Bulgarian dispute with Lukoil could turn into regional oil crisis

The rapid withdrawal of the derogation for the import of Russian crude oil for Russian company Lukoil’s Bulgarian refinery has the potential to lead to a crisis in the fuel market in the Balkan region, Bulgarian Prime Minister Nikolai Denkov warned in an exclusive interview for Euractiv Bulgaria.

At the moment, two of the Bulgarian Euro-Atlantic parties – GERB and DPS – are hawkish for the idea of the immediate withdrawal of the derogation for the import of Russian oil to Lukoil.

The government is negative and warns of serious risks if the Bulgarian refinery, which is the largest in the Balkans, is forced to stop work due to a lack of oil.

“Yes, the market is open, maybe after some time it will be able to recover through imports, maybe after some time the refinery will resume, but no one has done it to know how much it costs and how long it will take. With all the political and economic instability – because it’s a problem for people, prices can rise significantly,” said Denkov.

He gave an example of the fact that the Lukoil refinery is the only supplier of aviation fuel in Bulgaria. “Anyone who underestimates these risks is playing with fire,” said the prime minister.

He explains that the Bulgarian government will rapidly develop the project for an oil pipeline from the Greek port of Alexandroupolis to Burgas on the model of the interconnector with Greece, through which Azerbaijani gas can reach other countries of the Balkans.

Denkov commented that the regional interest in the oil pipeline is high and “there is no doubt that it is economically profitable if combined with the operation of the Burgas refinery”. This is related to the way in which the efficiency and future of the Burgas refinery is evaluated – it would look differently if it was “wrapped” with an oil pipeline, Denkov said.

The intention of the Bulgarian side is to build a pipeline for the export of the already produced fuels, and in case of a problem on the market, Bulgaria can quickly import from Greece.

Romania is also interested in the oil pipeline to Burgas, considering financing an extension to its border.

The project and the continuation of the oil pipeline north to Romania were among the topics discussed at the tripartite meeting of the prime ministers of Bulgaria, Greece, and Romania on October 9 near the Bulgarian Black Sea city of Varna.

The change with the oil pipeline project, known as the so-called “Grand Slam” agreed upon by pro-Russian Bulgarian President Georgi Parvanov and Vladimir Putin in 2008. The initial project was for an oil pipeline from Burgas to Alexandroupolis to carry Russian oil to Greece. Now the project is about securing oil supplies from the Mediterranean region without going through the Bosphorus.

“Bulgaria is interested in such reliable supplies so that tankers do not pass through the straits,” the prime minister told Euractiv.

Nikolay Denkov stated that Bulgaria will have control over the oil pipeline so that the country is not dependent on “other factors”.

“The idea is to create a company that will build the oil pipeline and operate it, similar to the project company that built and operates the Interconnector with Greece (ICGB),” he explained.

Part of the route of the Bulgarian gas interconnector with Greece will also be used, as it already has an environmental assessment.

“We are discussing from Greece that the oil pipeline should go to Stara Zagora and become part of the entire Bulgarian industrial complex in the area,” Nikolay Denkov also stated.

The idea of an oil pipeline between the two ports – Burgas and Alexandroupolis – has been around since the early 1990s.

In 2007, a tripartite agreement was signed at the head office of Russian company Transneft to create an international project company for the construction of Burgas-Alexandroupolis from the Greek, Bulgarian, and Russian sides. The idea was for the 285 km long oil pipeline with a capacity of up to 35 million tons to transport oil, bypassing the congested Bosphorus. However, the project was not carried out.

The caretaker government of Bulgarian President Rumen Radev unfroze the idea with the intention of providing alternative sources of oil for Lukoil, as the derogation for importing Russian oil by sea to Bulgaria expires at the end of 2024.

Interest in new nuclear power plants

The Bulgarian prime minister told Euractiv that Greece, Serbia and North Macedonia are interested in concluding long-term contracts for the purchase of electricity from the future units 7th and 8th of the Kozloduy NPP, which will use AP1000 nuclear reactors.

In response to a question about whether it is possible to get European funding for the construction of the new facilities, Denkov replied that this is not a major issue because the project looks “quite promising” for the state from an economic point of view.

“There is interest from different countries. A model must be made of how electricity is purchased. There is interest from Greece, North Macedonia and Serbia, most likely. But they should decide what they prefer, as we have to decide what is more profitable for us – whether to enter as investors in the project or to be with fixed contracts for the purchase of electricity. From what I hear, it seems that they prefer the second option, but the discussion is open,” Denkov commented.

He added that Bulgaria will use the new two reactors as the base capacities of the energy system during the gradual abandonment of coal.

(Krassen Nikolov, Emiliya Milcheva | Euractiv.bg)