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Serbian natural gas pipeline expansion on track as approvals begin to land

Highlights

Gazprom venture receiving permits from authorities

Bulgaria-Serbia-Hungary emerges as TurkStream extension

Bulgartransgaz suspends own expansion tendering process

London — Serbia's Gastrans -- a majority Gazprom-owned special purpose vehicle -- has begun winning approvals for the construction of a 403 km pipeline in Serbia designed to flow natural gas carried by the TurkStream pipeline from Russia further into southeastern Europe.

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Gastrans, 51% owned by a fully-owned Gazprom subsidiary and 49% by Serbian gas company Srbijagas, was set up to implement the project to expand Serbia's gas network to carry some 11 Bcm/year of Russian gas from the border with Bulgaria to the border with Hungary.

Gazprom CEO Alexei Miller met Serbian President Alexander Vucic in Belgrade this week with the pipeline project at the top of the agenda, Gazprom said in a statement.

"Special attention at the meeting was paid to the implementation of this project for the construction of a gas transmission infrastructure in Serbia," it said.

"It was noted that the project company Gastrans is currently receiving permits from the relevant authorities of the country to start the project."

SERBIA ROUTE

Gazprom delivered 2.15 Bcm to Serbia in 2018 via the traditional import route through Ukraine and Hungary.

However, once the current 10-year gas transit deal between Gazprom and Ukraine's Naftogaz expires at the end of this year, the Russian company is keen to supply customers instead via the second 15.75 Bcm/year leg of TurkStream.

Gastrans is set to take a final investment decision on the new pipeline by the start of March, according to senior Serbian gas officials.

It followed a decision last month by Bulgaria's state-owned TSO Bulgartransgaz to take FID on the $1.6 billion expansion of its grid network to accommodate flows via TurkStream.

The moves in Bulgaria and Serbia almost certainly mean the TurkStream route into Europe will comprise flows via Bulgaria and Serbia into Hungary and ultimately to the Baumgarten hub in Austria.

The other 15.75 Bcm/year string of TurkStream -- also due online by the end of 2019 -- will serve the Turkish domestic market, replacing volumes sent currently via Ukraine.

BULGARIA SNAG

However, the expansion of the Bulgarian network has hit a snag after project operator Bulgartransgaz suspended the tender for the construction of a new east-west pipeline in the country.

The tender to select the project contractor was 'temporarily' halted after an appeal against the process by Bulgarian power plant equipment maintenance and repair services company Atomenergoremont.

According to Bulgartransgaz, the appeal included a request that the tender process be suspended ahead of a decision by the Bulgarian competition commission.

"The contracting authority will suspend all actions until the entry into force of a decision rejecting the request for a provisional measure or a decision on the appeal," it said.

The appeal could delay construction of the pipeline in Bulgaria, meaning that if TurkStream comes online on schedule by the end of 2019, it may not have an outlet for on-flow into southeastern Europe until later in 2020.

-- Stuart Elliott, stuart.elliott@spglobal.com

-- Edited by Dan Lalor, newsdesk@spglobal.com