Current Regulatory and Upstream Market Developments in the Bulgarian Gas Market Kostadin Sirleshtov CMS

05 April 2019 25 Annual BBSPA Conference | CMS Sofia Significant development in the upstream market

 New players on the Bulgarian upstream market: • Woodside joins Shell in the prospecting and exploration of Khan Block, which is the largest farm – in deal in to date; • On 20 March the Council of Ministers awarded SPM Bulgaria LLC the permit for prospecting and exploration of Block West 1-25.

 Bulgarian upstream market more attractive: • Repsol extends its presence in the Black Sea and it is the third license holder now in Shell’s Khan Kubrat Block; • Third well completed by Total in the Han Asparuh Block; • Total, OMV and Repsol received two extensions of their Han Asparuh permit;

25 Annual BBSPA Conference | CMS Sofia Regulatory and Policy Developments

 The amendments in the Underground Resources Act are still expected • reasons for the delay: interested parties from all of the sectors and the administration are trying to accommodate different views on the ‘hot’ topics;  Significant amendments to the Bulgarian Energy Strategy until 2020 in push towards more oil and gas investments in Bulgaria;  No news on the upcoming Sustainable Energy Strategy of the country thus the Minister of Energy shall propose it to the Council of Ministers by the end of October 2019;  Announcement of the final feasibility study for Balkan Gas Hub delayed twice; No date set for its presentation to the public by Bulgartransgaz;  Bulgarian government in urge to ensure gas supply to the country after 2020;  Bulgarian government still to announce the Tervel Block tender following the priorities it set in the beginning of its mandate;

25 Annual BBSPA Conference | CMS Sofia Khan Kubrat Offshore Block Developments

 The permit holder now consists of: Shell (50%), Woodside (30%) and Repsol (20%);  The spud of the first well Khan Kubrat-1 to commence in the first week of April 2019 and to last for about 3 months;  Possible second well in the pipeline, at a new location if this one is successful;  Recently signed addendum with the Ministry of Energy;

25 Annual BBSPA Conference | CMS Sofia Galata Block / Gas Storage Transformation

 Galata Block developments: • The production from Galata and concessions is continuing; • The extension of the term of Kaliakra concession is progressing; • Extension of the concessions due to force majeure event remedied in 2018;

 Galata Field transformation into a Gas Storage Facility • Break through legislative change in art. 40, para. 1 of the Energy Act making it possible for any investor other than the state to be licensed as gas storage operator; • The application for licensing of the gas storage activity filed by Petroceltic with the Bulgarian Energy and Water Regulatory Commission; • All of the requested information presented and the input from the state expected.

25 Annual BBSPA Conference | CMS Sofia Other major developments offshore and onshore Bulgaria

 Total as operator of Han Asparuh Block, offshore Bulgaria announced the completion of the third exploratory well; no discovery announcement yet;  Han Asparuh permit extended with 109 days due to force majeure event;  Possible request for second regular extension of the permit is upcoming;

25 Annual BBSPA Conference | CMS Sofia Other major developments offshore and onshore Bulgaria

SPM Bulgaria permit

 Area of 4887 sq.m.

 No obligatory well

 5 years initial term

 Nearby Chiren field

 Underexplored

25 Annual BBSPA Conference | CMS Sofia Balkan Gas Hub

Political issues Practical Issues  Included in the Energy Strategy  available infrastructure and of the country future infrastructure, including pipeline routing  Final feasibility study still not announced  options for financing, including tariff estimation  Government in pursuit to insure gas supply  interconnection agreements with TSO’s from Turkey, Macedonia and Serbia during  EU/ Russia position the preparation phase

25 Annual BBSPA Conference | CMS Sofia TANAP / Turk Stream / Nord Stream

 Bulgarian gas supply diversification: • Expected gas supply to Bulgaria from Shah Deniz gas field in Azerbaijan; • Turk stream possible extensions through Bulgaria discussed; • Nord stream not to cross Bulgarian territory;

 Bulgartransgaz opened tender for gas supply on 26 March  The term for filing of offers is 8 April 2019;  Tender requirements published on Bulgartransgaz internet site.

25 Annual BBSPA Conference | CMS Sofia Opportunities offshore Bulgaria

 Expected relaunch of Tervel block tender  Main parameters of the tender: • Area: 4,032 km2 and water column depth of between 1,500 to 2,000m • Term for filing of tender bids: up to the 140th day following the publication of the tender decision in the Official Journal of the European Union • Term for filing of proposals in performance of the tender requirements: up to the 155th day of the publication of the tender decision in the Official Journal of the European Union • Deposit fee for participation in the tender: BGN 15,000

• The annual area fee will be BGN 161,280

• No obligatory well

25 Annual BBSPA Conference | CMS Sofia Kostadin Sirleshtov Partner, Coordinator of the Energy, Projects and Construction Practice for Central and Eastern Europe

Kostadin Sirleshtov is a partner at CMS Sofia and a Coordinator of the Energy, Projects and Construction Practice for CEE. His particular area of expertise is oil and gas, conventional power, underground resources, nuclear, electricity, renewables, infrastructure, projects, PPP, public procurement. He has advised on all offshore oil & gas production concessions in Bulgaria and was involved in all recent tenders in the sector. He has advised a multitude of energy clients on their oil & gas exploration and production activities in Bulgaria. Kostadin has worked as the Chief of the Minister’s cabinet for the Ministry of Energy and Energy Resources 2002-2004 and Chief of Minister’s cabinet in the Ministry of Defense 2005-2007. As part of the team at the Ministry of Energy and Energy Resources Kostadin was a member of the working group, which prepared the current energy legislation of Bulgaria, including the Energy Act T +359 2 921 99 42 2003 and the Energy Efficiency Act 2004. M +359 897 860 421 Relevant experience Education kostadin.sirleshtov@ cms-cmno.com  License tender procedures LLM (Hons) Law Faculty Sofia University  Negotiations with the governmental EU & UK law diploma, Cambridge CMS Sofia authorities University

Languages  Legal support during prospecting and exploration works/concessions Bulgarian, English, Russian Memberships  License transfers Bulgarian Bar Association,  Concessions extensions International Bar Association  Disputes related to concession matters  Farm in and farm out procedures Lectures List  Regulatory and commercial matters Available upon request related to concessions

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