Банкеръ Weekly



THE BIG BATTLE IS BETWEEN MOSCOW AND WASHINGTONIt is difficult to find an explanation to the inertness of the Bulgarian Government when it comes to the pipeline projects crossing the territory of the country, an expert in a big US oil company based in Baku told the BANKER weekly. Moreover, it all happens in a moment when oil prices reach levels that are record high for the past 20 years and demand is incessantly growing. At the same time, the oil deposits in the Black Sea basin are increasing every month and the administration in Ankara is not only willing to ease the rules for tankers passing through the straits of Bosphorus and Dardanelles, but also warns about potential overburden of the straits. In the last few months, this transport problem became a major one for the big oil companies that process fields in the Caspian region. Solution should be offered by both the western and the Russian producers. The issue is expected to grow particularly hot in a few months when additional tons of Russian oil are expected to be brought to the Black Sea aquatory along the Brody - Odessa pipeline. That oil is produced in both Caspian fields and the distant Siberia. However, authorities in Sofia seem to have fallen deep asleep. Despite the obvious partiality of the Minister of Regional Development and Public Works, Valentin Tserovsky, even the Bourgas - Alexandrupolis pipeline project waswrapped in summer lethargy It is all different in Moscow and Athens. As far as the BANKER weekly learned, a few days before the Olympic Games were opened the Russian Minister of Industry and Energy, Victor Christenko, and the Deputy Minister of Development of Greece, Georgios Salagoudis, reached an agreement to accelerate negotiations about this project. According to the Russian Ministry of Industry, the members of the panel of experts, working on the initiative will be replaced by the end of this month. Its first meeting is appointed for early September in Greece. The assessment of the economic parametres and the efficiency of the route, as well as the preparation of an inter-governmental collaboration memorandum will be on its agenda.In fact, such a document already exists. In the spring of 2002, Bulgaria and Greece signed it officially and sent it for signature to Russia. However, Moscow refused to sign it and resent the decisions on the project to private Russian oil companies. So far none of them has declared interest in Bourgas - Alexandrupolis. The only one who made comments was the LUKoil President Vagit Alekperov. He told the Russian media this summer that the reason to stop the negotiations was Greece's position with regards to the transport fee, and as far as Bulgaria is concerned, the problem is already solved.Who will be the members of the panel of experts and how the September debate will go on is not clear yet. It can only be said that Moscow wants a new agreement among the three parties included in the construction of the oil conduit. The Bulgarian Ministry of Regional Development and Public Works declared it had no information about renovation of the talks. The department has neither discussed sending new representatives to the panel of experts, nor prepared a group for the September meeting. The section to the Albanian port of Vlyora seems to have been definitely thrown out of the plans of the rulers, even though four months ago (on April 8, 2004) a special decree of the Cabinet declared the oil projects were its priority. A research by the BANKER weekly found out that the text of the trilateral inter-governmental memorandum for the Bourgas - Skopje - Vlyora pipeline which has been shifted among the Bulgarian departments since last autumn is on the desk of Minister Tserovsky since July. The document was approved by the Minister of Foreign Affairs, Solomon Passy, and the Minister of Energy, Milko Kovachev, and is now waiting for Mr. Tserovsky's signature. And he is not in a hurry to sign it - of course, not for personal whims. According to well-informed sources, it is the Prime Minister Simeon Saxe-Coburg-Gotha who wants the delay and there are two possible reasons for that. The first is the active lobbying by Bulgarian tour operatorsand their fears that the flow of tankers to the Bulgarian coast will have a negative influence on the country's sea tourism. The fear is also shared by the Deputy Prime Minister Lidiya Shouleva, the same sources reveal. However, they are not reasonable, people from the oil industry say. Simply because the beginning of the pipeline will be beyond the horizon line and will not be seen from the sea coast. There is also no ground to fear from pollution or potential ecological disaster caused by flooded crude oil. Experts underline that the route will bring only profit to the coast villages and the tourism - both during the construction works and the exploitation period. In principle, payment in the oil branch is among the highest in the world. Moreover, many