

granted a status of national significance by virtue of governmental decisions in both countries.

The project received positive EIA decisions for the Bulgarian and Greek territory after

conducted environmental studies. The engineering design stage of the gas pipeline in the

Greek section is completed, and the construction route is approved. A DSP-PP of the gas

pipeline has been agreed and enforced on the Bulgarian territory. The technical design in the

meaning of the SDA of the equipment has been developed, agreed with third parties which are

affected by the construction and tabled in the Ministry of Regional Development and Public

Works for final approval.

Auxiliary procedures are underway involving the issue of building permits on both territories.

Procedures involving the acquisition of rights in rem in properties affected by the construction

of the gas pipeline are therefore underway in the Bulgarian part.

The project company ICGB AD tabled in EWRC an Application for the temporary exemption

from regulated access under article 36 of Directive 2009/73/ЕC concerning common rules for

the internal market in natural gas. By 2014 a market test to book transmission capacity has

been conducted, and the results are considerably below the technical capacity of the gas

pipeline with different start dates of the proposed booking offers. In order to optimize the

trade structure of the project and securing the economically competitive conditions for

transport through the gas pipeline and to report changes in the regional gas market, at the

end of 2015 the NRAs of Bulgaria and Greece approved the conduct of a new market test. The

expected results are extremely important to the ability to secure funding for the project at

market conditions and the licencing of the gas pipeline on Greek territory, required for the

issuance of the building permit.

On 10 December 2015 a General Assembly of ICGB AD shareholders have been held where a

final investment decision has been made with planned start of the construction stage by Q4 of

2016 and project completion by 2018. The market test was launched in December 2015 and

over the period 14 December 2015 to 8 April 2016 Stage I of the market test took place:

Expression of Interest by parties interested in booking capacity in the IGB.

In August 2016 EWRC and RAE approved Notice to take part in Stage II: Invitation to the

participants in Stage „Expression of Interest“ to express their interest in booking capacity in

the IGB and in the period September – October 2016 Stage II of the market test in underway.

Currently binding offers to book capacity in the IGB are being submitted, the outcome is

required to continue the exemption process under article 36 of Directive 2009/73/ЕО with a

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view of signing long-term transport contracts to secure the minimum required annual revenue;

ICGB AD to financially secure the construction and operation of the gas pipeline and to finalize

the procedure involving the building permits by the competent authorities of the two countries.

It is expected the gas pipeline to be commissioned in 2019.

Interconnection Bulgaria – Romania

The project is implemented jointly by Bulgartransgaz EAD and Тransgaz S.А. in line with a

Memorandum of Understanding signed on 01.06.2009.

The forecasted total value of the project is set to be EUR 23,823 million. In line with Decision

of the EC C (2010)5962 of 06.09.2010 the two companies were granted financial aid under the

European Energy Programme for Recovery /the EEPR/ amounting to up to EUR 8,9 million. The

reverse flow interconnection has a total length of 25 km of which 15 km on Bulgarian territory,

7,5 km on Romanian territory and 2,1 km of underwater crossing of the Danube river. The

maximum capacity of the interconnection is 1,5 bcm/y (in the direction of the Republic of

Bulgaria to Romania), and the minimum 0,5 bcm/y (in the direction from Romania to

Bulgaria); the diameter of the pipe is Dn 500 mm and the operating pressure is Pn 50 bar.

The project is split in three parts: section underneath the Danube River, onshore part on

Bulgarian territory and onshore part on Romanian territory, and the onshore part of the gas

pipeline on Bulgarian territory is built. The optic cable underneath the Danube is laid down.

Currently a construction contract for the main has pipeline is signed with the Contractor SC

Habau PPS Pipeline Systems SRL, Ploiesti, and Act Standard Form 11 is signed in line with

Ordinance no.3 on the preparation of acts and protocols during construction works for the

Bulgarian part and Order to start the works for the Romanian part.

On 30.05.2016 Bulgartransgaz EAD and the national gas transmission operator of Romania

SNTGN Тransgaz SA signed a contract with the Association, including: INSPET АD (the leader)

and HABAU PPS Pipeline Systems SRL (the associated company) for the construction of the

back-up gas pipeline of the crossing (including the undercrossing) of the Danube river to

interconnect the gas transmission systems of Romania and Bulgaria. A protocol on opening the

construction site and determining the construction line and level concerning construction sites

of the technical infrastructure, Standard Form no.2 for the Bulgarian part and Order to start

the works for the Romanian part have been signed.

