Oil & Gas Laws and Regulations in Bulgaria (2024)

1. Summary 

Currently, the main piece of legislation, governing oil & gas matters in Bulgaria is the Underground Resources Act (the URA). This is a piece of legislation that is general for underground resources prospecting and exploration, exploration, and production. Resulting in certain aspects of oil & gas-related transactions and particular scenarios not covered by our jurisdiction’s legislation (by way of an example: change of control in permit holder is not explicitly regulated by legislation). This gives room for the market practice to shape the reality of the prospecting and exploration of oil & gas.

Following the major changes to the URA in 2020, we have noticed in the past years updates to the secondary legislation like: Ordinance on the Setting of the Amount, Terms and Conditions for the Fees under the Underground Resources Act and draft Ordinance for Control over the Agreements, Executed under the Underground Resources Act.

The URA is a specific legislative act to the Energy Act (EA), which is the main legislative act in the Energy sector. The EA has undergone several changes since 2020 but the most significant as relates to oil & gas are the licensing of the gas traders and the development of the legislation, concerning gas trading on the gas trading hub. We believe that both acts will undergo changes in case of rapid development of the oil & gas sector and discoveries made.

What we currently see is the populating of the gas market with licensed gas traders. We also notice the growth of the market share of the Balkan Gas Hub (BGH). This is due to various reasons, the main one being the diversification of the gas supplies to Bulgaria and the region. Currently, the licensed gas traders registered as participants on the BGH are 93. Growing the number of registered participants and their needs reasoned BGH’s anticipated introduction of clearing services by the midst of 2025.

Bulgartransgaz EAD, a state-owned company, is the sole entitled natural gas transmission network operator in Bulgaria.

Another company holds a license as a public supplier of natural gas – Bulgargaz EAD – which is also wholly state-owned.

There is another gas exchange stock in Bulgaria – the Bulgarian Energy Trade Platform. It is privately owned and its market share is pretty low.

2. Overview of The Country’s Oil & Gas Sector 

2.1. Legal Framework – A Brief Outline of Your Jurisdiction’s Oil & Gas Sector

As mentioned above, it is the URA the main legislative act that regulates and governs the prospecting and exploration, development, and production of oil & gas in Bulgaria. Prospecting and exploration of oil & gas may be done only based on a tender and following permit issued by the Council of Ministers at the suggestion of the Minister of Energy to the successful bidder.

During the prospecting and exploration phase, the permit holder pays an annual fee based on the area of the block where the prospecting and exploration rights are granted. Recently, the amount of the area fee was increased, as the tariff was not updated for quite some time. In addition to the annual fee, the permit holder is obliged to hold a guarantee covering the performance of the approved overall and annual work program; and covering its environmental obligations. Rarely, the permit holder may need to pay for extracted natural resources should the quantities are not for commercial sales.

Once there is a concession granted for the production stage, the company pays the concession payment based on the production and again shall maintain the respective guarantees, covering its production permit and environmental liability.

The import and export of oil & gas are regulated by general legislation, including the URA and the Energy Act. As mentioned above, a license is needed for trading with natural gas, including import and export if they are regarded as trading of natural gas.

There is only one license for a public gas supplier which is held by the 100 % state-owned company Bulgargaz EAD.

The other state-owned company is Bulgartransgaz EAD which is a combined operator performing licensed activities of natural gas transmission and storage. The company is an owner and operator of gas transmission infrastructure for natural gas transmission to natural gas distribution companies and industrial consumers on the territory of Bulgaria and to the neighboring countries Romania, Turkey, Greece, North Macedonia, and Serbia. Recently, Bulgartransgaz EAD announced public procurement procedures for the expansion of the transmission capacities from Greece to Bulgaria and from Bulgaria to Romania. The modernized infrastructure will ensure additional capacity from Bulgaria to Romania in the amount of 137.2 gigawatt-hour per day, and the total technical capacity will reach 295 gigawatts-hour per day.

Currently, there are three TSOs registered: Bulgartransgaz EAD, ICGB AD, and NOMAGAS JSC Skopje.

