The contract for the expansion of the Chiren UGS has been terminated, an extension of European funding will be sought with a new order

Acting Minister of Energy Vladimir Malinov announced to the deputies that the contract for the expansion of the Chiren gas storage facility has been terminated. An extension of the term for the grant agreement for the implementation of the project - under the Connecting Europe Facility program - will be requested.

The National Assembly heard Malinov in connection with the construction and commissioning of the construction "Expansion of the capacity of the Chiren UGS - drilling fund" and the impact of the investigation launched by the European Public Prosecutor's Office on the deadlines for completing the gas storage facility expansion project.

"There is no request from the European Prosecutor's Office in Sofia or from the General Directorate of the National Police to suspend the implementation of the contract. However, in view of the subject of the inspection and the report submitted, the management of Bulgartransgaz has decided to terminate the contract. The reason is that continuing its implementation, including the start of construction and installation works and the commitment of additional financial resources, may lead to financial damage to the company and make the inspection more difficult." Malinov said this in the National Assembly during a hearing on the reasons for terminating the contract for the project "Expansion of the capacity of the Chiren UGS - drilling fund" between Bulgartransgaz and the DZZD "UGS Drilling Chiren", quoted by BTA.

Malinov added that after the termination of the drilling fund contract, the management of Bulgartransgaz had several conversations with the financing institution. Next week, during his visit to Brussels for a meeting of the EU Council in the "Energy" section, the minister will request a meeting with the financial institution, to which he will emphasize the importance of the project.

On August 13, officers of the National Police and the European Prosecutor's Office entered the Bulgartransgaz building for an inspection, the subject of which was a review of the activities carried out under the gas storage expansion project, which are financed with European funds in the amount of nearly 78 million euros, Dir.bg recalls.

The next day, August 14, Minister Vladimir Marinov told the media that "while the inspection is underway, the contract for the Chiren UGS expansion project has been temporarily suspended," in order to ensure, in his words, that "all procedures will be fully transparent and in accordance with legal norms." At the time, the acting minister (and former director of Bulgartransgaz) welcomed and admired the inspection, stating that this was normal practice and confirmation of the transparency of the company's activities. At the same time, he expressed hope that the inspection would be completed as soon as possible in order to prevent delays in the project, which is key to diversification and energy security in the region. Malinov stressed that the public procurement had already been inspected by the State Financial Inspection Agency (SFI) this year, and no violations had been identified. According to him, all requirements had been strictly complied with.

So far (August 14 this year), no construction activities have been carried out, nor have any acts related to the implementation of the project been signed. "Furthermore, no requests for payments have been made by the contractor, nor have any payments been made, except for an advance payment, which is fully secured," Malinov emphasized in his statement to the media.

In connection with the inspection, the next day - August 15, Malinov sent a letter to the management of Bulgartransgaz and the Bulgarian Energy Holding, in which he insisted on full protection of the project and taking timely action to prevent damage to financial interests or improper spending of funds allocated by the European Union.

The contract provided for a doubling of the storage capacity to 1 billion cubic meters for storage and between 8 and 10 million cubic meters for production and injection.

The expansion of the Chiren UGS is undoubtedly a significant project for Bulgaria and the region. This was one of the projects that were launched under my management of Bulgartransgaz, since the expansion of Chiren is "A topic from before 2010. Part of the connecting gas pipeline has been put into operation, and by the end of the year the above-ground facilities that are necessary to increase the daily capacity, respectively for injection and extraction, will be activated and will be put into operation at the beginning of next year," noted last week on bTV Vladimir Malinov.

There are three public procurements that affect the expansion of the gas storage facility - generally the above-ground and underground part and connecting infrastructure, announced exactly 2 years before the European Public Prosecutor's Office's investigation began - on August 12, 2022.

In fact, the subject of the hearing in the National Assembly is the second public procurement: "Development planning, investment design, supply of the necessary materials and equipment, construction and commissioning of the construction: "Expansion of the capacity of the "Chiren UGS" - drilling fund". The procurement includes the activities of design, construction and commissioning of underground facilities - ten new operational and three observation wells, as well as new plumes connecting each of the operational wells with a new compressor station. The construction of the facilities will create a technical opportunity for a phased expansion of the storage facility in Chiren, increasing its operational safety and increasing its capacity capabilities.

The estimated value of the public procurement is 133,694,000 (one hundred thirty-three million six hundred ninety-four thousand) leva excluding VAT. The financing of the activities within the scope of the procurement will be carried out with borrowed funds and with non-repayable financial assistance under a signed grant agreement under the Connecting Europe Facility program, Bulgartransgaz announced in its announcement.

It became known that the signal was submitted by the Bulgarian Energy and Mining Forum, as its expert Hristo Kazandjiev explained on Bulgarian National Radio on August 13. "In the Chiren expansion project, a significant part of the funding is from the EC and it is completely justified and lawful for the European Prosecutor's Office to investigate abuses if there are doubts, and there are such in our signal," Kazandjiev said at the time. "We have indicated the problem, the goals and what is the essence of the abuse. The reason why we submitted the signal is that the initial expansion project, which has been developed by us for 20 years, was completely ignored. But it became the basis for preparing the conditions, requirements and pricing of the public procurement, which is the subject of discussion." Kazandjiev noted in the radio interview that the technical requirements of the public procurement were changed to the detriment of Bulgartransgaz.

Today, Minister Malinov noted to the deputies that the requested extension of the deadline for the implementation of the grant agreement is necessary so that the provided funding can be used for the planned drilling. The funding is divided into two parts - for the above-ground facilities, which will be put into operation at the end of the first quarter of next year, and for the drilling. The funds for the above-ground facilities are not at risk, the minister specified.

After a market study on the cost of vertical drilling, Bulgartransgaz specialists are ready to start a public procurement. Malinov expressed hope that the contract will be signed as soon as possible. The financing institution has been informed about the new approach, including the phased implementation of the drilling. From this point of view, an extension of the deadline for the implementation of the grant agreement and, accordingly, of the eligible costs will be requested.

Despite the delay in the extension deadlines, the management of Bulgartransgaz is looking for options for this to happen in stages. The minister announced that he has set the goal of increasing the injection and storage capacity during the next injection season, and after the completion of the drilling - also the production capacity.