1. 1 The Bulgarian Natural Gas Market: The TSO’s point of view Angel Semerdjiev, Executive Officer, Bulgartransgaz EAD 30 January 2009, Sofia

2. 2 Development of the gas market in Bulgaria 1963 1974 70 - ties 1993 End of 2006 September 2008 Discovery of Chiren - gas field with limited resources Transformation of the depleted gas field into an UGS Construction of the main gas pipeline from the former USSR to Bulgaria and the national gas transmission system Establishment of Bulgargaz EAD – successor of the “Oil and Gas” state owned company. Activities: production, transportation, distribution, storage and sale of natural gas Unbundling of Bulgargaz in compliance with Directive 2003/55/EC. Establishment of Bulgartransgaz as a TSO Establishment of Bulgarian Energy Holding (BEH) with 100% state ownership. Bulgartransgaz part of BEH.

3. 3 Bulgarian Energy Holding EAD  BEH EAD subject of activities is generation, production, transmission, transit, storage, management, distribution, sale and/or purchase of natural gas, electricity, thermal power, coals, as well as any other type of energy and raw materials for energy production.  The Holding includes the following companies: ● Mini Maritsa East EAD ● Maritsa East 2 TPP EAD ● Kozloduy NPP EAD ● NEK EAD ● Electricity System Operator EAD ● Bulgargaz EAD ● Bulgartransgaz EAD ● Bulgartel EAD.

4. 4 Bulgarian Energy Holding EAD With the establishment of BEH, Bulgaria has one of the largest energy companies in the region with:  assets EUR 4.3 billion  consolidated revenue EUR 1.8 billion  number of employees 21 000 people. All companies of the holding structure preserve their operational independence and licenses, as they are all owned and directly subordinated to the corporate centre BEH EAD.

5. 5 Present situation of Bulgarian gas market (1): Main players:  Public supplier (Bulgargaz) – imports gas from Gazprom (through contracts with three trading companies: Overgas Inc., Gazpromexport, WIEE)  TSO (Bulgartransgaz) – natural gas transmission  SSO (Bulgartransgaz) – storage of natural gas  Producer (Melrose Resources) - Galata field  Five gas distribution regions

6. 6 Present situation of Bulgarian gas market (2):  One source and one route of natural gas – full dependence on Russian-Ukrainian conflicts;  Contract for transmission only between the TSO and the Public supplier: Public supplier holds all the contracts with different customers and represents their interests - No direct contact of the TSO with individual customers, no contracts for balancing with individual customers;  Transmission Tariff – Post stamp.

7. 7 The licenses of Bulgartransgaz EAD: The gas companies carry out their activity as per licenses, granted by the State Energy and Water Regulation Commission (SEWRC). SEWRC has granted to Bulgartransgaz the following licenses:  License on natural gas transmission: the only one for the territory of the country;  License on transit transmission of natural gas;  License on natural gas storage.

8. 8 Bulgartransgaz EAD is owner and operator of:  Domestic gas transmission network in Bulgaria 1700 km of gas pipelines 4 compressor stations with total installed capacity 60 MW  Transit network in Bulgaria to Balkan region 945 km of gas pipelines: 40-48’’- 740 km; 20-28’’ - 195 km 6 compressor stations with total installed capacity 214 MW  Underground gas storage the only one within the territory of Bulgaria.

9. 9 Gas Transmission Infrastructure in Bulgaria:

10. 10 Organizational Structure of Bulgartransgaz The structure of Bulgartransgaz EAD includes headquarter in Sofia and regional offices in Botevgrad, Stara Zagora, Chiren, Ihtiman, Valchi dol and BTRV and Repair. Main divisions of the headquarter office:

11. 11 Gas transmission for domestic Market: Capacities and utilization of the pipelines The transmission of natural gas for domestic use during the last five years shows a slight increase. At the time the main system was built there were more working facilities using natural gas and at present there is a lot available capacity. Natural gas transmission in Bulgaria in 2008: 3.65 bcm (44% of the capacity of the pipeline) Although there is a lot of free capacity in the domestic pipelines a future congestion near the town of Varna is expected.

12. 12 Gas transmission for Transit: Capacities of the pipelines and real use Bulgartransgaz transits natural gas to Turkey, Greece and Macedonia. Total transit in 2008 – 16.7 bcm. Transit by counties: Turkey13,71 bcm (81.5% of the capacity of the pipeline) Greece2.85 bcm (61.4% of the capacity of the pipeline) Macedonia0.12 bcm (12.4% of the capacity of the pipeline) There is a long-term contract for the quantities of natural gas to the three countries and a reasonable change in these quantities in the next five years is not expected.

13. 13 National gas storage: Status quo plans 2011 One storage with total volume of working gas 560 Mcm 850 Mcm Number of injection-withdrawal wells:22 40 Maximum injection capacity daily:4 Mcm 8 Mcm Maximum withdrawal capacity daily:4.3 Mcm 10 Mcm In year 2008: 308.4 Mcm of gas were injected and 246.6 Mcm were withdrawn. Present production field near Galata is expected to become also a storage facility after year 2010.

14. 14  Construction of about 150 km gas transmission pipelines Dobrich-Silistra and UGS Chiren–Kozloduy–Oryahovo. To be accomplished by the middle of 2012 with own resources and financing from Kozloduy International Decommissioning Support Fund.  Additional drillings and over-ground facilities aiming at expanding the UGS Chiren working gas volume, injection and withdrawal capacity. Investment activities - domestic:

15. 15 Lessons drawn from Winter crisis 2009 There is an urgent need of diversification:  Bulgaria is the most vulnerable European country, with full dependency on Russian gas and only one supply route through Ukraine;  Negotiations and agreements for new volumes and capacities in order to differentiate the routes and sources of supplies;  Interconnections to neighboring countries;  Expanding UGS Chiren capacities and speeding up the conversion of Galata gas field into second Bulgarian underground gas storage;  Research of opportunities related to natural gas production and LNG terminal(s) construction.

16. 16 Other tasks of Bulgartransgaz for the near future: 1. Application for new Tariffs before SEWRC  Tariffs for transmission and storage;  Tariffs for access and connection to network;  Tariffs for balancing. 2. Elaboration of Network code. 3. Work on transparency requirements:  On-line booking and publication of available capacities in transmission system and UGS, etc. 4. On-line protocol for communication with customers

17. 17 Thank you for your attention!