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New oil pipeline to give Russia access to new energy markets 5 septembre 2006

Posted by Acturca in Energy / Energie, Russia / Russie, South East Europe / Europe du Sud-Est, Turkey / Turquie.
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Itar-Tass (Russia)

September 4, 2006 Monday, Athens

The head of the state-run oil company Rosneft, Sergei Bogdanchikov, said the construction of the Burgas-Alexandropoulis oil pipeline would give Russia access to new energy markets. « It is already clear at the preliminary stage that this project is very beneficial for Russia from the economic point of view, » he added but did not give concrete numbers.He does not think that the project has run into problems. « I can’t say there are some extraordinary complications. There is a normal process of getting approvals for the allotment of land and selection of places for terminals, » he said. Bogdanchikov believes that the pipeline can start operating by 2009-2010.

There is no final construction deadline, he told the journalists. « A regular timeline for such projects does not exceed two years. This is an important and serious project, but it is not complicated technically. My view is that 2009-2010 is a realistic deadline, » he said. « There is absolute confidence that the pipeline will be filled and supplies will be guaranteed, » Bogdanchikov said.He denied any link between the upsurge of interest in the project and the commissioning of the Baku-Ceyhan oil pipeline.

In his words, the soaring demand for oil in the world, growing oil extraction in Russia, and oil supplies from Kazakhstan « are the main driving force, not new routes. » Bogdanchikov said the overall cost of the project would be about one billion U.S. dollars.He expressed hope that controlling interest in the Burgas-Alexandropoulis oil pipeline consortium would belong to Russia.

« I would not like to anticipate events, but we hope that controlling interest will belong to Russian companies that will fill the pipeline with oil, » he said. In his view, it is too early to speak about the final configuration of the consortium, but Rosneft, Gazpromneft, and TNK-BK plan to participate in it. « The working group, which is dealing with this project, has promised to present a decision shortly, » he added. Bogdanchikov believes that the pipeline will allow Russia to enter American and Southeast Asian markets.

« The project is absolutely necessary because we need additional export routes. The new oil pipeline will make supplies to America and Southeast Asia possible because the deep-sea port in Alexandropoulis allows such supplies to be made. Therefore we will keep our oil buyers and get new ones, » he said. According to Bogdanchikov, « It is very important that the project is being implemented in cooperation with other countries. This will make supplies more reliable. »

Earlier Russia’s Economic Development and Trade Ministry called for accelerating work on the agreement between Russia, Bulgaria and Greece on the Burgas-Alexandropoulis oil pipeline. Deputy Economic Development and Trade Minister Andrei Dementyev said, « There are no grounds to doubt that it will be financed and filled with oil. » « The project can be economically effective for all participants. Its implementation is consistent with the diversification of hydrocarbon supplies, one of the key principles adopted at the G8 summit in St. Petersburg. We should get a project that can compete with sea oil transport routes, » he said. The pipeline will provide an alternative route for the transportation of oil from Russia and other CIS states to Southern Europe, bypassing the narrow Bosporus Strait.

It is planned that the pipeline will be about 300 kilometres long. The project is estimated at 700 million U.S. dollars.Russian oil will be taken from Novorossiisk by sea to Burgas, Bulgaria, and then by pipeline to Alexandroupolis, Greece. Dementyev believes that « the commencement of the project at the earliest opportunity would be the best solution for the participating companies, given current energy prices. »

Russian President Vladimir Putin will make a working visit to Greece on September 4 for talks with Greek Prime Minister Konstantinos Karamanlis and Bulgarian President Georgy Pyrvanov to discuss energy cooperation, including the construction of the Burgas-Alexandroupolis oil pipeline. The pipeline is supposed to provide an alternative route for Russian hydrocarbon supplies to Greece bypassing Turkey’s Bosporus and Dardanelles and subsequently to other West European countries.The 312-kilometre pipeline is expected to transport 35 million to 50 million tonnes of crude oil a year.

Russia, Bulgaria, and Greece signed an inter-governmental memorandum on the Burgas-Alexandroupolis project on April 12, 2005.

Reporter (Greece)

Greece: Burgas Oil Pipeline Construction Receives ‘Green Light’

04 September 2006

Greek Prime Minister Costas Karamanlis said that Russia, Greece and Bulgaria agreed to start the construction of the long delayed oil pipeline linking the Black Sea to the Aegean after meeting with Russia’s President Vladimir Putin and Bulgarian President Georgi Parvanov.
Karamanlis added that this deal is of significant importantce which is not a ‘dream’ any longer but a ‘reality.’

