1. Gas pipeline project

1.1 What will be the length of the gas pipeline in the territory of Serbia?

The route of the main gas pipeline on the territory of the Republic of Serbia will go from the border with Bulgaria, in the area of Zaječar, to the border with Hungary, in the area of Horgoš, the length of the gas pipeline will be 402 km.

1.2 Where will the gas come to the pipeline from?

In the projected return gas pipeline in the territory of the Republic of Serbia, gas can come from the transport systems of Bulgaria and Hungary.

1.3 What will be the capacity of the gas pipeline in the territory of Serbia? How much gas will be imported from Bulgaria, and how much will be delivered to Hungary?

The current maximum expected technical capacity at the border with Bulgaria is 12.87 cubic meters per year, whereas GASTRANS LLC Novi Sad has the right to reduce this capacity, in case that less interest in mandatory capacity lease is shown in response to calls for capacity leasing. (The amount of gas that comes from Bulgaria directly depends on the results of the binding phase in Bulgaria and the results of the binding phase, which is implemented by GASTRANS LLC Novi Sad. The same applies for deliveries to Hungary).

1.4 What will be the diameter and thickness of the pipeline walls?

The pipe diameter will be 1200 mm, the thickness of the pipe walls will be defined according to the design solution, depending on the category of pipeline.

2. The value of the project and its financing

2.1 How will the construction of gas pipeline in the territory of Serbia be financed? In which period should return on investment from collection of transit fees be expected?

As it is accepted in such large capital projects, construction is partly financed by the funds provided by the members of the Company, and partly from the project loans.

3. Construction and exploitation

3.1 Who will be responsible for the construction and commissioning of a gas pipeline?

Joint project company GASTRANS LLC Novi Sad is acting as an Investor for the implementation of a gas pipeline project on the territory of the Republic of Serbia from the border with the Republic of Bulgaria to the border with Hungary. IDC company, within the framework of the EPS agreement, will deal with the design, procurement of equipment and materials, construction and assembly work, employee training and the commissioning of interconnectors.

3.2 How many compressor stations are planned for construction?

On the route of the line, the construction of one compressor station (24 MW) is planned – at 146 km, in the area of Velika Plana.

4. Legal aspects

4.1  Does the project have the status of a national project in Serbia?

The project of constructing a main gas pipeline on the territory of the Republic of Serbia from the border with the Republic of Bulgaria to the border with Hungary by decision of the Government of Serbia № 351-2858/2019 from 21st of March 2019 has received the status of a project of national importance.

4.2 What is your assessment on the Energy Community Conclusion on the decision of the Energy Agency on the exemption of the project of construction of the Magistral gas pipeline from the Bulgarian to the Hungarian border, related to the respect of the Third Energy Package?

GASTRANS LLC Novi Sad is pleased that the Secretariat of the Energy Community acknowledged that the project represents a significant project of energy infrastructure, which should connect the Bulgarian and Hungarian gas transportation systems with the existing gas transportation system in the Republic of Serbia. The project of the construction of the main gas pipeline will significantly strengthen the energy security of Serbia and the entire region, and it will also create opportunities for the gasification development of the country.

4.3 Why is the exclusion from the Third Energy Package so important for the realization and subsequent operation of this gas pipeline?

In accordance with the European practice, new gas pipelines are built either as the modernization of the existing transport systems, which are being built by existing transport system operators, or as the construction of completely new gas pipelines, when they are being built by companies, which are established for the construction and management of new pipelines. Based on the existing exemption practice, the exemption was requested for the construction of completely new gas pipelines, and GASTRANS d.o.o. Novi Sad, taking into account a modern European practice, assessed that the exemption regime represented an appropriate way of implementing the project.

4.4. What percentage of the exemption was claimed? Why?

GASTRANS LLC Novi Sad requested an exemption from the claim for the division of property rights, the application of the third-party accession and price regulation, the requested exemption was adapted to the results by sending a non-binding invitation for capacity leasing, market studies and feasibility studies. It is difficult to tell the specific percentage, taking into account that the exemption was sought on various grounds that cannot be expressed as a comprehensive “percentage of exemption”.

