Банкеръ Weekly



Following many years of prevarications, fruitless negotiations and bungled plans, promises for oil and oil routes are flooding the country this spring. However, there are still more questions than real achievements. The Bourgas - Alexandroupolis route which acquired a thrilateral intergovernmental document for political support a week ago is still unsettled not only because of the lack of crude oil needed to fill in the pipe but also because of the absence of economic grounds proving the efficiency of the project. As to the other oil route that crosses the territory of Bulgaria and reaches the Albanian port of Vlyora, it is still lost in information mist. The main reason is that the route remains quite unpopular among the senior officials of the construction ministry.The work on the route Bourgas - Skopje - Vlyora is going on according to the schedule typical for the construction of new oil pipelines, a representative of the US AMBO company who is initiator and owner of the project told the BANKER weekly. However, he refused to say further details. But thanks to other sources, it became clear that a two-day meeting of expert groups from the three transition countries started in Tirana on April 19. The Bulgarian group appointed by the Council of Ministers in the beginning of the current year includes 14 experts from the construction, economic, transport, energy, and foreign affairs ministries. The discussions in the Albanian capital also involved representatives of the three western companies engaged with the route. One of them is the US Kellogg Brawn Root which is the project manager. The Argentinian-Italian Techint is the main contractor that will construct the appliance. It is also one of the main constructors of the transmediterranean oil highway between Algeria and Italy. As to the American Walsh company which is the author of several ecological projects in the region, it presented in Tirana its studies on the impact of the construction on the environment. The Albanian Government announced that it expected its country to earn USD60MN per annum due to the route. Still, about 50 conservationists demonstrated along the streets of Tirana arguing that the route construction would send away the foreign tourists.Representatives of the major shareholders in the future oil pipeline owner and operator took part as observers in the meeting, too. AMBO did not reveal the shareholders' names saying that the process of collecting the authorized capital was not over yet. The company only said that more than a half of the applicants had been specified and applications had been submitted for the remaining shares but were still being processed. An authoritative London-based financial institution which committed to select the members and the structure of the future oil company is negotiating with potential investors. Each of them may acquire up to 5% of the capital of the company. There are two Bulgarian companies among the candidates - Alliance Bulgaria and Bulgaria Industrial Holding. In case of approval, they will have to pay USD30MN of the total amount of the authorized capital fixed at USD300MN. This is a fourth of the approximately USD1.2BN needed for construction of the whole appliance. The remaining USD900MN will be provided as loans from the US OPIC export agency and Eximbank. The syndicated credit will be served by Credit Suisse First Boston.It remained unclear whether experts of the financial institutions attended the meeting in Tirana. However, there were no representatives of the large oil companies based in the Caspian Sea region that can guarantee that the pipeline will be filled. AMBO representatives noted that 200,000 barrels of oil per day have already been arranged (750,000 barrels a day are needed for the maximum capacity of the route which is 35 million tons per year).After leaving Tirana, the participants in the oil forum visited Skopje and at the end of the week arrived in Sofia. On April 22, experts from AMBO and the three western companies, main executors of the project, met a few Bulgarian companies experienced in the pipeline construction. Among them were Glavbolgarstroy (which built many of the gas pipelines from Yamburg to Bulgaria, including the gas highways on the territory of Bulgaria), Gazstroymontazh (which took part in the building of gas and oil pipelines), and Chimcomplect-Engineering (which employs some of the most authoritative pipeline designers in the region). The meeting aimed at assessing these companies' ability to take the necessary actions of high quality and in time. According to the AMBO plans, the appliances on the Bulgarian territory will be constructed by Bulgarian companies. As preliminary calculations show, they may be paid approximately USD100MN. In turn, the value of the Bulgarian part of the oil pipeline Bourgas - Skopje - Vlyora will be some USD450MN, of which USD200MN will be spent on construction and engineering services.

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