Putin stated that Russia is one of the world’s biggest energy producers and Greece and Bulgaria are close allies, adding that this common agreement has long-term effects.
This declaration of political support for the project paves the way for an intergovernmental agreement before the end of 2006.

Karamanlis pointed out the importance of this project for all countries involved and its people and expressed hopes that the cooperation among these countries be expanded to other sectors.

Delays since 1994

The idea to construct an alternative oil transfer pipeline from Russia and CIS countries bypassing Bosporus channel, i.e. Burgas-Alexandrupolis pipeline that would go through Bulgaria and Greece, was proposed in 1994 by a number of Russian and Greece companies. By the order of the Greek side, the German company ILF prepared in 2000 technical specifications and economic evaluation for the project. Along with the benefits, such as bypassing of the Turkish channels increasing carrying capacity of which is deemed problematic as well as offering a solution to the environmental issue in the region, the weak point of the project was absence of the raw material base confirmed by supplies of the oil companies.

Sibneft to become a key player

Lukoil was supposed to be the initial key player and oil provider, but shortly after Lukoil’s management clearly said that there was no intererest, because the project was not commercially viable to them. In the meantime, Moscow has also kept insisting on more preferential taxation concerning the oil pipeline construction and claimed a greater amount of revenues compared to the other participants in the projects – Bulgaria and Greece.

According to senior Russian officials, the long-term supply of oil is a necessary condition of any global oil and gas project, while in respect of the Bourgas-Alexandroupolis pipeline, the key players are those that can guarantee such supply. These certainly could be TNK-BP, Rosneft and Sibneft, as they can not only ensure long-term oil supply, but also have enough funds to invest in the project.

Now it seems that this obstacle has been been removed, when, during Alexei Miller’s, Gazprom’s CEO, recent visit in Athens, it was said that TNK-BP, Rosneft and Sibneft may possibly participate in the Burgas-Alexandroupolis pipeline project on an equal basis. Actually Miller was mainly intrerested in the $746 million pipeline project between the Greek and Turkish state-owned gas companies, Depa and Botas. However, there was an opportunity for the Russians to appear as white knights for the Burgas-Alexandroupolis. It should be noted that Sibneft belongs to Gazprom.

The project

The possible capacity of the pipeline will be 35 million tonnes per year – which may be increased to 50 million tonnes per year. The project includes a marine terminal at Burgas to unload tankers with capacities of 150,000 tonnes, and a terminal at Alexandroupolis, capable of handling tankers with capacities of up to 300,000 tonnes.The cost of the 312 kilometer long Burgas to Alexandroupolis oil pipeline is estimated at around $700 million. Apart from the pipeline, the project also includes:

a) Oil storage tanks in Burgas with a total capacity of 600,000 tons; b) An upgrading of the port of Burgas; c) Oil storage tanks in Alexandroupolis with a total capacity of 1.2 million tons; and d) Treatment installations for the tankers in the port or offshore  Alexandroupolis. It is estimated that around 25-30 tankers will be loaded in Alexandroupolis each month.

United States are backing the AMBO pipeline project

However, there is still fierce competition from the key players involved in the AMBO pipeline project, envisioned to run across Bulgaria, FYROM and Albania. This project is fully backed by USA and, in the past, AMBO’s officials have tried to diminish the Bourgas-Alexandroupolis importance. But the serious obstacle for the AMBO project is still geopolitical and its creation is in the drains, say some other analysts.

Though the Balkans are reasonably peaceful in comparison to more unstable parts of the world where Oil Companies operate, the AMBO pipeline is crossing Europe’s most unstable territorry, say analysts.

Even if Bulgaria is EU-bound and stable, Albania is poor, while FYROM is in danger from Kosovo Albanians who wish to break the country apart. Under the above circumstances, the AMBO project

Russia seeks pipeline deals with Greece

The Financial Times (UK), September 4 2006

By Kerin Hope in Athens

Vladimir Putin will make Greece a tempting offer on Monday to boost its regional role, by becoming a transit hub for Russian oil and gas exports to western markets.

The Russian president’s three-way talks in Athens with Costas Karamanlis, Greek prime minister, and Georgi Parvanov, the Bulgarian president, focus on reviving a much-delayed project for a 280km oil pipeline linking the Black Sea with the north Aegean.

First mooted 12 years ago as a means of reducing tanker traffic in the crowded Bosphorus strait, the project hung fire because Russian oil companies declined to make a firm commitment to supply 35-50m tonnes of oil yearly to fill the pipeline.

But Russia’s growing ambitions as an international energy supplier brought a policy switch. Gazprom-Sibneft, part of the state-owned gas group, is among several potential suppliers, according to industry analysts.

