January 31, 2019 / 4:15 PM / 15 days ago

UPDATE 1-Bulgaria will build pipeline to transport Russian gas

(Adds detail, background)

SOFIA, Jan 31 (Reuters) - Bulgaria will build a pipeline to transport mainly Russian natural gas to Serbia from its border with Turkey after three companies, including Gazprom, filed binding offers for capacity at its gas network, officials said on Thursday.

The project, which forms part of Bulgarian efforts to set up a regional gas hub and win the extension of Russia’s TurkStream to central Europe, had hinged upon its ability to sell sufficient capacity to make the pipeline commercially viable.

TurkStream is part of the Kremlin’s plans to bypass Ukraine, currently the main transit route for Russian gas to Europe and strengthen its position in the European market.

Its two lines that go under the Black Sea to Turkey, will each have an annual capacity of 15.75 billion cubic metres. The first one is aimed at Turkey’s local consumption.

State-owned gas network operator Bulgartansgaz said in a statement it took a final investment decision to build a new 484 km pipeline, estimated to cost about 2.8 billion levs ($1.64 billion), following the successful capacity booking.

“We have very good news,” Energy Minister Temenuzhka Petkova said in parliament. “The economic test for the project to expand the gas network completed successfully and the offered capacity was booked 100 percent.”

The other two bidders who filed 20-year binding bids included Bulgaria’s state-owned Bulgargaz and Swiss-headquartered energy company MET, officials said.

Bulgaria has been hoping to attract the extension of the second line of the TurkStream pipeline to run through its territory to Serbia, Hungary and Austria rather than through Greece.

Bidders have booked to ship smaller quantities in 2020 that rise to 17.6 billion cubic metres (bcm) a year at the border with Turkey and to about 11 billion bcm/y at the border with Serbia from 2021 to 2039, Bulgartransgaz data showed.

Energy analysts have expressed concerns that with the process Gazprom will be cementing its dominant position as gas provider in southeastern Europe. At present, Bulgaria meets all of its gas needs with Gazprom’s supplies.

“The biggest bulk of the capacity has been booked by Gazprom. This way the Russian company is strengthening its dominant position in the region,” said Martin Vladimirov with independent think-tank Center for the Study of Democracy.

$1 = 1.7040 leva Reporting by Tsvetelia Tsolova Editing by David Goodman and Elaine Hardcastle

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