There is only one underground gas storage in Chiren (Chiren UGS) with a major function – natural gas storage for covering the seasonal fluctuations in consumption and delivery of natural gas. It is currently being enlarged by drilling additional wells and building a connection pipeline to the gas transmission system and Balkan Gas Stream.

In the past couple of years, we have seen significant changes in the gas market and sources of gas supply but we believe that it is still to develop and extend due to the market demand, the extension of the gas transmission system, and the entry of new market players.

Bulgaria is still very much dependent on imported gas. The mix of imported gas is getting more and more variable. Domestic production has been in decline in the past years.

Prospecting and exploration works in the biggest offshore prospecting and exploration area continue and the state is considering joining the project.

2.2. Domestic Oil & Gas Production and Imports/Exports 

At present, Bulgaria has proven insignificant quantities of natural gas and oil reserves. 17 concessions have been granted from the group of mineral resources – oil and natural gas, most of which are in onshore territories, and limited quantities of oil and condensate are extracted.

For the first quarter of 2024 there is no export of domestic gas, the domestic production is equal to 1 million cubic meters, while the import is 1,024 million cubic meters.

So far, no significant natural gas deposits have been discovered on the territory of the Republic of Bulgaria. The actions that have been taken are to prospect and explore new natural gas fields, both onshore and offshore in the Bulgarian Black Sea. Currently, such works are being carried out in the area of Han Asparuh Block, where the tender for Han Tervel Block is now live. The main parameters of the tender are:

• The area’s size: 4,032 square km
• The bid participation deposit amount: BGN 15,000 or approximately EUR 7,500
• The specification that the bidder must prove a generated total net income of EUR 150 million in sales for the last three financial years
• Each bid will also be evaluated based on the proposed work program and funds allocated for environmental protection
• The minimum mandatory work program must include the following: acquisition of new 3D seismic surveys, the preparation of a geological model to delineate prospective drilling targets, an assessment of oil & gas potential, and the optional drilling of an exploration well

Chiren storage facility is a significant part of the national gas system. So far it is the only gas storage facility in the country and as mentioned above its extension was needed and currently undergoing.

Currently, Bulgaria does not have a LNG terminal. It is using neighboring countries' LNG terminals to re-gasify LNG supplies. Bulgargaz EAD entered into an agreement with Botas at the beginning of this year to secure re-gasification capacities.

The gas supplies to Bulgaria are done mainly by pipelines where the source of the gas is also LNG.

2.3. Foreign Investment and Participation 

Bulgarian legislation does not provide restrictions on foreign stakeholders in general to enter the domestic market.

Bulgaria passed legislation at the beginning of 2024 introducing a screening mechanism for foreign direct investments (FDI) in the country. The new mechanism introduced in the Bulgarian Investment Promotion Act provides for the criteria for screening of FDIs in Bulgaria and establishes the following monetary thresholds upon which the investment would be subject to scrutiny, namely:

• at least 10% of the capital of a company operating in Bulgaria is acquired, or the investment's value exceeds EUR 2 million in value;
• at least 10% of the capital of a company operating in the country and carrying out high-tech activities is acquired; or
• a new investment that exceeds EUR 2 million.

Certain jurisdictions are designated as low risk (e.g., US, UK, Canada, Australia, New Zealand, Japan, South Korea, the United Arab Emirates, and Saudi Arabia), this underscores Bulgaria's strategic alignment with international standards while streamlining regulatory processes for investors from trusted regions. Investments in critical sectors such as energy production and those originating from specific countries, irrespective of monetary thresholds, are subject to heightened scrutiny.

The URA imposes certain requirements for companies to meet to be granted a permit for exploration and production such as: the company needs to be registered under the Bulgarian Commerce Act or a similar act of another country; the company may not be registered under the legislation of a country with preferential tax treatment; the company needs to meet the financial, technical and management requirements to qualify for bidding round, etc.

It is interesting to note that past year Bulgarian government was contemplating the acquisition of share interest in the permit for prospecting and exploration of the Han Asparuh block. The intention was to acquire up to 20% of the share interest in the permit. The government assigned the Minister of Energy to monitor the process, where the activities were on the side of the Bulgarian Energy Holding.

It is good to mention that in the past years, all of the prospecting and exploration works offshore Bulgaria were and are being done by international major players like Total, OMV, Shell, Repsol, Woodside, etc.

