Russia Mothballs Trans-Balkan Oil Pipeline Project
February 21st, 2011
Jamestown.org: On February 17, the stakeholders and supervisory board of the Russian-led Burgas-Alexandropolis oil pipeline project shelved the project in all but name. The host countries, Bulgaria and Greece, had (each for its own considerations) recently suspended payments to the project company. The meeting decided to lay off staff and give up rented office space of the project company. Moscow has not given up officially on this project, and has scheduled a follow-up meeting for June. But Moscow does plan a pipeline via Turkey (the Samsun-Ceyhan project) as an alternative option (Interfax, Novinite, February 17).
Led by a consortium of Russia’s Transneft, Rosneft, and Gazpromneft, the shelved project envisaged building a trans-Balkan pipeline from Burgas on Bulgaria’s Black Sea coast to Alexandropolis on the Greek Aegean coast. Vladimir Putin oversaw the launching of this project in 2006-2007 while president of Russia.
The line was intended for Kazakhstani and Russian oil, delivered by overland pipelines to Russia’s Black Sea coast at Novorossiysk, and requiring an outlet to the open sea. Those volumes are due to increase from production ramp-up in Kazakhstan and expansion of the Tengiz (Kazakhstan)-Novorossiysk pipeline. With the Turkish Straits already congested, and unable to accommodate more tanker traffic, the Burgas-Alexandropolis pipeline was planned as an extra outlet from the Black Sea, bypassing the Bosporus Strait.
The project envisaged moving at least 35 million tons of oil annually, on Russian medium-size tankers from Novorossiysk to Burgas, onward by pipeline from Bulgaria to Greece, and onto supertankers at the deep-water port of Alexandropolis.
This project would have resulted in the first-ever oil pipelines controlled by the Russian government in European Union countries. US and European companies, which account for most of oil production in Kazakhstan and have built the pipeline to Novorossiysk, would have depended on the Russian government for the terms of transit through the Burgas-Alexandropolis pipeline. Although situated in EU territory, this pipeline would have been immune to the EU’s legal and regulatory framework.
Greece eagerly cooperated with Russia on this project, but the financial crisis forced the Greek government in 2010 to suspend payments to the project company. Some in Athens, however, hold Bulgaria’s current government and the West responsible for the project’s demise. Greek Deputy Prime Minister, Theodoros Pangalos, speaking at a Greek-Russia Society conference last December, accused the Bulgarian government of deliberately stalling under “strong Western influence” and that of “international oil companies linked with the US government” (Theodore Tsakiris, “Burgas-Alexandroupolis: Death of a great pipeline project ?” European Energy Review, February 17).
Bulgaria’s right-of-center government of Boyko Borissov, which defeated the Socialist Party in July 2009, promptly suspended Bulgaria’s participation in all three Russian-led energy projects (Burgas-Alexandropolis oil pipeline, South Stream gas pipeline, Belene nuclear power plant project) pending detailed review. Of the three projects, Burgas-Alexandropolis is the most sharply questioned in Bulgaria. The anticipated transit revenue is deemed too small to justify hurting the tourism-based economy on the Black Sea coast, which is of national importance to Bulgaria. It is feared that oil tankers shuttling off the beaches could discourage tourism, even before oil spills or accidents that are believed to be “waiting to happen.” Burgas and other municipalities on the Black Sea coast have voted against the project in specially called referendums.
The Russian-led Trans-Balkan Pipeline Consortium prepared the requisite Environmental Impact Assessment Study during 2010. Bulgaria’s Environment and Water Ministry, however, found multiple deficiencies and omissions in the study, and returned it to the project consortium on November 10 for further work. A resubmission was expected, but is not known to have materialized (Novinite, BTA, February 16, 17; European Energy Review, February 17). According to Bulgarian experts, the country would not have to pay compensation if it withdraws officially from the project on the basis of the environmental impact assessment.
Moscow structured the project company so as to guarantee Russian control. In January 2007, the state-controlled Transneft, Rosneft, and Gazpromneft formed the “Pipeline Consortium Burgas-Alexandropolis,” to act as project conveners. In March 2007, the intergovernmental agreement was signed in Athens, with Putin attending. In December 2007, the “Trans-Balkan Pipeline Consortium” was formed, with the three Russian companies holding an aggregate 51 percent (coequally divided between them). Bulgaria took a 24.5 percent stake, the Greek joint venture Helpe Thraki (which includes Hellenic Petroleum) 23.5 percent, and the Greek government a 1 percent stake. Bulgaria’s right-of-center government transferred the Bulgarian stake from certain interest groups into the Finance Ministry’s jurisdiction.
The project envisaged transporting 35 million tons of oil annually in the first stage, to increase to 50 million tons per year in a follow-up second stage, from Burgas to Alexandropolis. The line was to run for 280 kilometers, including 166 kilometers on Bulgarian territory. Project costs, initially estimated $900 million, rose to an estimated $1.5 billion (Novinite, February 9). The trans-Balkan project’s apparent demise should strengthen Turkey’s hand in negotiating the terms of the trans-Anatolian project, Samsun-Ceyhan, with Russia’s government and companies.
