Russia Startled by Bulgaria's Scrapping of BA Oil Pipeline

Energy | December 7, 2011, Wednesday // 16:07|  views

Russia's oil company Transneft has expressed dismay at the decision of the Bulgarian government to kill the project for the Burgas-Alexandroupolis oil pipeline, according to its representatives.

"Transneft has not been notified by the Bulgarian authorities that they are leaving the Burgas-Alexandroupolis oil pipeline project," Igor Demin, a representative of Transenft, told ITAR-TASS Wednesday, hours after Bulgaria's Finance Minister Simeon Djankov announced that the Borisov Cabinet wanted to do away with the controversial pipeline project.

Demin has reminded that in November Bulgaria's Environment Ministry technically approved the Environmental Impact Assessment submitted by Trans-Balkan Pipeline, the Bulgarian-Greek-Russian company set up to construct and run the oil pipe from the Black Sea to the Mediterranean.

The approval was granted after the Environment Ministry in Sofia returned the EIA paperwork for corrections by TBP several times.

Bulgaria's Finance Minister Djankov announced earlier that the Borisov Cabinet will send formal letters to Russia and Greece offering them to terminate by mutual consent the agreement for the construction of the oil pipeline.

If either Russia, or Greece – or both, as it might be likely – fail to agree, Bulgaria will be entitled to walk away from the project after a 12-month period, as stipulated by the agreement clauses.

The Bulgarian government decided on Wednesday to scrap the project for the oil pipeline, which was to take Russian crude through its territory to Greece.

According to the cabinet in Sofia the Burgas-Alexandroupolis oil pipeline – one of the three major Bulgarian-Russian energy projects – is not economically viable.

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 September, Russian oil pipeline monopoly Transneft said it will freeze the construction of the troubled Burgas-Alexandroupolis project, which has been largely obstructed by Bulgaria's government in the past 2 years.

Transneft will not abandon the Burgas–Alexandroupolis oil pipeline project - despite its partner Bulgaria's failure to provide financing - but will freeze the construction this fall, Transneft Vice President Mikhail Barkov declared.

The construction of the Trans-Balkan oil pipeline, designed to link the Black Sea port of Burgas to Alexandroupolis on the Aegean Sea, has long been hampered by the position of Bulgaria, which has threatened to abandon the project over environmental risks. Most of the pipeline was planned to run through Bulgarian territory.

Transneft has repeatedly complained that Bulgaria was failing to finance its part of the project. Media has said the project was likely to be suspended while Transneft only said it would minimize its spending on the pipeline.

The Russian "freeze" of the oil pipeline project came after in late August 2011 the Bulgarian government granted Trans-Balkan Pipeline an extension on the environmental assessment of Burgas-Alexandroupolis.

The 280-km pipeline, planned to link the Black Sea port of Burgas to Alexandroupolis on the Aegean Sea, is designed to transport 35 million tons of oil a year, with a possible expansion to 50 million tons, to ease the tanker traffic burden in the Bosphorus and the Dardanelles straits.

Transneft does not rule out finding a route bypassing Bulgaria to deliver Russian oil through Greece to the Mediterranean, Transneft head Nikolai Tokarev said in June 2011.

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.

In December last year, 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%).

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: greece, environmental assessment, Sergei Shmatko, Sergey Shmatko, Traicho Traikov, Russia, Burgas, Pomorie. Burgas-Alexandroupolis, TBP, Vladislav Emelyanov, Russia, Enviroment Ministry, Nona Karadzhova, Environment Minister, Trans-Balkan Pipeline, TBP, oil pipeline, Burgas-Alexandroupolis oil pipeline, Mikhail Barkov, environmental impact assessment, Simeon Djankov, finance minister


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