* Sofia, European Commission to set up working group
* As FID taken on Greece-Bulgaria gas interconnector
* Bulgarian hub to serve whole Balkan region
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Bulgaria and the European Commission have agreed to establish a joint working group to support the development of a gas hub in Bulgaria designed to serve the whole Balkan region.
Gas infrastructure in southeast Europe is poorly integrated, but with a number of projects on the drawing board -- including the now approved Greece-Bulgaria gas interconnector (IGB) -- it is hoped that the region can be home to an efficient gas hub.
The Bulgaria-EU working group, unveiled Thursday by Bulgaria's deputy Prime Minister Tomislav Donchev and Klaus-Dieter Borchardt, director of the EC's Internal Energy Market Directorate, will begin by assessing the legal, regulatory and financial requirements for creating the Balkan gas hub.
It will focus on creating a "stable regulatory framework and business environment to facilitate the connection between Bulgaria and the rest of southeast Europe," the Bulgarian cabinet said in a statement.
"The geographical location of Bulgaria and the existing gas infrastructure provide a stable basis for the development of a regional gas hub," Donchev said in the statement.
Borchardt said the commission supports the development of the gas sector in southeast Europe "to ensure the supply for all countries in the region," adding that the establishment of a regional center for gas in Bulgaria could be an "important springboard" for achieving that goal.
The agreement between Sofia and Brussels came the same day as a final investment decision was taken on the IGB pipeline that is expected to become operational in 2018.
The pipeline will primarily deliver gas from Greek to Bulgaria opening up a vertical gas corridor in the region.
The 180 km pipeline is designed to transport up to 5 Bcm/year in forward flow to Bulgaria and up to 2 Bcm/year in reverse flow.
Romania could also help contribute to a regional hub as it works toward bringing online offshore gas discoveries.
One is the major Domino (Neptun) discovery in Romania's sector of the Black Sea which is thought to hold resources of up to 2.5 Tcf (71 Bcm).
Analysts believe Romania could be the key to creating a regional Balkan gas hub.
"[Romania] is contemplating creating a southeast European gas hub with Bulgaria and Greece," Patrick Heather from the Oxford Institute for Energy Studies said in a paper this week.
"Sometimes there needs to be a catalyst for the change in attitude and, in the case of Romania, it is probably the gas find in the Black Sea that could make the country not only self-sufficient by the end of the decade but even have a surplus for export."
The push for improved regional gas interconnectivity comes as first the South Stream project to bring 63 Bcm/year of Russian gas to southeast Europe was canceled, and now its replacement TurkStream is frozen.
Although the EU had legal issues with South Stream, it would have provided the region with much needed diversity of route instead of having to depend on pipelines bringing Russian gas via Ukraine.
The replacement TurkStream is designed to allow Russian gas to be sold on to Europe at its border with Turkey.
But that project is on hold due to the political spat between Moscow and Ankara, so question marks remain over what sources of gas can help create a Balkan hub.
There is gas from Azerbaijan set to come to Greece by the end of the decade.
The TANAP/TAP pipeline network that is currently under development will bring Azeri gas through Turkey to Greece, and with the IGB interconnector to Bulgaria in place gas could wind up there, helping create a Balkan gas hub in Bulgaria.
The EC's Borchardt, speaking to the Bulgarian state news agency earlier this month, said Bulgaria and other countries in the region had been focused on large-scale pipeline projects such as South Stream and neglected the development of regional infrastructure.
He said that interconnections with neighboring countries were more important than ever, pointing to a number of projects that had been listed as EU Projects of Common Interest (PCI), which means they are eligible for EU financial support.
He said, though, that Bulgaria needed to become a model for regulation in the region and fulfil a number of "essential pre-requisites" before it could host a gas hub.
"[But] once established, such a well-functioning gas hub can secure gas supply for the whole southeastern European region which is today the most vulnerable region in Europe in terms of security of gas supply."
'RAPID, CONCRETE ACTIONS'
In January, the EU's top energy officials Maros Sefcovic and Miguel Arias Canete agreed with the Bulgarian government for the need to increase gas integration in the region and provide "real diversification" of gas supplies.
"This requires rapid concrete actions and to revisit and reinforce cost-effective regional solutions based on regional cooperation and solidarity," the commission said then.
It was during meetings with Bulgarian Prime Minister Boyko Borissov that the idea of making Bulgaria a common gas distribution center for EU member states in the region was first proposed.
The commission said that pre-conditions for functioning gas hubs are: proper infrastructure; transparency; and liquidity and non-discriminatory access to suppliers and customers.
The working group will assess whether Bulgaria meets these conditions.
--Stuart Elliott, firstname.lastname@example.org
--Edited by James Leech, email@example.com