The gas pipeline has been commissioned in 2016.

Interconnection Bulgaria – Serbia

The gas interconnection Sofia – Dimitrovgrad (Serbia) – Nis (Serbia) is envisaged to be

reversible connecting the gas transmission networks of Bulgaria and Serbia. The objective is

the diversification of routes, interconnectivity and natural gas transport. The gas pipeline is

expected to initially secure the supply of 1.8 bcm/year.

The expected value of the investment for the Bulgarian part of the route amounts to EUR 49

million. The realization of the project for gas interconnection with Serbia is split in two stages,

whereas the first stage, provisionally called “Design works” was completed on 31.12.2015 with

funding under the Operational program Development of competitiveness of the Bulgarian

economy 2007-2013. The implementation of the second stage, provisionally called

“Construction works” is envisaged to be funded under Operational program Innovations and

Competitiveness 2014-2020. The main reason for splitting the project is the impossibility of

the Serbian partner to carry out the construction on their territory together with the

construction timetables for the Bulgarian section.

At the end of 2014 a Contract for design and construction supervision has been entered into

with Chimkomplekt Engineering AD. In September 2015 a contract has been signed with

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Control Engineering AD for compliance assessment on the investment projects with the

requirements to the construction sites and construction supervision during the construction

works in line with SDA. In November 2015 the Detailed Spatial Plan – Parcelling Plan has been

approved. Expected deadline for the completion of the construction on the Bulgarian territory -

2020.

The interconnection Bulgaria – Serbia is a project of common interest for the European Union

in line with Regulation (ЕU) No.347/2013 (PCI) and a project of common interest for the

Energy Community (PECI).

Interconnection Turkey – Bulgaria (ITB)

The Interconnection Turkey – Bulgaria is a project for the development of interconnection of

the gas transmission networks of Bulgartransgaz EAD, Bulgaria, and Botas, Turkey, to enable

the possibility for diversification of natural gas sources, the supplying partners and routes thus

increase the security of supply to the region and boost the competition. The ITB project is

extremely important in terms of ensuring the diversification of gas supply to Bulgaria and the

countries from the region.

It will secure the possibility of supplying natural gas quantities from alternative sources,

connected with the Turkish gas transmission network – Caspian natural gas, LNG supplies form

the existing terminals in Turkey and other sources, whereas its realisation will at the same

time materially increase the transmission capacity in the direction from Bulgaria to Turkey.

ITB represents a new onshore gas pipeline in the section between the village of Losenets and

the Bulgarian-Turkish border in the vicinity of the village of Strandja, parallel to the existing

transit gas pipeline, with a length of about 76 km on Bulgarian territory, pipe diameter of 700

mm and capacity of about 3 bcm/year, at operating pressure of 64 bar. The construction of

compressor station Losenets – 2 near the existing compressor station near the village of

Losenets is envisaged as well.

The Interconnection Turkey – Bulgaria is a project of common interest in line with Regulation

(ЕU) No.347/2013. In 2015 Bulgartransgaz EAD was awarded a financial aid under the

Connecting Europe Facility for the implementation of a pre-investment study for the project.

A Feasibility Study has been completed as a first step to the future construction of the

interconnection, representing a comprehensive study of the possibility to realise PCI The

Interconnection Turkey – Bulgaria, including possible options for the gas pipeline route,

technical studies, cost assessment, assessment and analysis of market needs, financial and

economic feasibility, CBA, preliminary EIA, legal and regulatory feasibility, PCI development

schedule, preliminary Technical Terms of Reference for FEED, etc. The outcome of this

feasibility study were communicated in due course to the Turkish counterpart with a view to a

joint coordinated approach to the process and the deadlines of realisation of the ITB.

The concept for the construction of a gas distribution hub on the territory of Bulgaria is based

on the idea that significant gas quantities from various sources enter a real physical point in

the region of Varna for further transport and gas trade will at the same time be organized at

this point – a hub where each market participant could trade with natural gas at market

principles. The idea of building a gas hub is supported by the strategic geographical location of

Bulgaria, well-developed existing gas infrastructure for transmission and storage and the

interconnection projects with Romania, Turkey, Greece and Serbia.