2.4. Protection Of Investment 

Bulgaria is a member of the Energy Charter Treaty. However, it should be considered that at the end of May 2024, the EU announced its withdrawal from the Energy Charter Treaty, which will officially take place on April 27, 2025. It is also expected that EU Member States will withdraw separately (as some of them already did, e.g., Spain, France, Italy, Germany, etc.) and terminate their “sunset clauses,” the latter providing for 20 years post-withdrawal protection under the ECT, which will most likely be removed. Bulgaria has not demonstrated such an intention yet, but it is most likely to follow the other member states. The country also takes all necessary steps in time due manner to implement relevant to the energy sector EU directives. Bulgaria has been represented in court and arbitration cases, derived from the energy sector legislation in the past, and by no means makes an exception in comparison with other member states of the European Union when it comes to bearing its liability before domestic and foreign investors.

It is very important to mention that the URA does incorporate a stability clause, meaning that investment is given stability when the transaction is entered. The clause provides that:

In case of changes to the Bulgarian legislation which limit the rights or cause material damages to the permit holder, on the request of the permit holder, the terms and conditions of the executed contract shall be amended to restore its rights and interests corresponding to the initially concluded contract.

3. Exploration of Oil & Gas 

3.1. Granting of Oil & Gas Exploration Rights 

In Bulgaria, the prospecting and exploration, exploration, and production of underground resources are regulated activities, done on the basis of a permit, issued by the competent authorities following a competitive bid or tender or granted by right. This is set up by the URA and the secondary legislation issued thereto.

Oil & gas permits for prospecting and exploration may be granted following a competitive procedure or on the initiation of an interested party which is used as a trigger for a competitive procedure. The applicants need to meet the criteria on place of establishment, no criminal convictions, no violations of tax and social security legislation, no termination of concession agreement due to permit holder’s default, as well as to evidence their technical, management/professional and financial capabilities to manage the project.

The permits for prospecting and exploration of natural resources like oil & gas are granted on the consent of the Council of Ministers on the basis of a recommendation of the Minister of Energy, following the competitive procedure results. This means that the Ministry of Energy is leading the whole procedure (the competitive one) and then running the coordination with other ministries prior to having the permit approved by the Council of Ministers. In practice, this is a rather very formalistic and thorough procedure that consumes at least four months to complete.

When the bidding round is started by the initiation of the Council of Ministers on the suggestion of the Minister of Energy the public call is promulgated in the Bulgarian State Gazette and the EU official journal (as regards oil & gas) and all interested parties are given the main terms and conditions under which the permit shall be awarded.

The invitation includes the area it will be bidding for, its coordinates, the area use fee payable, any requirements for having to drill a prospecting well, any specifics of the area, information where interested parties will be given access to available information on the study of the concerned area, etc.

A permit is an administrative act. Its issuance is promulgated in the State Gazette and it is subject to appeal within 14 days following the publication by any party that has legal standing to do so. The permit does not enter into force, and the exploration contract cannot be signed before the expiry of the appeal period or before the completion of the appeal procedure. The grantor may decide to allow preliminary implementation of the permit, in which case the agreement can be signed before the expiry of the period for appeals.

Further, when a commercial discovery is made, it has to be reported to the Ministry of Energy so the latter can conclude a separate agreement for the concession of the area where the deposit is located. Despite the lack of significant discoveries on the territory of the Republic of Bulgaria, the government still shows support for the activities of exploration and prospecting both on and offshore Bulgaria.

3.2. Foreign Exploration

Under Bulgarian legislation, underground resources are the exclusive property of the state. Their prospecting and exploration may be done through a permit for prospecting and exploration issued following the procedure detailed in Section 3.1. The only formal limitation to a permit holder is that it may not be a company incorporated under the legislation of a country with preferential tax treatment or its associated companies be registered in jurisdictions with preferential tax treatment and may not be in insolvency or a liquidation procedure. The other requirements a permit holder needs to meet are set out in art. 23 and art 23a of the URA.

Once granted the permit for prospecting and exploration of natural resources, the permit holder may transfer it to another company following the provisions of the URA with the consent of the issuing authority, in the case of oil & gas prospecting and exploration, this is the Council of Ministers.

