Bulgaria Might Kill Burgas-Alexandroupolis Pipeline by Not Paying Dues

Energy | December 16, 2010, Thursday // 14:37|  views

Map by tbpipeline.com

Bulgaria has failed to pay the EUR 6 M that it owes as its contribution to the joint project company with Greece and Russia, which is supposed to construct the Burgas-Alexandroupolis oil pipeline.

Even though at the last meeting in Amsterdam of the shareholders of the Trans-Balkan Pipeline company, the joint Bulgarian-Greek-Russian venture that should construct and manage the pipe, the Bulgarian government pledged to pay its dues by December 15, 2010, it has failed to do so, revealed Mikhail Barkov, Vice President of the Russian oil company Transneft, as cited by RIA Novosti.

"They did not keep their word, and they are jeopardizing the entire project. This is a fact," Barkov stated making it clear that the failure of the Bulgarian government to make its financial contribution could result in the freezing of the pipe.

He revealed that as a result Greece has made the payment of its own contribution to the joint project company conditional on the payment by the Bulgarian government.

"We are now discussing what we should do. It seems that the project will be frozen," Barkov has explained with respect to the Russian position.

He explicitly declared that even if Bulgaria ultimately refuses to participate in a trans-Balkan pipeline for the transport of Russian and Caspian oil from the Black Sea to the Mediterranean, Russia will not give up and will seek other ways to construct such a pipe.

Barkov did not mention explicitly if he meant the construction of the Samsun-Ceyhan oil pipeline through Turkey, which is seen as the major competitor and alternative to the oil pipeline through Bulgaria and Greece.

Ever since the center-right government of Bulgarian Prime Minister Boyko Borisov took office in the summer of 2009, it has been balking at the construction of the Burgas-Alexandroupolis oil pipeline, which had been promoted vigorously by the formed Socialist-led Stanishev Cabinet and the Socialist President of Bulgaria, Georgi Parvanov. It has also been met with staunch resistance along Bulgaria's southern Black Sea coast over environmental concerns.

In the summer of 2010, Borisov said that Sofia has no money to participate in the construction of the pipeline. Later Sofia has agreed to pay EUR 4.88 M as a contribution to the project company, Trans-Balkan Pipeline. The Bulgarian authorities, however, have made the construction of the pipeline conditional on complex environmental assessment procedures.

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 has been put off for 2011.

Bulgarian Prime Minister 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.

Also in November 2010, Plamen Rusev, ex-director of Bulgarian branch of the project company who got sacked shortly before that by the Borisov government, commented that the decision of the Bulgarian government that the environmental impact assessment of the Burgas-Alexandroupolis oil pipeline is inadequate is aimed at buying time for financial reasons; in his words, the decision was "politically motivated" and was connected with the financial trouble of the Bulgarian state.

Earlier this week, Greece's Deputy Prime Minister Theodoros Pangalos was especially critical of Bulgaria as regards the issue of the construction of the Burgas-Alexandroupolis pipeline claiming that the rightist governments in Bulgaria in the past 15 years – including the current Borisov government – have served American interests by blocking the progress of the oil pipeline. Greece has been a strong proponent of the pipe.

Russian Prime Minister Putin and Energy Minister Shmatko have generally expressed "understanding" for the "environmental concerns" of the Bulgarian state but have also insisted on the realization of the project.

Bulgaria, Greece and Russia agreed to build the pipeline between Burgas and Alexandroupolis, taking Caspian oil to the Mediterranean skirting the congested Bosphorus, in 2007 after more than a decade of intermittent talks.

The agreement for the company which will construct the Burgas-Alexandroupolis oil transit pipeline was signed by Bulgaria during Russian President Putin's visit to Bulgaria in 2008.

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%).

On July 16, 2010, the Bulgarian government completed the restructuring of its Project Company Oil Pipeline Burgas-Alexadroupolis – BG" AD, which sealed the transfer of the company under the responsibility of the Finance Minister.

Construction of the pipeline has been on ice even after Bulgaria's government balked at the potential environmental damage that the pipeline could inflict on its resort-dotted coastline. The cabinet has stated that its final decision on the country's participation in the project will depend on its upcoming international environmental assessment.

During the summer, Bulgaria's Prime Minister Boyko Borisov unexpectedly said that the country was "giving up" on Burgas-Alexandroupolis oil pipeline project.

In a dramatic twist that left all of Europe confused, Borisov retracted his statements shortly afterwards, saying that the Bulgarian government hasn't made a final decision regarding the construction of the pipeline.

After it took office in July 2009, Bulgaria's new center-right government of the GERB party made it clear it was going to reconsider the country's participation in the three large-scale energy projects - South Stream gas pipeline, Burgas-Alexadroupolis oil pipeline, and Belene Nuclear Power Plant.

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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Tags: Transneft, Mikhail Barkov, Theodoros Pangalos, USA, oil pipeline, Russia, greece, Burgas-Alexandroupolis, Burgas-Alexandroupolis oil pipeline, Burgas-Alexandroupolis, oil pipeline, Burgas-Alexandroupolis oil pipeline, TBB, Trans-Balkan Pipeline, Russia, greece, Boyko Borisov, GERB, Sergey Shmatko, Plamen Rusev


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