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Legal dispute could push Bulgaria’s TurkStream gas extension back to at least end-2021

Bulgaria’s section of the TurkStream natural gas pipeline extension into Europe may not be ready until at least the end of 2021 due to the continuation of a legal dispute between Bulgartransgaz and a consortium led by Saudi contractor Arkad Engineering, according to information received from Arkad and Bulgaria’s Supreme Administrative Court late Friday.

The DZZD Consortium, which ranked second in the tender for construction works of the 484 km pipeline, has appealed a decision in June by Bulgaria’s antitrust body, the CPC, to corroborate the award of construction works to a consortium led by Arkad Engineering, a spokesperson from Arkad Engineering told S&P Global Platts.

DZZD’s appeal – which was filed to Bulgaria’s Supreme Administrative Court in early July – has reopened the legal case and put the pipeline project on hold indefinitely.

According to a spokesperson from Bulgaria’s Supreme Administrative Court, there is no legal timeframe by which the court has to make a decision, and a final ruling could take months or even years.

The spokesperson said the first hearing on the case is scheduled for October 24, after the summer break.

A contract between Bulgartransgaz and the contractor cannot be signed until the legal case is resolved, with construction works also on hold until then.

The Arkad spokesperson said that of the two options offered during the tender — to build the pipeline for Eur1.29 billion ($1.44 billion) within 250 days, or for Eur1.10 billion ($1.22 billion) within 615 days — Bulgartransgaz had chosen the second.

The DZZD Consortium, comprising Italy’s Consorzio Varna 1 and Completions Development Associations, affiliated to Russia’s TMK, also offered – in a re-examined proposal – to build the project for Eur1.10 billion within 615 days.

With a 615-day timeline for construction works, and assuming a fast resolution of the conflict straight after the October hearing, the pipeline project may not be ready until at least the end of 2021, two years after completion of TurkStream line two.

Russia’s Gazprom is planning to send gas arriving in Turkey via the second 15.75 Bcm/year line of TurkStream further into Southern-Eastern Europe via a bundle of pipelines crossing Bulgaria, Serbia and Hungary. The new route would help Gazprom minimize its reliance on the Ukrainian transit.

But the delay on the Bulgarian section means Gazprom will only be able to use TurkStream to ship its gas to Bulgaria and from Bulgaria to Greece, Macedonia and Romania via the existing network. But Serbia, Hungary, Bosnia & Herzegovina and Croatia will still remain entirely reliant on the Ukrainian route.

TROUBLED PROJECT
The consortium led by Arkad Engineering won the tender in April. However, at the end of May Bulgartransgaz decided to drop the Arkad Engineering consortium, claiming the company failed to present all the relevant documents on time.

Bulgartransgaz assigned the contract to DZZD, which had meanwhile lowered its offer to Eur1.10 billion, the same price offered by Arkad.

Arkad appealed Bulgartransgaz’s decision before Bulgaria’s CPC and won the case at the end of June.

In early July, the DZZD Consortium appealed the CPC’s decision before the Supreme Administrative Court, reopening the legal dispute.

The 484 km pipeline will run from Nova Provadia to the Kirevo/Zajecar interconnection point, on the border between Bulgaria and Serbia, and two annexed compressor stations.

Consorzio Varna 1, which forms part of DZZD, together with Completions Development Associations, declined to comment. Russia’s TMK – to which Completions Developments Association is affiliated – was not available for comment at the time of publication.
Source: Reuters

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