Russia Scraps Burgas-Alexandroupolis Oil Pipe - Report

Russia plans to withdraw from the project to build the Burgas-Alexandroupolis oil pipeline, the Russian news agency ITAR-TASS announced Wednesday, citing the daily "Vedomosti."

It is expected Russian participants in the project – the companies "Transneft," "Rosneft," and "GazpromNeft" will announce halting the project's financing Thursday in Rome, during a meeting of the Monitoring Board and the shareholders of the project company, Trans-Balkan Pipeline.

The pipe initially had a 2011 deadline, but the construction was never started. Bulgarian authorities failed to coordinate the project, "Vedomosti" writes, reminding that the new Bulgarian cabinet, which took office in 2009, is hesitant over the environmental impact of the project and, in reality, had stopped financing it.

Earlier in February, Mikhail Barkov, Vice President of "Transneft," announced that shareholders will discuss in Rome options to continue financing the project, ways to keep the company owner of the future pipeline in existence, and the Bulgarian position.

In December 2010, Barkov said that Bulgaria has failed to pay the EUR 6 M that it owes as its contribution to the joint project company with Greece and Russia, but it has pledged to pay its dues by December 15, 2010.

Experts have stated that Bulgaria might escape paying compensations if it withdraws the project on the basis of a negative environmental assessment.

In November 2010, the Bulgarian Environment Ministry said the environmental impact assessment of the Burgas-Alexandroupolis oil pipeline is inadequate and needs to be reworked; the ultimate decision about whether Bulgarian will take part in the project is expected after the results of the environmental assessment, which is to be revealed in February 2011.

Bulgarian Prime Minister Boyko Borisov, however, has written off the project on a number of occasions, declaring that there is no way the ultimate environmental assessment would be positive.

The 280-km pipeline, with 166 km passing through Bulgaria, would have an initial annual capacity of 35 million tons of crude oil, which could be later expanded to 50 million tons. Its costs are estimated at up to USD 1.5 B, up from initial estimates at USD 900 M.

The Trans-Balkan Pipeline company, which is in charge of the construction and subsequent operation of the future pipeline, and is headquartered in the Netherlands, was set up in 2008.

The Russian participant in the project, Pipeline Consortium Burgas-Alexandroupolis Ltd, has a share of 51%. It was founded jointly by three companies: AK Transneft (33.34%), NK Rosneft (33.33%), and Gazrpom Neft (33.33%).

The Bulgarian Joint stock company "Project Company Oil Pipeline Burgas-Alexandroupolis – BG" AD has a share of 24.5%. It was initially founded as jointly by two state companies, Bulgargaz (50%) and Technoexportstroy (50%) but was transferred in full to the Finance Ministry in February 2010.

The Greek participants are Helpe Thraki AE with 23.5% and the Greek government with 1%. The Helpe-Thraki AE was founded jointly by "Hellenic Petroleum" (25%) and "Thraki" (75%).

Three Bulgarian Black Sea municipalities - Burgas, Pomorie, and Sozopol - have voted against the pipe in local referendums over environmental concerns.

Municipalities neighboring Pomorie and nearby Burgas are also harboring fears that the pipeline could damage their lucrative tourism business, while environmental NGOs have branded the existing plans to build an oil terminal out at sea a disaster waiting to happen.

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