Boston, MA -- (SBWIRE) -- 10/03/2013 -- The Bulgarian business environment remains challenging with ongoing conflicts between Lukoil and Customs authorities downstream and a moratorium on hydraulic fracturing upstream. Bulgaria's oil sector is uninspiring with limited new activity and a continued decline in domestic production. Upside in Bulgaria's oil and gas sector comes from the US$1.2bn investment to upgrade the Neftochim refinery which will add a 50,000 barrel per day vacuum distillation unit, while the natural gas sector is looking increasingly positive. New gas projects being brought online both on and offshore will add to domestic output, as well as growing prospects from offshore seismic projects.

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The main trends and developments in Bulgaria's oil and gas sector are:

- Natural gas production remains positive with a ramp up from the Deventsi deposit as well as the return of the suspended Kalikara tieback, which will both boost production levels in 2013. We anticipate production of 594mn cubic metres (Mcm) for 2013.
- The offshore East Kavarna field will be brought on stream in 2014, further adding to gas production growth. We anticipate production to reach 766Mcm by 2017.
- Further upside to Black Sea potential could be gained in the Khan-Asparuh block, to the South of Romania's successful Neptun block. In June OMV, Total and Repsol began the largest 3D seismic survey ever in the Black Sea.
- Despite growing interest in the Black Sea, it has not all been positive. The tender for the Teres block, located next to Khan-Asparuh, was cancelled after receiving no bids.
- One operational licence at Lukoil's Neftochim Burgas refinery was revoked by the Bulgarian customs authority. This was reportedly due to the company failing to install metering equipment by the March 2013 deadline, a prerequisite set out by the authority to combat smuggling and tax evasion.
- A new vacuum distillation unit with a capacity of 50,000 barrels per day (b/d) is in the process of being built by Technip. The new capacity is expected to be operational by 2015.
- Bulgaria's Risk/Reward Ratings remain unchanged as the upstream sector fails to lure major companies while its downstream remains in the hands of Lukoil. Bulgaria remains mid-table in our Central and Eastern Europe Oil & Gas RRRs.
- Progress on improving cross-border gas infrastructure trade flexibility continues as the development of interconnectors between Bulgaria and Romania, Serbia, Greece and Turkey reach different stages of completion.
- Finally, in a very long-term prospect, the Bulgarian government has allowed a German vessel to navigate in the country's Black Sea Exclusive Economic Zone to investigate methane hydrates. Research will begin in December 2013 and conclude by January 2014.

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