Amendments to Bulgarian Energy Act green lights gas storage investments

Recent amendments to the Bulgarian Energy Act (“EA”), which Parliament passed on 26 April 2018, includes an important change to article 40 that allows for future gas storage investments in the country.

Currently, Bulgaria operates one gas storage facility at Chiren, which was build before the passage of the EA and was re-licensed through grandfathering rules in the legislation.

This facility, Underground Gas Storage (UGS) Chiren, is state-owned through the TSO Bulgartransgaz, and has a capacity of around 600 million m3 with little flexibility for expansion, which was demonstrated during the Russian-Ukrainian crisis in January 2009.

The Bulgarian Energy Strategy extending to 2020 (adopted in 2011) supports further investment in gas storage facilities, and identifies the offshore Galata production concession as a second gas storage depot.

Developing additional facilities like Galata was stalled, however, when licensing procedures before the Energy and Water Regulatory Commission revealed that article 40 of the EA contradicts article 18 of the Bulgarian Constitution, which stipulates that underground reservoirs are exclusive state property. (Before the current amendments were passed, applicants sought in rem rights – the court’s inherent power to rule over property matters – for obtaining gas storage licenses.)

Parliament’s amendments to the EA resolve the obvious contradiction between the act and the Constitution, and eliminate an applicant’s need to overcome this contradiction by pursuing in rem rights.

These amendments also streamline the process for the licensing of future gas storage facilities, and establish furthergroundsfor the potentialimplementationof the Balkan Gas Hub project.

For further information on these amendments and their implication for gas store investments, please contact: Kostadin Sirleshtov.