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Bulgaria: Shell International Gas Prospecting for a Deal

Sofia, 23 December 1997 (RFE/RL) -- A major Western energy conglomerate has apparently approached Bulgarian authorities with a proposal for a strategic partnership in carrying out joint projects for the transport of natural gas.

An informed source in the Bulgarian Committee for Energy tells RFE/RL that the company is Shell International Gas, part of the giant Anglo-Dutch Shell group. Within the group, Shell International Gas is responsible for the exploitation, marketing, and transport of natural gas.

According to the source, the proposal has short-, medium- and long-terms aspects.

In the short term, Shell is proposing investments for increasing capacity of the already-existing pipelines for the transit of natural gas to Turkey.

In the medium term, construction of new gas pipelines to Turkey are envisaged.

And in the long term the proposal is for building new pipelines through Bulgarian territory for transport of natural gas to Western Europe.

The company also proposes to take part in investments for construction of underground storehouses, which will be necessary if maximum flow through the pipelines is to be achieved.

By stepping into Bulgaria, Shell would gain a strategic advantage for access to the Turkish market, which is by far the biggest in the region and is steadily growing.

The annual consumption of gas in Turkey is now about 10,000-million cubic meters. Around the end of this century it is expected to be about 15,000-million cubic meters, and forecasts for the year 2010 point to 50,000-million cubic meters.

Shell is showing keen interest in projects for the extraction of Russian natural gas and oil, and their transport to the expanding markets in Turkey and the Balkan countries. On November 17, Shell and Russia's Gazprom signed an agreement for a strategic alliance. The capital of the new joint company was equally divided between the two energy giants.

It was announced that the first project of the new company is to be the exploitation of oil-and-gas deposits in Western Siberia. The annual output is expected to be about 25-million tons of gas and oil condensate (some 500,000 barrels daily).

Other prospective projects are being studied. Gazprom announced that it is issuing convertible bonds for 2,000-million dollars which will be distributed in equal shares between Shell and other institutional investors. Thus, the Anglo-Dutch Shell conglomerate will acquire two percent of the Russian company.

Meanwhile Shell, according to analysts, could be seen as taking the first step toward the accomplishment of plans for connecting Western Europe with the energy resources of Central Asia through Turkey.

The fact that Shell came to Bulgaria with concrete proposals for a strategic partnership immediately after the announcement of its project in Russia can be seen as an indicator of the role in these plans Shell sees for Bulgaria.

A positive element for Bulgaria's interests are the newly-established good business relations between Shell and Gazprom, although at first sight, it might seem otherwise. If a new joint company is formed between Shell and a Bulgarian state company, then that arrangement could prove useful to Bulgaria. That's because, unlike Bulgaria vis-a-vis Russia, Shell can deal with Gazprom on the basis of equality.

A joint company in which Shell and Bulgaria are partners with common strategic interests will no doubt mean a much stronger position for Bulgaria.