Higher optimism among Bulgarian households and business after the 40% reduction in the price of Russian gas

On Bulgaria’s National Liberation Day March 3 when the peace treaty after the Russo-Turkish War of 1877-1878 was signed and Bulgaria was liberated from a five-century Ottoman rule, the Russian energy company Gazprom sent to Bulgaria a new contract for gas deliveries. After seven months of difficult negotiations, by the force of this document, the price of natural gas for Bulgaria was reduced with 40.3% since August last year. The difference between the old and the new gad price, which has been already paid by the clients, will be reimbursed. The price of Russian gas fell from EUR 22 to EUR 13 per megawatt and the Bulgarian consumers will be reimbursed with over EUR 75 million. This country’s Minister of Energy Temenuzhka Petkova commented that the unprecedented decrease will make the Bulgarian economy more competitive and noted the important role the European Commission played in this process through the anti-monopoly case against Gazprom.

How Bulgaria benefits from are the gas price reduction?

This country consumes an average of 3 billion cubic meters of natural gas per year. 90% of the gas quantities consumed by this country are imported, mainly from Russia at prices that were until recently among the highest in the whole EU. Now, after the price reduction, gas prices are similar to those in other European countries. The thermal power stations will feel the positive consequence of the latest reduction of the gas price the most. They supply central heating to the citizens and the business. Practically, these thermal power plants will not receive large sums, because they owe a lot of money to Bulgargaz and they have to pay this money. However, their economic condition will improve without a doubt after the latest price cut. Other large clients of Bulgargaz and producers of cement, chemicals, fertilizers and metals will also become more competitive on the domestic and the foreign markets. However, experts contend that the end consumers are not likely to receive 40% price reduction and they will only get 20% price cuts.

The new formula for calculation of gas prices, which entered the contract between Gazprom and Bulgargaz, is another reason for optimism against the backdrop of the positive and favorable developments on the Bulgarian energy market. The new prices will not depend that much on the prices of the oil derivatives. Moreover, the prices of natural gas in the gas hubs in Europe will be taken into account during their calculation. According to experts, when the new prices enter into force, the price reduction may even exceed 40%. These prices will be set each month by the Energy and Water Regulatory Commission, which will make them more flexible and adequate to the market at least until the expiry of the new contract with Gazprom in two years.

Driven by competition, the lower prices of Russian gas will cause reduction of prices of gas imported from other countries as well. Yesterday, the Executive Director of Bulgargaz Nikolay Pavlov said that Bulgaria will seek to renegotiate the price of the natural gas that will be imported from Azerbaijan as of October this year. Perhaps, this will be Bulgaria’s policy during the purchase of liquefied natural gas (LNG) as well. Last year, this country received nearly half a billion cubic meters of LNG which was delivered via Greece.

Source: bnr.bg

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