4.5 How to solve territorial disputes on the route of construction of the gas pipeline? In which manner are the interests of the land owners taken into account?

In order to respect the valid legislation of the Republic of Serbia, as well as the legal rights and interests of the owners of land plots on which construction and assembly works will be carried out, GASTRANS LLC Novi Sad realizes activities on solving the status of land plots in the period of construction and exploitation of the facility, which include:

  1. Preparation and adoption of land registry documentation, which ensures the expropriation of the land during the period of construction and exploitation of the facility;

  2. Issuance of the decision on expropriation of land from the competent services of the Republic of Serbia;

  3. Setting up agreements with owners of land plots;

  4. Compensation payments to the owners of land plots;

  5. Registration of immovable property after expropriation.

The works on resolving the status of land plots are carried out strictly in accordance with the adopted deadline for the realization of the facility. The chief executor of the work related to the settlement of land plots rights is SAIPEM company.

5. Ecology and social responsibility

5.1 What is the assessment of the impact on the environment and the social sphere?

The necessary condition for the safe construction of the main gas pipeline (interconnector) of the Bulgarian border – the Hungarian border represents an assessment of the impact of all construction processes on the environment. The approval of a study on the environmental impact assessment of a project is a document which confirms preventive environmental protection measures, based on the development of studies and implementing consultations with public participation and analysis of alternative measures in order to gather data and predict the harmful effects of certain projects on life and human health, flora and fauna, soil, water, air, climate and landscape, material and cultural goods and the mutual interaction of these factors. Furthermore, this document sets out and proposes measures that can prevent, reduce or eliminate adverse effects, bearing in mind the feasibility of these projects.

6. Current questions

6.1 In 2018, a non-binding invitation for leasing the capacities of the gas pipeline GASTRANS LLC Novi Sad had a good response. Which companies have shown interest in leasing capacity? For how many years, in which quantities? Are these the same companies that have reserved capacities in Bulgaria?

Complete data on interest obtained on the basis of a non-binding call for capacity lease has been published in accordance with the decisions of the Energy Agency and they are publicly available on the GASTRANS LLC Novi Sad website. In accordance with these decisions, the Company is obliged to ensure the confidentiality of a certain data.

6.2 Does and to what extent the Energy Community’s opinion obligate GASTRANS d.o.o. Novi Sad and Serbia regarding the construction of this infrastructure project?

In accordance with the Law on Energy, the Energy Agency of the Republic of Serbia, when making the final decision should take into account, as much as possible, the opinion of the Secretariat of the Energy Community.

6.3 Will it possible to build an extension for Republika Srpska in the future?

The technical gas pipeline project does not currently plan to build a gas pipeline-extension for Republika Srpska.

6.4 Has the gas transit fee been defined yet?

The conditions of the transit and the transit fees will be defined during the negotiations.

6.7 What will the construction of the gas pipeline bring to Serbia and its citizens?

Consumption of the Serbian gas is constantly increasing, therefore the gas demand in Serbia will increase in the future.

The volume of gas delivery to Serbia in the period from 2014 to 2017 was increased by 41%. During 2018, export of PAO “Gazprom” to Serbia amounted 2.15 billion cubic meters of gas, which is 1.2% more than in 2017 (2.12 billion cubic meters). The construction of the main gas pipeline will significantly strengthen the energy security of Serbia and the entire region, and it will also create opportunities for the gasification development of the country.

6.8 Could you please provide an urgent answer as of which date the deadline of 6 months of the Letter of intent of the bank from the Article 11.5 of the Rulebook is calculated, which letter of intent the bidder should submit with the Binding Bid? Should the letter of intent be binding or non-binding? In which currency the Letter of intent should be?

The deadline of 6 months should be calculated starting from the date of issuance of the letter of intent by the bank. The subject letter should be binding and should relate to EUR amount representing 2/12 of yearly payments for booked capacity for the first year (the tariffs from Article 5.3 of the Rulebook should be used).

6.9 In item 11.3 of the above mentioned document (for the reference purposes: the Rulebook) it is stated that we are obliged to submit adequate proofs on our capability to provide security for meeting of pecuniary obligations. The very Invitation does not define this. Please clarify whether on the occasion of submission of the bid bond and Binding Bid Form we should also submit a proof on our capability to provide security for meeting of pecuniary obligations? If this is the case, please clarify how this letter should look like, in free form or there is a model which is acceptable to you.