The new permit holder must meet the same requirements and criteria the permit holder did upon granting the permit for prospecting and exploration.

3.3. Stages of the Exploration Process 

As part of the tender procedure and one of the selection criteria, the applicant provides its overall work plan. The overall work plan contains the minimum amount, type, and scope of work. Once the applicant is the winning bidder and respectively becomes the permit holder, the overall work plan becomes an inseparable part of the prospecting and exploration agreement. The overall work plan covers the whole period of the permit and its implementation is spread through the years of the duration of the permit in the annual work plans. Works may be added to the work plan but may not be taken out.

The permit holder guarantees the performance of the works out of the overall work plan by a bank guarantee or a cash deposit, together with the guarantee for compliance with the environmental requirements.

The term of prospecting and exploration of oil and natural gas in offshore areas may be extended following the requirements of the URA up to three times two years each, and one year for appraisal.

3.4. Obligatory State Participation 

Under the URA the state does not get ownership or interest in the permit. Last year the Bulgarian government set a precedent by making a decision to assess the possibilities for acquiring up to 20 % of the permit for prospecting and exploration of oil and natural gas in the Han Asparuh area, offshore Black Sea. Up to date, there is no decision for the actual joining of the permit and the terms and conditions under which the state is joining the permit.

What the state gets out of a permit for prospecting and exploration of oil and natural gas is payment of the area fee, and payment of potential extracted volumes of oil/natural gas, exceeding the ones needed for appraisal. The data collected is co-owned by the state and the permit holder following the requirements of the URA and sub-legislative legislation for the duration of the permit. Once the permit expires, the date becomes exclusive ownership of the state.

Once the permit for prospecting and exploration is over, the state becomes the exclusive owner of all the data and information collected during the prospecting and exploration phase.

What the state most benefits from during the prospecting and exploration of underground resources like oil & gas is having been paid the area fee and collecting updated data from the study of the area.

3.5. Risks To Be Considered

As Bulgarian legislation is compliant with EU legislation and the Bulgarian government is open to foreign investment and collaboration – the main risk we may identify is the short terms for doing prospecting and exploration works on and offshore Bulgaria as regards oil and natural gas. This was tackled by the recent amendments and supplements in the URA giving additional periods for doing such works and there are prospects for further improvement of the legislation in this regard.

Further, our legislation incorporates the stability provision. Even though the stability provision is rather too general and has not been tried and tested in court, it is an option for investors to enforce it in case of need.

4. Production of Oil & Gas 

4.1. Granting Of Oil & Gas Production Rights 

The holder of a permit for prospecting and exploration, who has announced a commercial discovery and has been issued a certificate for commercial discovery, is entitled to receive by right concession within the terms and deadlines set by the URA.

Concession rights may be granted also following a tender procedure for a specific area and type of underground resource.

The Council of Ministers grants production concession based on a request of the Minister of Energy once the Ministry of Energy has verified the presence of all preconditions for issuance of the concession. There is no limitation on the number of concessions that one individual or company may have. The decision to grant a concession is an administrative act. Similar to the permit for prospecting and exploration, it’s subject to publication, appeal, and entry into force, and might be subject to preliminary implementation. The concession rights are granted for a particular territory, which shall include the territory of the discovery and territories, necessary for the performance of the concession activities. Similarly, to the prospecting and exploration permit, the concession rights are granted following the provisions of the URA. The supervision of concession activities is with the Ministry of Energy which reports to the Council of Ministers in case of need. Secondary legislation is being now considered, empowering the Ministry of Energy’s administration to supervise the concession activities.

4.2. Foreign Production 

Production under concession agreements by foreign entities is not subject to special regulation by the URA. The procedure for granting production rights under a concession follows the same general rules as stipulated in Section 4.1. The requirements for a foreign company to hold a concession are similar to the one, applying to an applicant for prospecting and exploration of oil and natural gas. Therefore, similar restrictions exist like the one for granting a permit for prospecting and exploration to a foreign company. For more, details please see Section 3.2. Moreover, the concession rights come only after the successful prospecting and exploration of a given area. Our experience shows that the Bulgarian government does not differentiate between local and foreign investors and it is willing to cooperate with either of them in order to succeed in ensuring its oil & gas independence.

