The European Commission has approved the Bulgarian government’s plan to invest $18 million (EUR 16 million) in the expansion of the country’s only natural gas storage facility, a regional priority project for energy security.
Sofia had sought clearance from European Union state aid rules for a nine-year public guarantee on the loan for the independent operator Bulgartransgaz EAD.
The project aims to raise the Chiren Underground Storage’s (UGS) capacity to 35 billion cubic feet (one billion cubic meters) from 19 billion cubic feet (550 million cubic meters), according to the project description on Bulgartransgaz’ website.
Bulgartransgaz has set an investment of, according to the European Commission, $313 million (EUR 285 million) for the expansion of the facility in the northwestern province of Vratsa.
“The Commission found that the Bulgarian scheme is necessary and appropriate to facilitate Bulgartransgaz’s investment in its natural gas storage facility”, the European Commission said in a press release.
“Furthermore, the Commission concluded that the scheme is proportionate, as the aid will be limited to the minimum necessary to ensure the investment in the plant, and will not have undue negative effects on competition and trade in the EU.”
The expansion project is part of the latest cohort of so-called projects of common interest (PCI) of the EU, designated in a resolution November 19, 2021. Chiren UGS is one of four targeted projects listed in the resolution to increase the natural gas storage capacity in Southeastern Europe. The three others sit in Romania.
PCI designation grants faster permitting and priority financing as part of measures for regional energy security and climate resilience, according to the EU.
Bulgartransgaz, which also transports gas, has signed two EU funding deals worth $85 million (EUR 77.91 million) and $4 million (EUR 3.9 million), according to the official project profile on the owner’s website.
“The aim is to ensure security of gas supply, enhance competition in the gas market, also thanks to a greater integration of the plant in the network, and encourage gas trade in the region”, the European Commission statement said.
The expansion involves the building of above-ground facilities, 10 high-flowrate exploitation wells, three observation wells and connecting infrastructure, according to the description on the Bulgartransgaz site.
On July 21 Bulgartransgaz announced the start of construction for the above-ground portion. The DZZD Tech Energy Expansion consortium has won the contract for the procurement, construction and commissioning works, as announced by Bulgartransgaz January 20.
For the other components, the design, construction and commissioning rights have gone to DZZD UGS Drilling Chiren, as announced by Bulgartransgaz April 5.
Bulgartransgaz, a subsidiary of Bulgarian Energy Holding EAD, also said in the April 5 announcement talks were ongoing with potential USA financers for additional support for the expansion project.
The completion of the whole expansion project is targeted July 2024, as specified in an online official project brochure.
“Chiren underground gas storage facility will provide more flexibility and security to the natural gas market in Bulgaria and the region”, Bulgartransgaz executive director Vladimir Malinov said in the July 21 press release.
“There is a growing need for additional natural gas storage capacity in Bulgaria and the region”, Bulgartransgaz said in a media release March 23. “The increasing importance of the Chiren UGS capacity expansion is also driven by the suspension of supplies from the Russian Federation to various European countries.”
“Equally important is the positive effect of Chiren UGS expansion on trade. The availability of sufficient gas storage, withdrawal and injection capacity is key to the successful entry into the market of alternative natural gas sources, including LNG”, Bulgartransgaz added. “The expansion of Chiren LNG will provide additional flexibility, increase market integration and promote competition.”
The project aims to raise the capacity of Bulgaria’s only natural gas storage facility to 35 billion cubic feet.