Банкеръ Weekly

Briefs

IT'S AMBO TIME

The new oil map of the Euro-Asian corridor, the Balkans, and the whole of Europe, was outlined in the first November days. The merit for that goes to politicians, energy experts, economists and financiers from Bulgaria's neighbour countries. Bulgaria has no representatives among them yet, although in the end of last week ministers from Premier Simeon Sax-Coburg-Gotha's Cabinet officially announced the revival of the Bourgas-Alexandroupolis project. Despite the promises that the new memorandum on the oil pipeline would be signed in December by Moscow as well, the route is not yet on the new European oil map. However, two other routes have been clearly mapped outPaneuropean (to meet oil demand of the refineries on the Old Continent) and principal (for crude oil access to international markets). The first one passes through Romania, Serbia, Slovenia and Italy, and the second one crosses our country's territory. However, this will not be the Bourgas-Alexandroupolis pipeline, promoted by Energy Minister Valentin Tserovsky, but the route to the Albanian port Vlyora. The BANKER weekly learned that the documents for the project of the US company AMBO, circulating official institutions for more than a year now, have become topical again. But the instructions for their quick advance do not come from Mr. Tserovsky, but directly from No 1, Dondoukov street. The new draft of a trilateral memorandum between Sofia-Skopje-Tirana, which is presently being discussed by all concerned institutions, also starts from there. According to plans, the document is to be considered by the Council of Ministers next week (most probably on November 18), and signed by representatives of the three countries' governments by December 15.As far as the Bourgas-Skopje-Vlyora project is concerned, it is close to the final, AMBO's Financial Manager Dr. Warren Phillips, commented for the BANKER. He specified also that the undertaking would be managed by the US company Kellogg Brawn Root, the construction would be effected mainly by the Argentinian-Italian company Тechint (one of the main contractors, realizing the transmediterranean oil trunk road from Algeria to Italy, and the report on the environmental impact would be prepared by the US Walsh. Loans of USD900MN have been agreed with the American export agency OPIC and the US Eximbank. The syndicated credits will be serviced by the US bank Credit Suisse First Boston.The entire project is worth about USD1.2BN,the remaining USD300MN of which will be ensured by private investors. The first 200,000 barrels per day for the new pipeline have been contracted as well, Dr. Phillips said. Negotiations are going on for filling up the maximum capacity of the route (750,000 barrels per day, or 35 million tons a year). In Dr. Phillips' words, 50% of the shareholder capital of the company that will own the facility has already been raised. Orders for the remaining shares are currently being processed by a authoritative financial institution from London, which is negotiating with potential investors. Each of them could acquire up to 5% of the capital. There are two Bulgarian applicants - Allianz Bulgaria and Industrial Holding Bulgaria. The Bulgarian part of the oil conduit will cost about USD450MN, of which USD200MN will be spent on construction and engineering services. According to Dr. Phillips, the money for subcontractors (which could be Bulgarian firms as well) will be about USD100MN. AMBO's representative in Bulgaria Rumen Nikolov explained that the US company plans to organize immediately after the signing of the memorandum in Sofia a meeting between Bulgarian building and engineering companies and the main contractors of the project. Bulgarian managers should present at that meeting their capabilities of fulfilling the necessary work in due time and with good quality. The same problem will face the candidatesfor the construction of the Paneuropean oil conduit Konstantsa-Triest, that will be transporting to EU countries about 60 million tons of crude per year. The oil will be coming from the Caspian region and the route will pass through the territory of five countries (Romania, Serbia, Croatia, Slovenia and Italy) and will be linked with the Trans Alpine Pipeline for transport of fuel in Austria and Germany. One more deviation has been projected - to the refineries in Northern Italy. A few days ago the international committee for the project's realization conclusively coordinated the interests of participants in it and a final protocol was signed, Andrei Grigoresku, Chief Secretary of the Romanian Ministry of Economy, confirmed. He said that five companies were nominated to fulfil the construction, but declined to specify them. Experts from our northern neighbour country, however, are adamant that the Austrian OMV group (which has purchased recently the top Romanian oil refinery Petrom )will be certainly among them. Meanwhile, due to ecological reasons the