European Commission looking into South Stream Bulgarian tender

European Commission looking into South Stream Bulgarian tender


By Clive Leviev – Sawyer of The Sofia Globe

The European Commission was looking into the public procurement tender to pick a contractor for the Bulgarian stretch of the South Stream gas pipeline, but no formal investigation has been opened at this point, the spokesperson for internal market commissioner Michel Barnier, Chantal Hughes, has said.

“We have been recently made aware that there are some concerns around the public procurement aspects of the Bulgarian part of the South Stream project. Our experts are looking into the issue. It is far too early at this stage to say exactly what rules apply and whether any of these have or not been breached,” Hughes said during the daily Commission briefing on January 14.

Bulgaria announced the tender on December 21 2013, with a deadline of January 10 2014 for potential bidders to submit letters of interest, drawing criticism from some quarters that the period was too short and the bulk of it was covered by the winter festive season.

Bulgarian Energy Holding, which hold equal stakes with Russia’s Gazprom in the project company that will build the Bulgarian stretch of the pipeline, said that 11 companies submitted letters of interest before the deadline expired.

“My understanding is that, in most cases, the minimum [period to express interest] is around 10 days, but it can be more depending on what the context is. The first thing to do in this case is to determine whether or not European public procurement rules apply and that is not necessarily completely straightforward because we’re talking about issues to do with exclusivity of rights, we’re talking about an international government agreement,” Hughes said.

“One way or another, treaty rules will of course apply and they have their own requirements,” she said.

South Stream is the project promoted by Moscow to build a new gas transit route to South-Eastern and Central Europe. Although Russian officials say that it will increase gas security in Europe, some analysts view it as mainly a political project, meant to put pressure on Ukraine, the current main route for Russia’s energy exports to the EU.

The pipeline will pass under the Black Sea before crossing Bulgaria, Serbia and Hungary to reach its destination in northern Italy. Branches to Croatia, Slovenia and Republika Srpska in Bosnia have also been planned, with possible branches to Macedonia and Austria under discussion.

Last month, the European Commission said that the current intergovernmental agreements in place between Russia and several EU member states breached EU law, specifically Third energy package regulations, which prevent gas producers from also owning pipeline capacities.

Moscow views the regulations as squarely directed against Gazprom – the company is also under investigation by the EC on charges of abusing its dominant position in several Eastern European markets and could face a multi-billion fine if it is found guilty – and has maintained that the intergovernmental agreements are above EU regulations.

The EC said that EU member states will have to renegotiate their current agreements with Russia, but the individual countries have asked energy commissioner Guenther Oettinger to take on the task instead. Oettinger, who will visit Moscow on January 17 prior to the EU-Russia summit later this month, is scheduled to meet with Russian energy minister Alexander Novak and is expected to discuss the South Stream issue during a face-to-face meeting.