The project would give Gazprom a direct outlet to the Mediterranean, with oil being shipped across the Black Sea from Novorossiysk to Burgas in Bulgaria and transferred by pipeline to the Greek port of Alexandroupolis.

Greek officials said the three leaders would give a political go-ahead for the €1bn ($1.3bn, £673m) project, which is being developed by Russia’s TNK-BP, with the aim of reaching a firm agreement by December.

Shareholdings in Trans-Balkan Pipeline, the project developer, are still being negotiated, with the Russian side insisting on a controlling stake as the oil supplier.

Greek participants are Hellenic Petroleum, the state oil refiner, and Prometheus, a joint venture between Gazprom and Kopelouzos, a private pipeline constructor. Bulgargaz, Bulgaria’s state-controlled gas company, which has close ties with Gazprom, would be among the Bulgarian shareholders.

The second item on Mr Putin’s agenda is to persuade Greece to double the capacity of a new 300km cross-border gas pipeline from Turkey that will be extended beneath the Adriatic to Italy, to provide an additional route for Gazprom to export to western Europe.

The €290m Greek-Turkish pipeline, due to be completed next month, will have capacity to carry 11bn cubic metres yearly, but would be limited to 3bn cu m yearly until the link to Italy is ready in 2008.

Greece already imports Russian gas from Bulgaria and liquefied natural gas from Algeria to supply a growing domestic market. It plans to further diversify supplies through buying gas from Azerbaijan that would be shipped from Turkey.

Mr Karamanlis’s government is under pressure from the US to resist Russia’s offer to invest in expanding the Greek-Turkish pipeline and provide gas at competitive prices. With Depa, the Greek state gas utility, due for partial privatisation in 2007, the government is not currently prepared to respond to the Russian offer, according to Greek officials.

But in the medium term Greece wants to avoid being excluded from new pipeline networks developed in south-east Europe.

Bulgaria, already a transit hub for Russian gas deliveries to Turkey and Greece, is participating in the European Union-backed Nabucco project, which would supply Azeri gas through Turkey and the Balkans and reduce Europe’s dependence on Gazprom.

$900M Pipeline Wins Backing

The Moscow Times, September 5, 2006 Tuesday

$900M Pipeline Wins Backing

Yuriy Humber, Staff Writer

President Vladimir Putin won agreement from Greece and Bulgaria on Monday to push ahead with a long-stalled $900 million pipeline to carry Russian crude from Bulgaria to Greece.

Following talks in Athens with Bulgarian President Georgy Parvanov, Putin and Greek Prime Minister Costas Karamanlis told reporters that a final deal on the 280-kilometer pipeline linking the Black Sea with the Aegean would be signed by the three countries by the end of this year.

Oil could start flowing by 2009.

The pipeline would show Russia to be a proactive and reliable energy supplier, and benefit Europe as a whole, Putin said in a briefing before the talks.

It « unquestionably lies in the context of the agreements reached in St. Petersburg, » he added, referring to the Group of Eight summit in July. « I don’t thing anybody can stop [the pipeline] now, » Karamanlis told reporters.
The link could significantly ease delays for tankers travelling through Turkey’s congested Bosporus, which are estimated to cost oil companies hundreds of millions of dollars per year. The straits are currently the main southern export route for Russia and Kazakhstan, and a cause of growing rivalry between the two countries.

Russia is seeking to open new oil and gas routes to reach European consumers and avoid dependence on transit through Ukraine and Belarus.

Kazakhstan has said it plans to triple its crude exports within a decade, most of which travel through Russia via the Caspian pipeline to the Black Sea port of Novorossiisk.

Preliminary construction work on the Bulgarian-Greek pipeline, to run between Burgas on the Black Sea coast and Alexandroupolis on the Aegean, could begin as early as this fall, Parvanov said Monday.

The pipeline has been stalled for a decade amid disputes over transit tariffs, ownership and construction contracts. The project is to be managed by Trans-Balkan Pipeline, with shareholdings yet to be negotiated. Russia is pushing for a controlling stake as the oil supplier,
while Bulgaria is likely to be represented by state-controlled Bulgargaz and Greece through oil refiner Hellenic Petroleum and pipeline constructor Prometheus, the Financial Times reported Monday. Russia is pushing for Gazprom
affiliate Stroitransgaz to be in charge of building the pipeline.

Over the last decade, a number of alternative routes have been proposed to bypass the Bosporus, including the U.S.-backed pipeline from Azerbaijan to Ceyhan on the Turkish Mediterranean, which began operating this summer after four years of construction.

Another proposed Bosporus bypass, from Burgas to Vlore in Albania via Macedonia, has sought to secure commitments for supplies of Kazakh and Russian crude, but has received little support from the Kremlin.