Thu, Dec 08 2011 09:07 CET Bulgaria’s Government has decided to withdraw from the Bourgas-Alexandroupolis oil pipeline as it is no longer considered financially and economically viable.
The decision was announced on December 7 2011 by Energy Minister Traicho Traikov and Finance Minister Simeon Dyankov after a Cabinet session.
“According to the analysis of the oil pipeline project, it cannot be implemented under the terms of the 2007 agreement,” Dyankov.
Bulgaria has offered to terminate the trilateral agreement with Russia and Greece by mutual consent. If the two countries reject the request, Bulgaria will pull out of the project in 12 months. Despite the withdrawal, Sofia will meet its financial commitments to its partners, Dyankov said.
The Cabinet also passed a decree to raise by 12.8 million leva the capital of Project Company Bourgas-Alexandroupolis Oil Pipeline BG to settle its obligations to other shareholders in Trans Balkan Pipeline (TBP), the project company behind the oil pipeline.
According to Dyankov, there is no threat for Bulgaria to be penalised for its decision as the country had worked over a year with international companies and law offices.
Bulgaria’s decision to scrap the project comes a month after the Environment Ministry gave its approval to the environmental impact assessment (EIA) of the project, submitted by Trans Balkan Pipeline.
Greece is ready to renegotiate the Burgas-Alexandroupolis oil pipeline to become profitable for Bulgaria
December 18, 2011 | Filed under: Geopolitics
Greeks are willing to renegotiate the conditions for the construction of the Burgas-Alexandroupolis oil pipeline in order to realize the project, said Minister of Environment, Energy and Climate Change George Papakonstantinou, answering Victoria Mindova’s question “What is your position concerning the Burgas-Alexandroupolis project after Bulgaria’s withdrawal? ” Papakonstantinou replied, “The Burgas-Alexandroupolis project remains extremely important to us and we are willing to accomplish it. We are sorry for the specific position of the Bulgarian government at the moment and we would like the existing problems to be solved. We are ready to negotiate again with the other two parties to find an opportunity to realize the project in a different form.”
Greece continues to seriously express its willingness to realize the Burgas-Alexandroupolis pipeline despite Bulgaria’s firm position that it would like to abandon the project. While the situation with the pipeline is being clarified, Greece is seeking ways to utilize unused deposits of mineral resources because, despite the goodwill of the government, the development of renewable energy sources is still lagging.
Greece is one of the European countries with significant deposits of mineral resources. The latest data show that the deposits in the country are worth € 28 billion at current prices, said Yiannis Maniatis, Deputy Minister of Environment, Energy and Climate Change. 75% of the production of Greece, which corresponds to approximately € 1.5 billion, is exported. This sector employs 23,000 people directly and another 100,000 people indirectly. He believes the country is able to expand the extraction of mineral resources, which will significantly increase and improve the trade balance and the budget revenues.
There will be a ministerial invitation to tender for the development and extraction of gold, copper, silver and other metal mines in the area of Kilkis by the end of the year. Initial estimates of operating revenue reached € 1.5 billion, which could be developed to reach turnovers of up to € 7 billion. Maniatis promised other government auctions would follow until March 2012. This will allow competitive private interests to enter the energy and extractive sector, which will break the state monopoly in this field.
Based on these plans, Maniatis expects that in the next 10 years, Greece would be able to meet between 20% – 30% of its energy needs from its own primary resources. “Every year, Greece spends about € 10-12 billion for imports of 99.5% of the oil products we need. The energy programme we have developed now will allow us to reduce its imports by 30% within 10 years due to the local production development.”
Another trick that can help the recovery of local economy and meet European Union targets for a cleaner environment is the renovation of old buildings. It improves energy efficiency of houses, reduces energy consumption and brings new life to the faded construction sector. The poorest households who cannot afford to repair or fix them own the most energy inefficient houses. “From this perspective, subsidizing the renovation is social policy. Materials and labour in this sector are mainly Greek, which will give additional impetus in recovering the local economy. By improving the energy efficiency of buildings alone, we can restore 15,000 jobs.”
Reforming the public sector functions and improving the public administration in Greece are of utmost importance. Now is the time, when the country can correct the mistakes and make a new start. In this sense, each ministry has a large amount of responsibilities that it should meet in order for the process to move forward.
The first concrete step by the Ministry of Environment, Energy and Climate Change in the process of relieving the state bureaucracy is the change in the law permitting natural compliance. About 23,000 such permits upon submission of the initial project plan are issued in Greece each year, which is a huge number in comparison with France, for example, which issues about 2,000 permits per year. The difference is that now the Ministry will give more importance to the phased control than to the original project approval, which may subsequently be amended. “The formation of a provisional coalition government was an important step to restore economic stability in the country. It will not be achieved unless the different forces in the country leave Lucas Papademos to do the work in the best possible way. Instead of making plans for the next election, it would be better to think about the next generations,” said Maniatis in his commentary on the state of the political system in the country.