Wednesday, June 20, 2012

Nabucco Reduced to Rump Project

With the announcement of the proposed Trans Anatolian Natural Gas Pipeline (TANAP) in December 2011, Nabucco has recreated itself as a pipeline proposal that begins at Turkey's western border.  Instead of being the European Union's premier pipeline project in the Southern Energy Corridor, it is now a regional competitor to the Trans Adriatic Pipeline (TAP) and the Interconnector Turkey Greece Italy (ITGI).

The weakness of the original Nabucco proposal could never be overcome:  there was no source for the natural gas that the pipeline was supposed to carry.  In January Sergey Pravosudov, Director of the Russian Institute of National Resources, said, "Europe has long been discussing supply alternatives.  However, nothing is being done in their main project Nabucco.  Europeans themselves admit that the more time passes the fewer chances remain to breathe life into Nabucco."

Because of this inaction, Turkey decided it could not wait for the European actors to get their act together, and Azerbaijan did not want their market to be limited to Russia.  According to a report in Hurriyet Daily News, a Turkish Foreign Ministry official stated, "With the economic slowdown that will reflect in the use of natural gas, Europe put the breaks on."  A Turkish Energy Ministry official added, "Azerbaijan wanted to sell the gas that it will produce from Shah Deniz 2 gas fields.  It did not want to sell it to Russia and did not have the time to wait for the EU to decide."  Azerbaijani parliamentarian Valeh Alasgarov characterized Europe's approach as indifference.  "No one takes care of this project," he said.  The result was TANAP, an abridged Nabucco to carry 16 bcm of natural gas from the fields.  Turkey would consume 6 bcm themselves, and pass 10 bcm to its Western border for onward movement to Europe.

Mark Adomanis, a contributor to Forbes magazine, declared Nabucco a failure.  As a project to demonstrate European unity against Russian energy policy, the pipeline showed the European Union as "almost comically incompetent and incapable."  Adomanis noted that in 2012 Gazprom was arguably more deeply entrenched in Europe than it ever had been.  Jamestown Foundation's Vladmir Socor noted that while the Nabucco shareholders would never leave the consortium, there were chinks in the armor.  German shareholder RWE was making overtures to TANAP, and the Turkish government (owner of the shareholder Botas) was prioritizing TANAP which was "easier to implement" than Nabucco. Hungary's MOL went on record that as long as there was no definite source of natural gas supply, no final investment decision could be reached on the project.   Julian Lee, an analyst at the Center for Global Energy Studies, declared the project dead.  "I think that Nabucco in the way that it was originally envisaged as a pipeline running from Turkey's eastern border all the way to probably over.  I don't think that is going to happen.

In April, Hungary's Prime Minister Viktor Orban met with Gazprom CEO Alexey Miller.  Less than a week later, he announced that MOL would leave Nabucco in favor of South Stream.  In an email, they held out hope that they could rejoin a Nabucco in a different format.  MOL cited "uncertain costs and gas sources and, with the current structure and project management, the implementation of the Nabucco project is not secured.  We believe in the South Corridor concept, that could eventually also include a re-considered Nabucco."  

Austrian shareholder OMV began to consider a Bulgaria to Austria version of Nabucco.  It would use the intergovernmental agreements and regulations that had been negotiated for the original Nabucco, and would cost considerably less since the distance would be shorter.  The consortium submitted the modified proposal for a 1,300 km pipeline to the Shah Deniz consortium.  Nabucco's Managing Director Reinhard Mitschek put the best face he could on it:  "We are convinced that we have submitted a competitive and comprehensive proposal...and that this proposal represents a win-win situation for our shareholders and for suppliers alike."  In changing its size, Nabucco West may have lost the support of the EU.  European Commission spokeswoman Marlene Holzner told the press it did not matter whether Nabucco or a rival won, as long as the EU got direct access to the Caspian gas, and that the initial 10 bcm capacity could be increased in the future.

Nabucco's construction costs for a 10 bcm pipeline are now approaching the per kilometer price of the 63 bcm South Stream pipeline, according to Investcafe's Grigory Birt.  Given the convergence in price, he predicted the new Nabucco had little chance for success.  "The lower the capacity of the project, the less profitable that project will be," he said.

While the final decision rests with the Shah Deniz consortium, the question remains if the European Commission will bring enough political pressure to bear to keep Nabucco-West in the game.  The original Nabucco was designed to carry only 5% of the projected natural gas needs of Europe, and Nabucco-West has less than one-third of the original capacity.  The new proposal does little to meet Europe's desire for a modicum of energy independence from Russia.

Tuesday, June 19, 2012

After over a year of wrangling over price, India and Pakistan have signed a gas purchase contract with Turkmenistan.  This is the first step in the creation of the TAPI (Turkmenistan Afghanistan Pakistan India) pipeline.  Interestingly, transit country Afghanistan did not sign a contract although they did initial a memorandum of understanding.

The Asia Development Bank (ADB) celebrated the development.  "After more than 20 years of diplomacy, the 1,800 kilometer (818 miles) natural gas pipeline that connects one of Central Asia's largest energy suppliers with South Asia's critically underserved market has moved a step forward," it said in a press release.  Klaus Gerhaeusser, Director of the ADB's Central and West Asia Department, was enthused.  "The pipeline represents a win-win scenario for each member country, as it will give Turkmenistan more diverse markets and help fuel the energy hungry economies to the South."

In theory, Gerhaeusser is correct.  The pipeline is designed to take 33 bcm per year for 30 years of natural gas from Turkmenistan to feed the energy hungry subcontinent.  The pipeline is also supposed to help Afghanistan develop economically, thereby helping the peace process.  Not only would Afghanistan purchase 5 bcm of gas from the consortium (India and Pakistan would get 14 bcm each) but they would also earn transit fees.  Turkmen President Gurbanguli Berdymukhamedov has said Afghanistan could earn more than $1 billion annually in transit fees, and Afghan President Hamid Karzai predicts pipeline maintenance could provide employment for 50,000 Afghans, according to the Associated Press.