In the context of European objectives to build interconnected and single European gas market,

the realization of the gas hub concept is in line with the projects for the Southern Gas Corridor

development and the plans for development of gas infrastructure in Europe to improve the

security of supply and the diversification of gas supply sources. The project is in line with the

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regional needs, identified by the high level CESEC group and the European Energy Union

strategy.

The gas hub could rely on Russian natural gas supplied through a new offshore gas pipeline in

compliance with the European requirements of the Third energy liberalization package and

through the currently existing route, natural gas produced in the Black Sea shelf – the

Bulgarian (from the Han Asparuh, Silistar, Teres blocks) and the Romanian, natural gas from

sources of the Southern gas corridor (the Caspian region, the Middle East and the Eastern

Mediterranean) and LNG from terminals in Turkey and Greece.

The objective of creating a gas hub is to see the construction of the required gas transmission

infrastructure to link the natural gas markets of the member states in the region - Bulgaria,

Greece, Romania, Hungary, Croatia, Slovenia and beyond them the member states from

Central and Western Europe and the Energy Community countries - Serbia, Macedonia, Bosna

and Herzegovina, etc., thus contributing to achieving the major priorities of the European

energy policy.

In December 2015 the government of Bulgaria and the European Commission agreed to set a

joint working group to support the development of a trade concept, business and financial plan

for the gas hub Balkan. The working group which was announced by the Deputy Prime Minister

for European Funds and Economic Policies Tomislav Donchev and Klaus-Dieter Borchardt,

Director "Internal Energy Market" of Commission’s Directorate General “Energy” will examine

the technical, legal, regulatory and financial aspects of the project. It will also focus on finding

the solutions to the most commonly faced challenges when developing a stable regulatory

framework and trade environment, aimed at a facilitated connection of Bulgaria and the

remaining part of South East Europe.

The concept for gas hub in Bulgaria is a project of common interest in line with Regulation (ЕU)

No.347/2013.

Eastring – is a project for the construction of a transport corridor through the territories of

Slovakia, Hungary, Romania, Bulgaria, enabling the possibility for bi-directional supply of

natural gas from alternative sources. It is envisaged the corridor to be realised between IP

Veľké Kapušany (the existing interconnection point between the Ukrainian and the Slovakian

gas transmission networks) and the interconnection point with EU external border on the

territory of Bulgaria, whereas the project combines the construction of new gas infrastructure

with optimization of the existing one in the countries along the corridor. Eastring is a project of

common interest in line with Regulation (ЕU) No.347/2013.

The Eastring concept as currently developed envisages the project to be developed jointly and

in coordinated manner by the TSOs of Slovakia, Hungary, Romania and Bulgaria and is

presented in Annex А of the Plan as a cluster of projects, as follows: Eastring – Bulgaria,

Eastring – Romania, Eastring – Hungary, Eastring – Slovakia.

Different route options are examined within the project. It is envisaged Eastring to be

executed in 2 stages – the first to be commissioned in 2022, securing a capacity of 570

GWh/d, and the second stage in 2025, reaching a capacity of 1140 GWh/d.

Bulgartransgaz EAD is the company in charge of the realization of the Bulgarian section of

Eastring. Concerning the territory of Bulgaria1 for stage 1 of project’s development (a capacity

of 570 GWh/d) the construction of a new gas pipeline DN 1400 with a length of about 257 km

is envisaged from a new entry/exit point on the Bulgarian–Romanian border to a new

1 Bulgartransgaz EAD project represents a completely new infrastructure on the territory of Bulgaria. The capacity of

the gas pipeline is completely new and does not affect capacities under long-term cross-border transport contracts.

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entry/exit point on an EU external point on the territory of Bulgaria, as well as the construction

of new compressor capacities 88-90 MW. Stage 2 of project’s development (a capacity of 1140

GWh/d) envisages the further construction of new compressor capacities. An envisaged

possibility to interconnect Eastring with the networks of Bulgartransgaz EAD with entry/exit

capacity of 200 GWh/d.

The TSOs of Bulgaria and Slovakia, Bulgartransgaz EAD and Eustream will cooperate in

investigating the possibilities for construction of the Eastring project on the territories of their

countries. These are the provisions of a Memorandum of Understanding between the two

countries, signed on 9 June 2016 within the 14th Gas Infrastructure Europe Annual Conference,

whose host was Sofia. The Minister of Energy of Bulgaria, Temenuzhka Petkova and the

Minister of Economy of Slovakia, Peter Žiga attended the signing of the Memorandum.