In November last year, Putin backed Turkey as an energy hub, hinting that an oil pipeline could be laid under the Black Sea to northern Turkey alongside the Blue Stream gas pipeline, which began operation a few years ago.

Kazakhstan is currently pushing Russia to double the capacity of the Caspian pipeline to 67 million tons per year. Russia holds 24 percent in the company running the pipeline, and Kazakhstan 19 percent.

With rivalry increasing over the Caspian pipeline, the Kremlin cannot wait any longer to ease the pressure on the Bosporus, analysts said.

« They’ve run out of time, » said Chris Weafer, chief strategist with Alfa Bank. If Russia agrees to expand the Caspian pipeline, it would be signing off on a further 700,000 to 1 million barrels per day being shipped through the Bosporus, Weafer said.

Increased traffic also means greater environmental risks for the Bosporus. In an interview published Monday with Greek newspaper Eleftherotypia, Industry and Energy Minister Viktor Khristenko said oil prices above $70 per barrel had boosted the « financial attractiveness of the Burgas-Alexandroupolis project. »

The pipeline would initially transport 15 million tons of crude per year and would increase to its full capacity, 35 million tons, by 2012, the Kremlin web site reported Monday.

The biggest stumbling block for the pipeline has been overcoming the skepticism of Russian oil companies, as the Aegean is a shallower, more complex navigational route than the Adriatic.
Also, the Kremlin for years lacked a state-controlled oil company capable of leading the project, Weafer said. Gazprom’s acquisition of Sibneft, and the boosting of Rosneft through its acquisition of a large chunk of Yukos and its
recent shares listing, has made « a national champion oil company available to participate, » Weafer said.

So far, TNK-BP has been the major driver of an economic study into the pipeline’s feasibility.
« An alternative to the Bosporus needs to be found, of course without leaving the competition from Kazakhstan the chance to take the place » of Russian oil exports, TNK-BP spokeswoman Marina Dracheva said Monday.

Although Gazprom Neft, formerly Sibneft, currently sends most of its crude through the Druzhba pipeline to the northwest, the company is definitely interested in the Bulgarian-Greek pipeline, spokesman Ivan Gogolev said.
Before the pipeline becomes viable, however, the three countries will likely seek some guarantees from Turkey, since taking as much as 35 million tons from the Bosporus, which currently sees roughly 100 million tons pass per year, would undermine Istanbul’s business and cause it to lower its own transit rates.

« It has to be a deal where everyone, including Turkey, wins, » Gogolev said. Among foreign oil majors, market insiders said U.S.-based Chevron could be looking to access new European pipelines to move its Kazakh crude. « Some of our
shareholders may move » to the Burgas-Alexandroupolis pipeline, a spokesman for the Caspian Pipeline Consortium confirmed Monday, referring to Chevron.

Chevron has a 15 percent stake in the CPC consortium. Picking Burgas-Alexandroupolis over other routes is ultimately a political decision, and does not make complete economic sense, said Ted Ferguson, CEO of AMBO, the U.S.-registered company backing the Albania-Macedonia-Bulgaria route to bypass the Bosporus.

Ferguson questioned whether the port at Alexandroupolis would be able to load large oil tankers known as VLCCs, or very large crude carriers, of 300,000 tons.

« Alexandroupolis is right on the margin of operability for VLCCs, » he said by telephone from London on Monday. The Greek port on the Aegean would safely only be able to cope with tankers of 200,000 tons, Ferguson said, which would mean it would only be able to economically send cargoes to Mediterranean destinations. The three countries involved in AMBO would meet next week in Tirana, the Albanian capital, to give
the go-ahead for $30 million of preliminary pipeline work this year, Ferguson said. He said the pipeline could be completed by 2010.

An officer at the Central Port Authority of Alexandroupolis said Monday that the current port facilities did not allow large oil tankers to enter the harbor, as it was too shallow.

The AMBO project has also been stalled for years — mainly due to political instability arising from the Balkans wars in the 1990s and a lack of committed oil from Russia and the Caspian.
Ferguson said he expected the pipeline to gain momentum now, with the election of new governments in Albania, Macedonia and Bulgaria this year.

At least one analyst wondered why Russia was focused on southwest Europe at all, rather than east Asia.

« The project to send crude to China is much bigger and closer to completion, » said Mikhail Zak, head of research at Veles Capital. The 80-million-ton pipeline to China and the Pacific, the first branch of which is due to be completed by 2008, faces one problem, however, Zak said.

« It’s not at all clear where all that oil is coming from, » he said. Staff Writer Tim Wall contributed to this report.


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