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Bulgaria links cheaper Russian gas with South Stream approval

elineSOFIA: Bulgaria linked on Wednesday its approval for building of the Bulgarian section of Gazprom-led South Stream gas pipeline with a deeper gas price cut from the Russian supplier, it said on Wednesday.


It is prepared to sign a final investment agreement for South Stream, which aims to pump up 63 billion cubic metres of gas per year under the Black Sea to southern Europe as of 2015.


South Stream, a rival to European Union-backed Nabucco West project, will help Moscow keep its position as major gas supplier to Europe.


But Sofia, which meets over 90 percent of its gas needs with Gazprom imports, demanded better price terms for a new supply contract as of next year.


Bulgaria agreed in August an 11 percent discount on Gazprom's gas deliveries with a back date from April until the end of 2012.


"We have arranged an 11 percent cut. Now we want a further reduction," Economy and Energy Minister Delyan Dobrev said at a meeting with foreign journalists.


Gazprom has already accepted cuts in gas prices in its long term contracts with German utilities E.ON and RWE , Italy's ENI and Edison, Greece's DEPA and Poland's PGNiG.


The Bulgarian section of South Stream is estimated to cost 3.3 billion euros and will be jointly owned by Gazprom and Bulgaria state energy holding BEH.


Bulgaria, hit by economic crisis said it would provide very limited funds for the pipeline, which will be project-financed.


A final investment decision for the whole South Stream project, a rival to an EU-backed pipeline project called Nabucco, is expected later this month, with construction planned to start in December.


Copyright Reuters, 2012


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