Pipeliners

04-15-2005 MOSCOW (Igor Tomberg, candidate of economics and leading researcher at the Institute of World Economic and Political Studies, Russian Academy of Sciences, for RIA Novosti) - On April 13, the governments of Russia, Bulgaria and Greece signed a memorandum of cooperation in the construction of an oil pipeline. This may end the difficult 13-year talks on the construction of the pipeline from Burgas (Bulgaria) to Alexandroupolis (Greece), bypassing the Bosporus and the Dardanelles. The talks lasted so long that the media started describing them as "long-suffering." After its commissioning, oil will be delivered by sea from Russia's port of Novorossiisk to Burgas and onward through the new pipeline to Alexandroupolis in Greece and the European, U.S. and Asia Pacific markets. The project was initiated by Russian and Greek companies, and the signing of the memorandum will give a political start to the talks on its construction. The group of Russian initiators includes LUKoil, TNK-BP, Transneft, Stroitransgaz and Sovcomflot. Experts of the working group say industry will save about $1 billion owing to cheaper transport costs. The pipe will be 280km long, and its throughput capacity is to be 35 million metric tons a year (it could be increased to 50 million). The tentative cost of the project (include the price of steel) is about $783 million. The signing of the memorandum does not mean a green light for investment and construction. Oil experts say there are many financial and technical questions about the design, and the oil companies have not pledged to send oil by the new pipe. The main goal of the project is to divert a part of oil traffic from the Bosporus and Dardanelles, through which Russian tankers deliver oil to southern Europe. Turkey has recently imposed stricter rules on ships passing through the straits, which have resulted in regular tanker jams. Tankers spend an average of 20-25 days in the straits, which affects the suppliers' profits. Judging by the map, there are many bypass routes, and the most advanced of them is from Baku (Azerbaijan) to Ceyhan (Turkey). But this route is not acceptable to Russia for economic (expensive) and political considerations. The best route economically, politically and even for religious reasons (Bulgaria and Greece are Orthodox nations) is from Burgas to Alexandroupolis. The new corridor would also suit Russia's partners, as it would bring southern Europe closer to the international oil markets and boost the fuel and energy sectors in the Balekans. Theodoros Roussopoulos, a Greek government spokesman, said recently that oil transportation cooperation with Russia and Bulgaria would have a big [positive] effect and promote "the common goal of regional development and geostrategic cooperation." But there are no guarantees that the oil companies will provide their output to the new pipe, though they keep complaining about the shortage of export pipelines. Moreover, there will be tough competition with other projects. The enlargement of the Caspian Pipeline Consortium (CPC), by which ChevronTexaco delivers oil from Tengiz in Kazakhstan to Novorossiisk, has been put into question. After buying Unocal, which owned a 8.9% stake in the Baku-Ceyhan project, ChevronTexaco decided to redirect 6-8 million tons a year from the Kazakh field to Ceyhan in 2006. Ukraine is again talking about the need to use the Odessa-Brody pipe for the transportation of Caspian oil to Europe (as of now, Russian oil companies use it to export their output via Odessa). Russia rejected Turkey's offer of building a pipeline between Samsun on the Black Sea and Ceyhan on the Mediterranean, fearing that the construction and use of the pipeline would increase transportation costs and rival the routes across Russia. Turkey argues that the oil companies would have to spend more anyway because of delays in transit through the straits. So far, Turkey has used the straits as an instrument of pressure on Russia, introducing limits on the transit of tankers from Novorossiisk. The construction of the new pipe bypassing the Bosphorus will force Ankara and several other parties to make concessions. The Burgas-Alexandroupolis pipe will provide additional aces for the Russian government's oil and gas talks with Ukraine. Experts think that the memorandum was signed ahead of time in view of the first Moscow visit by Ukrainian Prime Minister Yulia Timoshenko this week, which has now been cancelled.