Azerbaijan's beneficial role in Bulgaria's gas supply and global market dynamics [COMMENTARY]

In May, it is projected that Azerbaijani natural gas supplied through the Bulgaria-Greece Interconnector (IGB) will account for 76.6% of Bulgaria's domestic demand.

According to the information provided by the Energy and Water Regulatory Commission (EWRC) of Bulgaria, the long-term gas contract with Azerbaijan, which is indexed to international oil prices rather than gas hub prices, plays a role in "achieving favorable prices."

As stated by the regulator, the remaining portion of gas for household consumption is provided by Bulgargaz, the state gas company, through a contract for the supply of liquefied natural gas (LNG).

The Bulgarian regulatory authority for public services, EWRC, has approved a 7% reduction in the regulated gas price for May, setting it at 54.7 leva (equivalent to 30 US dollars) per MWh. Transportation costs, excise taxes, and value-added tax are excluded from this price.

Although the regulator did not specify the reason for the price decrease following a slight increase in April, it mentioned considering price trends in international gas markets.

It's worth noting that the Greece-Bulgaria gas pipeline was put into commercial operation in October 2022. The IGB aims to transport "blue fuel" produced within the framework of the second stage of exploitation of the "Shah Deniz" gas-condensate field in the Azerbaijani sector of the Caspian Sea to Bulgaria. The state company "Bulgargaz EAD" has signed a contract with the "Shah Deniz" consortium for the supply of 1 billion cubic meters of gas from the "Shah Deniz-2" field.

The total length of the pipeline, which passes through 150 kilometers of Bulgarian territory, is 182 kilometers. It is expected to have an annual transportation capacity of 3-5 billion cubic meters.

Here poses questions:

Given that it is predicted to cover 76.6 percent of Bulgaria's domestic consumption in May, how important is Azerbaijan's role in supplying Bulgaria with gas?

The regulator noted the price trends in the international gas market to lower the gas price. However, knowing the sensitivity of Azerbaijan's gas prices to global market dynamics, especially fluctuations in energy markets makes great sense.

Head of the Innovative Economic Research Center of Azerbaijan Technical University, professor, economist Elshad Mammadov stated to Azernews that establishing cooperation in the direction of gas supply with Azerbaijan is quite beneficial for the foreign trade partners.

"This is because of Azerbaijani gas is transported via pipelines, as is well known. The price of gas transported through pipelines is traditionally more favorable compared to liquefied gas, and this determines significant advantages for the foreign trade partners in cooperation with Azerbaijan. At the same time, Azerbaijan has proven itself as a reliable, durable trading partner. All agreements related to Azerbaijani gas supply bear the signature of the state, and I believe that the signature of the Azerbaijani state is widely accepted in the global arena, demonstrating its reliability and durability," Elshad Mamadov noted.

According to him, furthermore, Azerbaijan prioritizes durable, long-term trade cooperation in its relevant agreements in the energy sector, which undoubtedly promises great opportunities for the foreign trade partners.

"Therefore, I consider that Azerbaijan's cooperation in the energy sector, whether with Bulgaria or other countries in the foreign trade sector, is developing along a promising trajectory, contributing to the formation of economic processes in those countries."

Economist thinks that Bulgaria is not a major gas consumer to that extent.

"There has been a significant decrease in the share of industrial enterprises in recent decades. Nevertheless, gaps in European energy policy today encourage many European countries, including Bulgaria, to return to traditional energy carriers. And Bulgaria is undoubtedly among them. This is because of Bulgaria faces quite serious problems and challenges regarding its energy supply. Cooperation with Azerbaijan should be further emphasized with the exploitation of the interconnector, and I believe that not only Bulgaria but also several other European countries will witness the deepening of their cooperation with Azerbaijan in the near future in terms of gas supply," Mammadov concluded.