Bulgaria: Oh – I have to pay for the pipeline?

Will that be cash, credit or debit?

Bulgaria appears to be ahead of most countries signing up for gas projects. Probably only for the fact that they are the only ones that might be able to squeeze a little extra money out of others. Sofia now wants a little extra help from the EU to finance its pipeline construction to connect to Nabucco. I guess a transit pipeline is not much help if you can’t get the gas out of it. Seriously, though this raises two flags.

One, Bulgarian finances are tight, but so are the other CEE countries – Romania, Hungary, how will these countries be paying, not only to build the actual Nabucco pipeline but the connections for the off-take? Will MOL and Transgaz be able to self finance these portions? For me, this is a significant point as it indicates that the other countries will be coming out with similar requests for financial help or maybe even a reduction in their share of financing portions of the project. If things are financially tight now, for companies and governments alike how will they raise the needed capital in time to begin construction in the next few years?

Point, 1.1 For Bulgaria, Serbia and Hungary it also must be asked:

– What about financing of South Stream connections?

– What about financing for South Stream pipeline portions that are more directly connected to state participation?

Two, we have a on Trend.az, of Bulgaria getting ready to join AGRI. Georgia is keen to export Azeri gas via tanker to Bulgaria. However, while the whole AGRI project remains speculative, it becomes even more unsure when it appears that Bulgaria can’t finance key aspects of the Nabucco project. Security of supply can be increased for each country, but participation in every new gas pipeline project that is announced seems dubious.

And three, what will also appeal to Hungary and Romania, is Bulgaria request to shift Nabucco costs out of national budgets – i.e. debt levels will not be seen.

Overall, the financial crunch is emerging for these projects. While countries continue to sign up and support all alternative routes – the deeper questions of who is going to pay for this still needs to be asked. In addition, if these pipelines/LNG facilities are built how much will gas cost for consumers? Will the cost be so high, as to reduce demand making these projects over ambitious?