New Gas Interconnector between the Republic of Serbia and the Republic of Bulgaria

Author: Stefan Mićić, Legal Trainee from the Law Firm „VUK Tax Attorneys“

Date: 11th December 2023

In accordance with the Serbian Energy Law (hereinafter: the „Energy Law“), interconnector is pipeline which passes border between countries for connecting their systems. New gas interconnector between the Republic of Serbia and the Republic of Bulgaria is released into work on 10th December 2023, which connects their systems.

Capacity of the new interconnector is cca. 1,8 billion m3 of natural gas per year, while his length is cca. 109 km. However, pertinent characteristic of this interconnector reflects in the fact that this interconnector is bidirectional, bearing in mind the fact that Serbia already has in place interconnector which connects it with Bulgaria, but that interconnector goes in one direction only, from Bulgaria. So, now natural gas can be exported from Serbia to Bulgaria, which will certainly stimulate development of natural gas market in Serbia. Additionally, licenced public supplier of natural gas “JP Srbijagas” (hereinafter: “JP Srbijagas”), concluded commercial contract with the company “Sokar” from Azerbaijan, which stipulate deliveries of 400 million m3 of natural gas per year, that should be delivered through new gas interconnector.

In Serbia, new interconnector will be connected to the transmission system operated by “Yugorosgaz transport” d.o.o. Niš (hereinafter: “Yugorosgaz”). New gas interconnector in Serbia will be operated by operator of transmission system “Transportgas Srbija” d.o.o. Novi sad (hereinafter: “Transportgas Srbija”), while in Bulgaria new interconnector will be operated by operator of transmission system “Bulgartransgaz” EAD. Transportgas Srbija is the only operator in Serbia which is 100% in state ownership, and this operator is in charge for operating transmission system that has most entries and exits to other transmission and distribution systems, with the length of cca. 2401 km, whereas this is the only transmission system connected to the underground gas storage in Banatski dvor, also only storage of a kind in Serbia. However, this operator, as well as Yugorosgaz, does not possess licence for conducting energy activity of operating transmission system, nor certificate by which it would be appointed as one of three possible forms of organizing operators of transmission system, in accordance with the Energy Law. Mentioned licence and certificate are issued by the Serbian Energy Agency (hereinafter: “AERS”), as independent regulatory body.

Beside new interconnector, interconnection points that Serbia already has with neighbouring countries are as follows: (i) with Hungary, entry and exit point of interconnection, (ii) with Bosnia and Herzegovina, only exit point of interconnection, (iii) with Bulgaria, only entry point of interconnection.

On entry point from Hungary, and on exit point to Bosnia and Herzegovina, transmission system is operated by Transportgas Srbija. However, Transportgas Srbija still do not fully apply respective Network Code, so consequently allocation of capacities on these interconnection points, has not been organized so far by this operator. Namely, capacities on entry point from Hungary are used only by “JP Srbijagas”, while capacities on exit point to Bosnia and from the Russian Federation, according to AERS’ data. Bearing in mind the fact that new gas interconnector will be operated by Transportgas Srbija, as well as the fact that Transportgas Srbija do not apply its Network Code in all its parts, and that consequently it did not organize allocation of capacities on interconnection points under its competence, it remains to be seem if new interconnector will also be “reserved” only for some market participants, or all market participants will be entitled to acquire capacities on new interconnector under certain conditions.

As we stated in the introductory part, Serbia is already connected with Bulgaria with one-way interconnector, with capacity of cca. 13 billion m3 of natural gas per year, and length of cca. 402 km, from border with Bulgaria as entry point, through Serbia, to the border with Hungary as exit point of this interconnector. This interconnector is operated by operator of transmission system “Gastrans” d.o.o. Novi sad (hereinafter: "Gastrans"), whereas this operator is the only operator which holds license for conducting energy activity of operating the transmission system, and it is appointed as an independent operator of transport, in accordance with the Energy Law. However, considering that Gastrans has built interconnector which it operates, AERS issued Resolution on 5th March 2019 on exempting Gastrans from applying rules on access of third party, in accordance with the Article 288 of the Energy Law. In other words, capacities on this interconnector are allocated with priority to JP Srbijagas and to the company “Gazprom Export”, in the amounts established by the said Resolution. Accordingly, this operator offers capacities on every point of interconnection as short-term capacities (quarterly, monthly, daily and intraday capacities), in the minimum amount of 10% of total capacity, and this capacity can be offered in physical direction as interrupted and uninterrupted, as well as in commercially reversed flow, but latter only as interrupted. Gastrans offers capacities for allocation through RBP platform (Regional Booking Platform), which is in detail regulated by the Network Code of this operator. Also, with said Resolution AERS approved to Gastrans to be exempted from obligation of ownership separation, as well as from applying regulated prices. Additionally, considering that natural gas from the Russian Federation is delivered to Serbia through this interconnector, we emphasize that Bulgarian Government abolished the fee for transit of Russian gas through Bulgaria to Serbia and Hungary. In Serbia, subject interconnector operated by Gastrans, is connected to transmission system operated by Transportgas Srbija, in Pančevo, Gospođinci, and Paraćin.

Beside the new interconnector and existing interconnection points, according to the plan for development of transmission system until 2029, enacted by Transportgas Srbija, construction of gas pipelines that will connect Serbia with Romania, Croatia, Montenegro and North Macedonia is also planned.

So, we are witnessing prompt development of natural gas market in Serbia, as with construction of new interconnectors and by expanding gas pipeline routes, Serbia is connecting with neighbouring natural gas markets, thereby creating greater opportunities for trading with natural gas on a commercial basis, apart from accomplishing primary aim of guarding security and energy stability of Serbia. Also, by extension of existing, or construction of new storage where natural gas can be stored in larger volumes and used for commercial needs, as well as by potentially establishing of exchange for natural gas trading, Serbian natural gas market can very swiftly become truly developed and liberalized, as is the case with electricity market, which would consequently result with the Serbian natural gas market becoming attractive also for other market participants, beside those that are currently active and dominant.

Our Law Firm will promptly and carefully monitor all upcoming activities on the natural gas market in Serbia, as well as on abroad markets, in order to effectively assist clients with our substantial experience and professional analysis in eliminating all ambiguities in practice.