In accordance with the Invitation, the Binding Bid should be accompanied by the supporting documents set out in the Invitation and the Rulebook i.e. by the bid bond and the sufficient evidence from the Articles 11.4 and 11.5 of the Rulebook on ability of the Bidder to provide security for meeting of its pecuniary obligations from the Gas Transportation Agreement. The Article 11.5 of the Rulebook sets out the content of such letter.

6.10 In order to prepare proper Escrow Account Agreement with the bank, can you please clarify the following provisions of the Appendix 1 of the Rulebook (text of the guarantee for seriousness of the bid): 1. “that the Bidder, after the notification on acceptance of its bid by Applicant, during the bid` validity period, fails or refuses to enter into the gas transportation agreement i.e. amendments of the gas transportation agreement, when requested from the Bidder.” (for the reference purposes: an English text contains certain errors, while the Serbian version is the correct one). What is the deadline in which the notification on acceptance of the bid should be provided by the Gastrans? We understand that the Bidder and the Applicant are the same entities, for example the Bidder is […], The Guarantor is the Bank and the Beneficiary is the Gastrans? What is the bid validity period? Does it mean that the Bidder is obliged to enter into the Gas Transportation Agreement in the period from the date of notification of the Bidder on acceptance of the Bid until the expire of the bid validity period i.e. 1st June 2019?

Model of the guarantee for seriousness of the bid from Appendix 1 of the Rulebook contains a mistake, the correct wording should be „the Bidder, after the notification on acceptance of its bid by Beneficiary, during the bid` validity period, fails or refuses to enter into the gas transportation agreement i.e. amendments of the gas transportation agreement, when requested from the Beneficiary“. The notification on acceptance of the bid will be provided by 29 March 2019. The Bidder and the Applicant are the same entities, the Guarantor is the Bank and the Beneficiary is Gastrans. The bid validity period is set in the Article 11.7.2 of the Rulebook (6 months). In line with the Article 14.2 of the Rulebook, the Bidder is obliged to enter into the GTA within 15 days from sending the signed GTA by GASTRANS to the Bidder.

6.11 Please be informed that […] intends to submit the Binding Bid in the Binding Phase of contracting of the long-term transmission of natural gas in capacity exempted by the Act on exemption of the New Interconnector for natural gas. In accordance with the Article 5, Paragraph 2 point (ii) […] will provide the security for seriousness of bid in the form of deposited funds at the escrow bank account. In the attachment of this email please find the calculation of the value of the transaction and requested deposit amount. We would appreciate if you could check and confirm the calculation in order […] could proceed with the negotiation with the banks. Please note that the amount of the capacity indicated in the calculation is only for the purposes of the calculation and the final figures contained in the submitted Binding Bid Form could differ.

Hereby we confirm the manner of calculation you provided in your e-mail.

6.12 We hereby inform you that […] intends to submit the binding bid in the binding phase of contracting the long-term natural gas transportation in the capacity exempted by the act on exemption of the new interconnector for natural gas. […] plans to deliver the bank guarantee for seriousness of bid issued by […], as well as the Letter of intent of the bank on fulfilment of pecuniary obligations from the Gas transportation agreement. Attached to this e-mail please find the calculation of the value of the bank guarantee for seriousness of bid and the Letter of intent. Please, confirm to us today on 15 March 2019 at latest until 4 pm, the calculation of the bank guarantee for seriousness of bid, calculation of amount from the Letter of intent, as well as acceptability of the bank being the guarantor. We emphasize that the capacity given in the calculation is given only for the purpose of calculation and the volume of requested capacity in the binding bid form may differ.

We came to a small difference during calculation, so we advise you to check again the calculation. Generally speaking, the calculation is performed in the manner that the amounts of relevant tariffs, the quantities you intend to book and number of years of booking are taken and then the relevant percentage is applied to such amount.

Also, it should be taken into account that the transportation starts as of 1 January 2020, so there would be no transport in 2019.