4.3. Stages of the Production Process 

The concession agreements for the production of oil and natural gas are with a maximum term of 35 years which may be extended in specific cases if the preconditions are met. The concession agreement sets forth all the terms and conditions of the works, applicable procedures, responsibilities, and obligations between the parties, guarantees for the performance of the work as well as for the observance of the environmental legislation. Where the concession agreement is silent the URA shall apply.

The concession agreement mainly includes the parties, subject of concession, coordinates, and area of the concession rights, terms and when it starts to run, rights and obligations of the parties, adjacent area to the concession rights, financial terms and conditions, concession payments, security for the performance of the obligations, possibility for the transfer of rights and obligations, terms and conditions for the termination of the concession agreement, terms and conditions for the works performance, environmental responsibilities, dispute resolution clauses, etc.

4.4. Obligatory State Participation 

There is no regulation currently in force in Bulgaria, stipulating obligatory state participation nor does the state actively seek participation in the process. The only precedent we have seen so far is mentioned herein above.

The state’s main interest in the concession is receiving the concession payment.

The concessionaire pays a concession payment, the amount of which shall be determined considering the type, group, and value of underground resources, as well as the specific terms of extraction and primary processing. The amount, terms, and conditions for the concession payment shall be determined by the concession contract based on the sub-legislative acts. A portion of the concession payment amounting to 50% shall be transferred to the budgets of the municipalities, where the areas are located.

4.5. Risks To Be Considered

At this point, we believe that the applicable legislation is quite balanced, and industry is favored to stimulate investors in the market. We may not identify high risks related to the production of oil & gas in Bulgaria.

5. Termination of Production of Oil & Gas 

5.1. Abandonment and Decommissioning 

The rights acquired on the grounds of concession for production shall be terminated upon termination of the relevant contract with the expiration of the concession term.

• The contract may be terminated upon the occurrence of any of the below:
• expiry of the initial term of the concession and acceptance by the competent authorities of the activities for liquidation of the extraction site and/or reclaiming of the affected land and forests;
• in the event of objective impossibility to pursue the activities under the granted concession;
• in cases where a decision for declaring bankruptcy of the permit holder or the concessionaire has come into force; by mutual agreement;
• by virtue of the ruling of a court of justice or a court of arbitration;
• in cases where within three years from entry into force of the concession agreement no extraction of subsurface resources has started for reasons attributable to the concessionaire; or
• for other reasons provided for in the agreement.

The Minister of Energy is entitled to suspend the validity of the concession if the concessionaire pursues activities that conflict with the legislation in force or violate the provisions of the concluded agreement.

Shall the concessionaire not be able to decommission the infrastructure then the state enters into such obligation. The funds for the works to be done come out of the guarantee provided upon commencing the works. If there are not enough funds to cover the expense, the state has a claim against the concessionaire.

The plans for the abandonment and decommissioning of the oil & gas facilities represent an inseparable part of the overall and annual work plans for the prospecting and exploration, production, and initial processing of the underground resources. They are approved and coordinated at once. The bodies involved in the approval and coordination process are the Ministry of Energy, the Ministry of Environment and Waters, and their local administrative bodies.

The procedure is led by the permit holder/the concessionaire.

5.2. Environmental and HSE Consideration 

The URA, the Environmental Act, the Biological Diversity Act, and secondary legislation set the environmental obligations to the permit holders and concessionaire for prospecting and exploration, exploration, and production of oil & gas. As regards environmental obligation and compliance of permit holders and concessionaires with the legislative requirements, including the compliance of the plan and programs, it is the Ministry of Environment and Waters and its Regional Departments that approve them and/or run the respective procedures.

HSE considerations are being aligned with the Bulgarian Labour Code and any specific requirements that may be applicable for this type of work specifically. HSE considerations are particularly of interest in the case of drilling prospecting and exploration wells or setting up and operating production facilities.

6. Safety of Oil & Gas Exploration and Production 

6.1. International Treaties to Which the Jurisdiction Is a Party 

The main international treaty, that the Republic of Bulgaria is a party to, is the Energy Charter Treaty. The treaty provides for a global legal framework in investment, trade, transit, dispute resolution, national sovereignty, energy efficiency, etc. in the field of energy including the oil & gas sector.