oil experts will come to the country due to the pipeline. The second reason for the government to freeze the oil projects wasgeopolitical interestsSuch stances have been recently voiced by observers from London as well. It is another matter if geopolitical motives have anything in common with Bulgaria's national interests. Anyway, as official Sofia was doing nothing Ankara managed to arrange the strongest oil combination. After construction of the oil pipeline from Baku to the Mediterranean port of Jayhan began last year, Turkey is now about to build a second route, on its European territory this time. The Kairkioy-Ibrikhaba project, crossing Turkish Thrace, is the shortest bypass of the Bosphorus strait, 193 km long. Moreover, while Ankara succeeded to get powerful support from Washington for the Baku-Tbilisi-Jayhan route, it turned for assistance to Moscow for the Thracian oil conduit and results were not late. In end-July the Russian oil transporting monopoly Transneft announced that according to preliminary estimates the building of the pipeline from Kairkioy to Ibrikhaba, with an annual capacity of 60,000,000 tons, will cost about USD900MN. It was specified that the facility would be entirely financed by bank and corporate credits and that the Russian company would be operating the oil conduit. The route was proposed by the private Turkish firm Anadolu, and an expert panel was set up in June 2003 to develop the project analyse its technical and economic details (in addition to Turkish experts it includes representatives of Transneft and the Russian-British company ТНК-ВР). Judging by the official announcement, the price for oil transit will be USD7.47/ton until the credits are paid back, and USD3.04/ton afterwards. Construction is expected to be completed within two years. In order to reduce the traffic through the Bosphorus strait and at the same time guarantee its oil dominance in the region, Turkey definitely plays with open cards. Just a week ago its energy ministry announced that five projects on oil pipelines through its territory were being discussed. According to Financial Times, authorities in Ankara discussed them in July with representatives of the oil companies, based in the regions of the Caspian Sea and an agreement was reached that discussions would continue at a second meeting in end-August. Russian oil companies, which are among the top exporters of crude through the Bosphorus, did not attend the talks in July, but were invited to the meeting in August. It became known that in July the Turkish Government had promised to oil producers overall assistance for the implementation of the chosen project (no matter which one is preferred). In fact, even Ankara's yearning for a second oil pipeline can be easily cooled down. At that, not due to technical or financial hindrances, but for purely political reasons. If the two Turkish oil conduits become a fact, the tap of Caspian crude shall no longer be controlled by seaside countries or big Western companies, exploiting Caspian oil deposits, but by Turkish authorities. Both the White House and Kremlin would hardly allow that. Oil is too important for the two most powerful countries in the world. For Russia it means money and influence, and for the USA it is an essencial necessity. Therefore, it is quite logical that the Russians and the Americans try to diversify the oil risks. This reduces the chances of passing the oil conduit through Thracian Turkey and brings to the fore the alternative projects, mainly those via Bulgaria (Bourgas-Alexandoupolis and Bourgas-Skopje-Vlyora). Many of the observers of the global oil market share the opinion that after Moscow's unofficial support for the Kairkioy-Ibrikhaba project and Sofia's silence, the choice of an oil bypass of the Bosphorus strait will be postponed for September or October (before the decisive battle for the White House, scheduled for November 2). The joint choice of the oil route and the increased quantities of Russian crude for the US oil refineries are said to be among Putin's gifts for the next US president. Naturally, only guesses could be made about political games at such a high level. But is is certain that the situation on the international oil markets would soon change. Today global deliveries of crude and natural gas are dictated by the Middle East, but tomorrow they will be replaced by Caspian oil, said Bylent Aliriza, expert of the Washinton-based Centre for Strategic and International Research in the beginning of August. His words were quoted by Associated Press. According to him, the situation with providing oil to the world could be reduced to a mathematical equation. Everyone that wants oil deliveries to go up should settle the problem regarding transportation bypassing the Bosphorus, pointed out Alizira. It is interesting what the Bulgarian Government solves at present and if its equation is mathematical.

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