Russia, Bulgaria, Greece ink Burgas oil pipeline deal

Moscow (Platts)--15Mar2007

Russia, Bulgaria and Greece Thursday signed a long-awaited deal to build
the Burgas-Alexandroupolis oil pipeline to export Russian oil via Bulgaria and
Greece bypassing the congested Turkish straits.
Russian President Vladimir Putin, Bulgaria's Prime Minister Sergey
Stanishev and Greece' Prime Minister Costas Karamanlis attended the signing
ceremony for the deal to build a 280 kilometer (174 mile) oil pipeline at a
trilateral summit in Greece.
The Burgas-Alexandroupolis project, which has been under discussion for 14
years mainly due to doubts over its profitability, envisages shipping oil from
Russia's port of Novorossiisk across the Black Sea to Burgas, and then
building a 35 million mt/year (700,000 b/d) pipeline to transport it to the
Greek Aegean Sea port of Alexandroupolis.
The pipeline, with an estimated cost of around Eur 1 billion ($1.3
billion), is aimed at reducing the expense and time of transporting Russian
oil from the Caspian Sea to Europe and the United States. Oil tankers
currently have to negotiate the narrow Bosphorus Straits, where increasing
traffic has raised concerns over congestion.
It will provide Russia with an access to a deep water port of
Alexandroupolis, to export crude by tankers with a deadweight of 300,000 mt.
The construction of the pipeline will allow to diversify and expand
volumes of deliveries of Russia's hydrocarbons to international markets, Putin
told reporters at a press conference after the signing ceremony, broadcast by
Russia Today TV news program.
"I am convinced that the energy potential of Russia and a strategic
geographic position of Greece and Bulgaria opens up a broad prospects for our
cooperation and provides new opportunities for establishing major regional
hubs to transit Russian oil to European and world markets," Putin said.
The project will allow for raising crude deliveries from the Caspian
region, he said. "We are not talking about a re-direction of existing oil
flows but filling the system with new volumes [of crude], which is expected
[to arise] in Russia and other countries, transiting oil via Russian
territory," he said.
The first stage of the project may see a capacity of 15 million mt/year,
with its further expansion to 24 million mt/year at the second stage, and
further increase to 35 million mt/year at the third stage, according to a
statement posted at the Kremlin's web site. The route might be expanded up to
50 million mt/year later.
Russia's will have a 51% stake in the project, with Bulgaria and Greece
to hold half each of the remaining 49%.
The construction of the pipeline will start in 2008, Bulgaria's Prime
Minister Sergey Stanishev said at the press conference, Russia's Prime-Tass
news agency reported.
Russia's Transneft president Semyon Vainshtock confirmed that all the
preparation work for the start of the construction would be done as quickly as
possible.
It will take "not a year or two but much, much less," Vainshtok was
quoted as saying in the Athens by Prime-Tass.
Speaking about ecological concerns, Putin said that all the new
technologies and the latest equipment would be used to build the pipeline to
ensure meeting all the demands by ecological organizations.
Putin did not rule out that the pipeline's route might be changed if
environmental interests require the move.
"Everything is possible when we talk about finding the best way to ensure
interests of the project and environmental requirements," he said.
EU Energy Commissioner Andris Piebalgs Thursday welcomed the signing of
the agreement on the pipeline, which will reduce the increasing pressure of
maritime oil transport through the Bosphorus and the Dardanel straits.
"Given the increasing density of maritime traffic in the enclosed Black
Sea and additional quantities of oil exported from the region, it is of utmost
importance to give a higher priority to the alternative of transporting oil by
pipelines," Piebalgs said in a statement.
Burgas-Alexandroupolis pipeline is considered by the Commission as a
project of pan-European interest, he added.
--Nadia Rodova, nadia_rodova@platts.com