6.2. Offshore Safety Directive 

The Offshore Safety Directive was transposed and its provisions are embedded in the URA and within Ordinance on the Requirements for Prevention of Accidents in Prospecting and Exploration or Exploration or Extraction of Mineral Resources - Oil and Natural Gas in the Territorial Sea, the Continental Shelf and in the Exclusive Economic Zone of the Republic of Bulgaria in the Black Sea.

7. Import, Export, and Sales of Oil & Gas 

7.1. Import and Export of Oil & Gas

The Energy Act does not provide any specific regime for the origin of gas to be transmitted and sold on the wholesale market.

Еxtraction companies, natural gas traders, end suppliers of natural gas, gas transmission network operators, natural gas storage facilities operators, liquefied natural gas facilities operators, customers connected to the gas transmission network, market makers, and liquidity providers shall conclude natural gas transactions at freely negotiated prices.

The import and export of natural gas in Bulgaria through the gas transmission system will trigger specific customs formalities, both at entry points and upon exit of the country. Although the import of natural gas through a fixed transmission system is exempt from import VAT it still triggers some import customs formalities. Similar customs formalities will occur on export transactions performed from the territory of Bulgaria. In export transactions (i.e., sale of natural gas to a third country) the exporter, i.e., the seller shall have to perform customs formalities upon exit from the territory of Bulgaria.

Production companies and natural gas customers inside and outside Bulgaria may construct direct gas pipelines between each other and may conclude contracts for the delivery of natural gas through the said gas pipelines.

As the import and export of oil & gas is done, using the gas pipeline network of Bulgartransgaz EAD (BTG), the party willing to transport the oil and natural gas through the network shall enter into the respective Access and Transmission agreement with BTG, as well as into a Balancing agreement.

Booking of capacity is done by the client on the respective platform.

The catalog of the entry/exit points, their names, and codes within the TSO’s network may be found on the website of BTG.

7.2. Transportation 

The transportation of natural gas and gas network operation is done by the Bulgarian transportation system operator, BTG.

BTG as the gas transmission network operator shall ensure, among others:

1. integrated management of the natural gas transmission network with a view to its reliable, safe, and efficient operation;
2. transmission of natural gas through the natural gas transmission network and metering of the said gas;
3. maintenance of the facilities and installations of the natural gas transmission network in accordance with technical requirements and safe operation requirements;
4. expansion of the gas transmission network in accordance with long-term forecasts and plans for the development of gas supply and outside the framework of such plans, where economically justified;
5. maintenance and expansion of the auxiliary networks;
6. provision and control of third-party access on a non-discriminatory basis between network users or groups of network users in compliance with the quality requirements, and provision to network users of information that they need for efficient access to the network;
7. the coordinated development and operating compatibility of the gas transmission network with interconnected gas transport systems;
8. operators of other gas transport systems, operators of natural gas storage facilities and/or operators of liquefied natural gas facilities, and/or operators of gas distribution networks have sufficient information to ensure that transportation and storage are done in a manner consistent with the secure and efficient operation of interconnected networks and facilities;
9. sufficient cross-border capacity with a view to integration of the European gas transmission infrastructure while meeting all economically reasonable and technically feasible requests for capacity and with a view to meeting the requirements for the security of gas deliveries;
10. inclusion of gas from renewable sources into the gas transmission network, where this is technically feasible and secure.

The operation of gas transmission networks is done in accordance with the rules of management of gas transmission networks adopted by the Bulgarian Energy Regulator based on a proposal of BTG.

The procedure for access to the gas transmission system is initiated by the filing of an application with the TSO in a template form. The form may be filled in Bulgarian or English language. It is accompanied by original documents certifying the lack of obstacles to joining the network (that the company is not insolvent, in insolvency and/or liquidation procedure) and a good standing certificate of the company.

The draft Access and Transmission contract and the GTC applicable to it are available on the website of BTG.

The gas transmission in the territory of Bulgaria may be done based on an entry-exit tariff model.