On 13 July 2016, in Bratislava, Slovakia, during the informal meeting of EU energy ministers,

the Slovak Minister of Economy Peter Žiga and the Bulgarian Deputy Minister of Energy Zhecho

Stankov signed a Memorandum of Understanding between the ministry of Energy of the

Republic of Bulgaria and the ministry of Economy of the Slovak Republic. The document aims

to provide political support for the realization of the Eastring project and creates no new legal

obligations, nor amends existing legal commitments of the Parties and/or third parties. The

creation of a high level working group is proposed, including with the involvement of the TSOs,

and coordinated cooperation on all project aspects.

A project for the construction of a gas pipeline/s to increase the capacity of

interconnection of the northern semi-ring of Bulgartransgaz EAD national gas

transmission network and Transgaz S.А., Romania gas transmission network –

transmission corridor Bulgaria-Romania-Hungary-Austria.

The project is part of the concept for coordinated development of the gas transmission

networks of Bulgaria, Romania and Hungary (transmission corridor Bulgaria-Romania-

Hungary-Austria) meant for the bi-directional transmission if natural gas between the

countries.

On Bulgarian territory the project envisages the construction of new infrastructure and

modernization and expansion of the existing one with a view of increasing the interconnection

of the northern semi-ring of the national gas transmission network of Bulgartransgaz EAD and

the gas transmission network of Transgaz S.А., Romania.

The construction of the Bulgarian section together with the existing gas transmission

infrastructure is expected to secure the technical possibility for natural gas supply of between

3-5 bcm/year between the planned entry points of the southern border of Bulgaria and

between Romania and Hungary with an opportunity for access to the Central European gas

market.

7.4 Storage capacity expansion projects

Natural gas storage plays an extremely important role in securing additional flexibility of the

gas transmission systems, material contribution to the management of congestion and

seasonal optimization in the use of the gas transmission systems. The importance of gas

storage facilities will grow in the conditions of an integrated and interconnected regional

market.

Chiren UGS expansion project

Projects for the modernization and expansion of the capacity of the existing underground gas

storage Chiren are currently underway. The owner and the operator of Chiren UGS is

Bulgartransgaz EAD.

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The project for the modernization of Chiren UGS in the short run (as early as in 2016) will

allow the increase of daily deliverability up to 5.0 mcm/day by means of the drilling of two new

exploration wells Е-72 and Е-73. The drilling works for well Е-72 have already been completed

and a decision to commission it is expected. The drilling works for well Е-73 have been

launched.

The project for the expansion of Chiren UGS envisages a material increase in the volume of the

working gas of up to 1 bcm and increase in the injection and withdrawal flowrate of up to 8–10

mcm/day. The increased technical characteristics will allow the gas storage to be used not only

to cover the needs of the Bulgarian market, as the situation currently is, but also to meet the

peak consumption of the countries in the region.

The expansion project will be implemented is stages by 2021. In 2015 a Contract has been

signed and implemented with subject-matter “Geotechnical simulation of Chiren reservoir”.

The objective of the contract is to forecast the tightness of the geological reservoir of Chiren

UGS. After the completion of simulations at different operating parameters the Contractor

concluded that Chiren UGS is reliably thigh and recommended an increase in the formation

pressure up to 150 bars. In 2015 a contract for another key project to prove the tightness has

been entered into, namely “Surface gas analysis on the area of Chiren UGS”, completed at the

start of 2016. The conclusion of the Contractor is that the results from the geochemical studies

on the territory of Chiren UGS at the current operating regime confirm the absence of loss of

pressurization.

Based on these latest studies, the technological operation and expansion deign developed in

2011 and the 3D field seismic studies on the area of Chiren structure, scheduled for execution

in 2016 - 2017, as well as other geological and geophysical studies, Bulgartransgaz EAD will

have the required preliminary geologic conditions to take an investment decision for the

gradual increase in the volume of the working gas up to 1 bcm.

In the period 2018 – 2021 depending on the results from the studies the activities relating to

the design and drilling of new operational and surveillance drills will be carried out, liquidation,

retrofit and repair works on old drills. Detailed design and construction of the surface

infrastructure allowing the expansion will also be carried out over the same time.

