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Bulgartransgaz, Arkad Engineering sign deal to extend Bulgarian TurkStream gas line

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Bulgartransgaz, Arkad Engineering sign deal to extend Bulgarian TurkStream gas line

London — Bulgaria's gas transport system operator Bulgartransgaz said Wednesday it has signed a contract with a consortium led by Saudi Arkad Engineering for the procurement of materials and equipment, investment design, construction and commissioning of the Bulgarian section of the TurkStream natural gas pipeline's extension into Europe.

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The signing of the agreement came after the termination by Bulgaria's supreme administrative court on Monday of an appeal by the DZZD consortium, which came in second in the tender for the assignment of the procurement and construction contract.

The project -- which Bulgartransgaz has named Balkan Stream -- forms part of a group of pipelines running through Bulgaria, Serbia and Hungary that are destined to transport gas from TurkStream's line two into Central and Eastern Europe.

Bulgaria aims to build a 474 km pipeline running from Nova Provadia to the Kirevo/Zajecar interconnection point on the border between Bulgaria and Serbia, as well as two annexed compressor stations.

Under its contract, Arkad Engineering now has 615 calendar days to complete the pipeline part of the project.

The contractor will have to complete construction of in initial 308 km section running from the Polski Senovets compressor station, located in Polski Trambesh municipality, to the Bulgarian-Serbian border within 250 calendar days. Building permits for this section have already entered into force, Bulgartransgaz said.

Arkad will then have to construct the remaining 166 km of the project, from Polski Senovets to Zlatina, in Provadia municipality, by the end of the 615 days period.

An Arkad spokesmen has previously told S&P Global Platts that the consortium would be ready to start construction works straight after the signing of the contract.

Supposing an immediate start to construction works and full observance of the 615 day timeline, the project would be ready in about 20 months, meaning by summer 2021.

But while the TurkStream project is expected to be completed by December, the 615 day timeline for Balkan Stream means that Russian gas major Gazprom will have to wait until at least summer 2021 to be able to transport TurkStream gas forward into CEE.

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LEGAL WRANGLE

The consortium led by Arkad Engineering won the tender for the procurement and construction of the Bulgartransgaz project in April 2019, offering 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.

But at the end of May, Bulgartransgaz decided to drop the consortium, saying it had failed to present all of the relevant documents on time.

Bulgartransgaz subsequently assigned the contract to DZZD, which had in the meantime lowered its offer to Eur1.10 billion, with a 615 day deadline, the same price offered by Arkad.

Arkad appealed Bulgartransgaz's decision before Bulgaria's competition commission and won the case at the end of June.

In early July, DZZD appealed against the original decision before the supreme administrative court, reopening the legal dispute.

-- Silvia Favasuli, silvia.favasuli@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com