If there is a need for access to the gas transportation pipeline system, the secondary legislation shall apply, namely the Ordinance for the gas transportation and gas distribution systems. The application for joining the gas transportation and gas distribution systems is thoroughly examined and decided on by authorities. Should there be a need and benefit to joining the systems, a contract is entered into based on the approved documents and the available town planning documents. The facilities to be joining the gas transmission and gas distribution system shall comply with the requirements set in the Energy Act and the related legislation.

7.3. Land Rights 

The obligation for the construction of the infrastructure for gas transportation/gas distribution is split between the party willing to be connected and the system operator. The connectivity point is the borderline of the parties’ obligations.

The company may be granted rights to construct and hold such servicing facility based on the provisions of the URA and the EA unless it owns the land where the facility will be passing.

Usually, such rights are in-rem rights like superficies or servitudes. Should the company fail to reach an agreement with the landowner for having the infrastructure go through his lands, assistance may be sought by competent authorities.

The construction of direct pipelines is ensured by the production companies and the gas infrastructure facility operators. The construction may be done only based on an executed contract for joining the gas transmission/gas distribution network.

7.4. Access and Integration 

In the context of European goals for building an interconnected and single pan-European gas market, Bulgaria's policy and legislation for gas infrastructure development are directly linked to the country's position as one of the main gas distribution centers in Southeast and Central Europe. Key to market integration by 2030 is the interconnections with the Republic of Greece and the Republic of Serbia, the participation in the liquefied natural gas terminal near Alexandroupolis, Greece, as well as the expansion of the gas transmission infrastructure on the territory of Bulgaria from the Bulgarian-Turkish to the Bulgarian-Serbian border. To implement this policy, a number of projects of common interest to the European Union are being implemented under Regulation (EU) No. 347/2013 on guidelines for trans-European energy infrastructure, as well as projects of common interest to the energy community and priority gas projects under the gas interconnection in Central and South-Eastern Europe.

Currently, BTG has assigned two projects on the territory of the country for the construction of the vertical gas corridor between Greece and Bulgaria and Bulgaria and Romania. It is expected when ready, these two projects to increase the capacity of the gas transmitted from and to the two neighboring countries.

7.5. Gas Transmission and Distribution 

The activities of “transmission of natural gas” and “storage of natural gas” are carried out by BTG. The transmission of natural gas is carried out on the national gas transmission network and the gas transmission network for transit transmission. As mentioned above, BTG is the holder of licenses for the activity “transmission of natural gas,” as well as a license for the activity "natural gas storage.” BTG is an operator of the National Gas Transmission Network for transmission of natural gas on the territory of Bulgaria to gas distribution networks and non-domestic customers of natural gas; gas transmission network for transit of natural gas through the territory of Bulgaria to the neighboring countries Romania, Turkey, Greece, and North Macedonia and the underground gas storage Chiren for storage of natural gas for primary purposes to cover seasonal inequalities in consumption and ensure the security of natural gas supply.

The individual access and transmission contracts are signed annually between the user and BTG.

The access and transmission fees are available on the internet site of the Bulgarian TSO.

8. Trading 

8.1. Trading License 

Natural gas transactions are regulated by the provisions of the EA (article 173 to article 184) and the Natural Gas Trading Rules. The transactions could be based on written agreements and/or organized gas exchange markets.

The categories of transactions with natural gas are (i) delivery; (ii) transmission through the natural gas transmission and the natural gas distribution system; (iii) gas storage; (iv) transactions for the balancing of the market; and (v) transactions on spot or VTP of the gas delivery systems.

Parties to the transactions with natural gas in Bulgaria are (i) BTG (TSO); (ii) production companies; (iii) gas storage facilities operators (currently only BTG); (iv) LNG facilities operators; (v) the gas system operators; (vi) combined operator; (vii) gas distribution system operators; (viii) gas traders; clients and parties, forming the market; (ix) end supplier of natural gas; and (x) liquidity suppliers.

According to the adopted amendments to the Energy Act, as of October 1, 2021, the activity of "trading with natural gas" may be carried out based on a license issued by the Energy and Water Regulation Commission. The latter also issued the Rules on Trading with Natural Gas. The licensing procedure requires the candidates to provide extensive information and proof of their technical and financial ability to exercise the above-mentioned activity.