participants in the project refused to stick the Paneuropean pipeline with the Croatian post of Omishvali, as the initial version projected. The choice of the route is quite advantageous for Bucarest, because apart from additional quantities of oil for Romania, it will allow to use the existing transport infrastructure in the country. The fact that more than half of the oil conduit (630 km of all the 1,360 km) will be passing trough the country's territory should not be ignored either. The European Union (EU) has already released EUR2.1MN for working out a technical and economic appraisal of the project, but the amount is just a part of the promised EU financing. The USA is also interested in the project's implementationA considerable part of the expenses for the feasibility study was undertaken by the US Agency for International Development (USAID). The World Bank, which has helped the Serbian authorities to set up a special secretariat with the Energy Ministry in Belgrade to coordinate activities with Bucarest and Zagreb, was also attracted. According to preliminary estimates, construction of the new 400-km-long sections of the route and modernization of the existing 800 km of the oil network will cost about USD1BN. During the week Bucarest officially announced that the implementation of the project will start in the beginning of 2005 and be completed towards 2012-2014.Bourgas-Vlyora and Konstantsa-Triest are the two routes along which Russian and Caspian oil will certainly run, analysts claim. According to them, the chances of the two shortest bypasses of the Bosphorus (the Bulgarian Bourgas-Alexandoupolis and the Turkish Kaitkyoi-Ibrikbaba) are currently close to none. The reason is that the oil from the two initial ports can reach only European consumers, and the crude for the refineries of the Old Continent is guaranteed, even now. Moreover, on October 18 the President of Transneft Semyon Vainshtok pointed out that the unused capacities of the Russian trunk pipelines are for about 13 million tons per year. In the near future, however, Russian oil companies would hardly resort to them, even if output increases considerably. The free capacity of the Drouzhba pipeline in the Unecha-Mozir section is 2 million tons annually, the Samara-Lisichansk section has 4.5 million tons free capacity, and another 6.8 tons can be undertaken by the transport facilities between Omsk and Pavlodar. The perspectives for complete loading of each of these pipelines are directly connected with the realization of some of the big Russian oil projects. The southern section of the Drouzhba oil conduitdelivers Russian crude oil to Germany, Poland, the Czech Republic, Hungary and Slovakia. Until recently the narrow place of the facility was the Unecha-Mozir section. But its capacity is sufficient to meet the demands of all refineries in the above-mentioned Central European countries, Transneft experts claim. An expansion will be necessary only in case the pipelines of Drouzhba are extended to Western Europe or a new big crude oil consumer appears in the region. In 2004 Transneft expanded Drouzhba's narrow section, hoping that the Croatian port of Omishvali would become such a big consumer after the idea for linking the Drouzhba and Adriya pipelines is realized. The agreement for its implementation was signed between Belorussia, Russia, the Ukraine, Hungary, Slovakia and Croatia back in the end of 2002, but its implementation has not started so far. The most serious hindrance turned out to be the coordination between the six countries, their oil companies, and oil consumers along the route. During the week, however, Russia signed the conclusive protocol on the oil conduit from Konstantsa to Triest. The free capacities along the Samara-Lisichansk section appeared in 2001 when Transneft built the Suhodolnaya-Rodionovka bypass, going round the Ukraine. Technically, the new pipeline could be used for deliveries of Russian oil to Odessa, but transportation along it would be extremely disadvantageous from an economic point of view. The possibilities for using free capacities of the Russian-Kazakh oil conduit Omsk-Pavlodar-Chimkent are also only visionary. The Pavlodarsk oil refinery (about 3 million tons per year) would be its only consumer. Big quantities of Russian crude in that direction could be transported only after the realization of one of the two projects - the oil conduit Russia-Kazakhstan-Uzbekistan-Turkmenistan-Iran, or the pipeline between Kazakhstan and China. The future of the Iranian project at the present stage is more than doubtful. Construction of the Kazakhstan-China pipeline has already begun, but the pipeline from Omsk should be connected with it in the coming years. So, Russian crude from Caspian oil deposits will be flowing westwards for the time being, to the Drouzhba oil conduit and the Black Sea coast. Some of the oil could pass through our country as well.

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