Chiren UGS expansion project is a project of common interest in line with Regulation (ЕU)

No.347/2013. Bulgartransgaz EAD received in 2015 a financial grant under the Connecting

Europe Facility of EUR 3 900 000 (three million and nine hundred thousand), representing up

to 50% of the forecast value of the Action for the 3D field seismic studies on the area of Chiren

structure and the corresponding quality control.

Rehabilitation and expansion of the capacity of the national gas transmission network (mostly

the northern semi-ring) will be carried out parallel to the realization of the storage facility

expansion) with which the storage is connected with a view of the possibility of securing the

transport of the bigger daily quantities for withdrawal and injection.

An idea to build a second gas storage facility on the territory of Bulgaria

To guarantee the security of supply and to stimulate the gas market liberalization, a study of

the possibilities to build a new gas storage facility in Bulgaria is planned. The development of

gas infrastructure in the region, including the projects of the Southern gas corridor, the

planned interconnections and other big cross-border gas projects justify the need in the long

run of securing additional storage capacity thus the gas storage facility project.

Without excluding the existing underground gas storage Chiren, a new storage facility would

serve not only the national, but also the regional gas market after the planned construction of

the new interconnections with neighbouring countries. It could be built in a suitable geological

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structure – in depleted gas fields (either onshore or offshore), in salt caverns or aquifers. It

should, however, be noted that the construction of one new underground gas storage from the

start of the geological and study activities by its commissioning in normal operation would take

no less than 7 - 8 years.

Mechanisms for cooperation with other MS to prepare and implement joint

Preventive Action Plans and joint Emergency Action Plans.

Preparation and implementation of the joint Preventive Action Plans

No preparation and implementation of joint Preventive Plan with neighbouring EU MS is

currently envisaged.

Cross-border access to storage facilities

Following the connection of the national Romanian gas transmission system with the transit

gas pipeline, crossing the Romanian territory, a possibility to supply natural gas to Bulgaria will

be available in case of cut-off in the supply along the transit gas pipeline from Russia through

Ukraine and Moldova. In crisis situations by to 2,6 mcm/day may be secured from Romanian

indigenous production, gas storages or other sources and be directed from CS Silistra through

the Romanian system (reverse flow) to the transit gas pipeline to Bulgaria.

Bi-directional capacity

In line with the requirements of Regulation (ЕC) No.994/2010 of 1 January 2014

Bulgartransgaz EAD taking into account the technical capabilities of the gas transmission

network for transit transmission secured the technical possibility for reverse flow natural gas

supply from Greece through Bulgaria at the existing IP of DESFA S.А. and Bulgartransgaz EAD

gas transmission networks - Kulata/Sidirokastro of 4,2 mcm/day at a pressure of 35 bar at IP

Kulata/Sidirokastro and 6,0 mcm/day at a pressure of 40 bar at IP Kulata/Sidirokastro. These

possibilities for reverse physical flow are in cases of cut-off in the supply at the entry of the

national gas transmission network. Access to LNG from different sources is thus also secured.

In 2016 IAs have been entered into in line with the requirements of Regulation (ЕU)

No.2015/703 between Bulgartransgaz EAD and DESFA, Greece and between Bulgartransgaz

EAD and Transgaz, Romania.

A technological connection between the national gas transmission network and the gas

transmission network for transit transmission has been commissioned at CS Ihtiman, which

guarantees the reception of these quantities in case of natural gas supply from Greece to

Bulgaria.

The modernization of CS Petrich has been completed with the construction of an additional

connection with the aim of reversing gas flows from Greece and complying with the values of

harmful emissions in 2016.

.....................................

Nikolay Nikolov – Deputy Minister of Energy and Chairperson of the Working Group in line with Order no.RD-16-

243/06.06.2016

Deputy chairpersons:

....................................

Veneta Tsvetkova – Director, Directorate Energy Projects and International Cooperation and Chairperson of the

Working Group in line with Order no.RD-16-243/06.06.2016

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....................................

Vladimir Yankov – Information Security Officer and Chairperson of the Working Group in line with Order no.RD -16-

243/06.06.2016 г.

.....................................

Vili Rusenova –Senior expert, Directorate Security of Power Supply and Crisis Management and WG Secretary