Domestic legislation stands out with cheap and time-efficient license procedures, which result in a high (for the country’s scale) number of licenses for both foreign and domestic stakeholders. Also, an advantage is the option to file for a license online.

8.2. Products

Transactions in natural gas shall be effected on the basis of written contracts and/or on an organized natural gas exchange market in compliance with the provisions of the Energy Act and the natural gas trading rules adopted by the Energy and Water Regulatory Commission. The rules shall be published by the energy companies and the commission on their websites.

Natural gas transactions on an organized natural gas exchange market shall also be effected in compliance with the rules of operation of an organized natural gas exchange market, as adopted by the commission.

The rules shall be published by the operator of the regulated natural gas exchange market on its website.

Transactions in natural gas shall be delivery, transmission through a gas transmission network, gas distribution networks, closed gas distribution networks, and storage of natural gas, as well as transactions of transfer of ownership over the natural gas for the purposes of balancing and trade at a physical point or virtual point of trade of the gas transmission networks.

The transactions in short-term standardized products and products with terms of delivery less than or equal to one year shall be concluded on an organized exchange market of natural gas. Extraction companies shall offer not less than 15% of the natural gas extracted by them in the country on the regulated exchange market of natural gas. After January 1, 2025, transactions whose subject is different from short-term standardized products, may be done outside the regulated natural gas exchange market.

9. Competition

9.1. Authorities

The Commission for Protection of Competition (CPC) is responsible for overseeing the fair and compliant competition environment. The CPC has the authority to trigger an investigation for competition breaches at its own will. Moreover, the CPC has full authority over the competition field and its decision can be only appealed before the Supreme Administrative Court.

A competition-related investigation can be also triggered by a third party, again before the CPC.

9.2. Anti-Competitive Actions 

As the Bulgarian oil & gas prospecting and exploration, exploration, and production market is undeveloped, no anti-competition actions have been initiated, so far.

The CPC has the authority to resolve mergers and acquisitions above certain financial thresholds. As the financial thresholds, regulating whether a transaction will undergo a merger clearance before CPC, are in practice negligible for the energy sector, basically all envisioned deals should undergo such examination. The outcome is either giving clearance or prohibiting the said transaction. The Bulgarian domestic legislation provides for an obligation for the involved parties to provide information that is considered more extensive than in other European jurisdictions. The process usually takes two months for the CPC to resolve but can be prolonged based on the complexity of the case.

10. Stability Clause and Dispute Resolution 

10.1. Stability Clause 

Our legislation does contain a stability clause:

Article 63: In the event of changes in the Bulgarian legislation that may restrict the rights or may cause material damage to the permit holder for prospecting and exploration or exploration or to the concessionaire, upon request thereby the terms and conditions of the concluded contract shall be amended to restore his rights and interests in conformity with the initially concluded agreement.

One of the specifics of the URA that the prospecting and exploration, exploration, and production phases are covered in different agreements, reflects the impossibility of the investors to have the whole project covered by the stability clause. Therefore, each of the agreements for prospecting and exploration, exploration and respectively production are covered by separate stability clauses. This may result in a gap between the initial date the stability provisions apply for the respective phase.

According to the URA, the permit holder/concessionaire, mentioned in Sections 3.1. and 3.2., is entitled to request amendments to the respective agreement, if the law changes in a way that limits the rights or causes damages to the permit holder/concessionaire in contrast to the moment when the agreement was entered.

The current wording of the stability provision is rather general and, so far, it has not been tried and tested in court. There have been several motions for the update of this provision of the URA, so far all of them unsuccessful.

10.2. Compulsory Dispute Resolution Procedure

Under the URA the parties to an agreement for prospecting and exploration/ production license may choose between having a dispute resolved by the competent Bulgarian court or arbitration. The arbitration may be Bulgarian or international. In any case, the contract shall choose the forum as well as the language and procedure a dispute will be reviewed.

URA also allows for certain matters to be regarded by an expert. This shall be explicitly set in the prospecting and exploration agreement and/or the concession agreement.

10.3. International Treaty Protection 

Bulgaria is a party to both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID). So far there has not been a major dispute involving Bulgaria and foreign companies on prospecting and exploration/production of oil & gas.