The cost of the project is estimated to be between $10 billion and $12 billion to construct, and it has attracted US interest.  Daniel Stein, senior adviser to the US State Department's special envoy for Eurasian energy, said that two major US oil companies were interested in participating in the project.  The US government also supports the project, both because of the positive contributions to Afghanistan and because it would detract from a competing project to service South Asia with Iranian gas.

Despite American support, TAPI does not appear to have fallen prey to the US-Russian rivalry for Central Asian energy resources.  Russia is also interested in investing.  Gazprom has gone on record as saying they wanted to be involved in any way the project envisions.  In reply, leaders of the governments involved issued a statement that, "The parties welcome Russia's interest in participating in implementation of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project."

One would think that with American and Russian support, that TAPI would be a done deal.  Unfortunately, its transit of the worst parts of Afghanistan and Pakistan makes the project problematic.  Andrew Neff, the Moscow-based senior energy analysts, said the instability in Afghanistan meant the project was unlikely to attract financing from Western banks.  "The main hurdle is the security concerns in Afghanistan," he said.  Neff's colleague at IHS Global, Lilit Gevorgyan, concurs.  "With the Western troops' pullout by 2014 from the still volatile Afghanistan, building an expensive pipeline in country with very weak central government seems almost unattainable."

Trans Anatolian Gas Pipeline Strongest Game in Town

The Trans Anatolian Natural Gas Pipeline (TANAP) is the latest proposal to bring Shah Deniz II gas to Europe.  It currently holds the inside track, since the owners of the project are the state owned oil and gas companies of Turkey and Azerbaijan.  The pipeline will originate at the Caspian, and will take natural gas to Turkey's western border.  Ever since it was proposed in December 2011, it has frightened competing pipeline projects.

According to Olgu Kumus, an analyst at CERI Sciences Politiques in France, TANAP is the main competitor for Nabucco, and not the Gazprom-supported South Stream.  "The Trans-Anatolian pipeline aims to transfer the same gas source to Europe as Nabucco," he told SE Times.  "The most important partner in the Trans-Anatolian pipeline is SOCAR (the State Oil Company of Azerbaijan), which manages the Shah Deniz II gas field with BP.  In other words, the Trans Anatolian pipeline will not have a supply problem because the region's dominant supplier is a stakeholder."  Faced with such competition, Nabucco has now proposed a scaled-down version of its pipeline that starts at the western Turkish border, aptly named Nabucco West.

Not only is TANAP a threat to Nabucco, however, but as more Shah Deniz II gas comes on line the pipeline could expand its capacity.  This puts it in competition with South Stream.  SOCAR president Rovnag Abdullaev said that Azerbaijani gas production would reach 30 bcm by 2015, and 50 bcm by 2025.  He claimed that TANAP, originally planned to carry 16 bcm per year, would have the capacity to carry 60 bcm annually with a possibility of an increase.   Such expanded capacity would leave room for Turkmen gas if the Trans Caucasian Pipeline were to be built.

As plans proceed, SOCAR has invited other companies to join in the TANAP project.  "We would like other large international companies to be part of the project as well," said Abdullayev.   Ukraine's Ambassador to Turkey, Sergiy Korsunsky, told reporters that Ukraine would like to take a stake of up to 10% of TANAP and could pay for it with cash, or by supplying the project with pipes.  In addition, competing pipeline consortiums TAP (Trans Adriatic Pipeline) and ITGI (Interconnector Turkey Greece Italy) said that their projects were compatible with TANAP.  "TAP will be happy to work with the developers of TANAP for any required coordination between the two pipelines, thus providing a fully integrated solution for the delivery of Caspian gas to Europe," External Affairs Director Michael Hoffman told Reuters.  Similarly, the CEO of IGI Poseidon, ITGI's operator, said "The ITGI project starting at the Turkish-Greek border is fully compliant with any option to transit Azeri gas through Turkey, including TANAP."

Wednesday, June 13, 2012

Trans Adriatic Pipeline Chosen for Italy

Trans Adriatic Pipeline (TAP) Managing Director Kjetil Tungland told EurActiv he has received a letter from the State Oil Company of the Azerbaijan Republic (SOCAR), inviting TAP to enter into "exclusive negotiations" with the Shah Deniz consortium.  SOCAR added the invitation was supported unanimously by all the members of the consortium, and the decision is final.  What this means is that the Interconnector-Turkey-Greece-Italy (ITGI) project, an alternative route to Italy supported by the Italian and Greek governments and whose members are primarily Greek corporations, has been eliminated from consideration because of the continuing economic turmoil in that country.  The Shah Deniz consortium is a group of companies led by Statoil and British Petroleum (BP).  Other members include SOCAR, LUKOIL, NICO (Iran), Total and TPAO (Turkey). 

TAP is sponsored by the Swiss energy company EGL, Germany's E.ON AG, and Statoil ASA from Norway.  A weakness of this consortium is that it lacks an Italian partner but, with the Shah Deniz decision supporting TAP, ITGI supporter Enel SPA of Italy has expressed interest in joining the TAP group.  "Enel is interested in all projects that bring gas to the country, includiing TAP," said Enel CEO Fulvio Conti

If built, TAP will carry 16 bcm of natural gas from the second phase of the Azeri offshore gas field, Shah Deniz.  They would pick up the gas at the Turkish border, and carry it 800 kilometers. While the Shah Deniz consortium has agreed to use TAP if it sends gas to Italy, it still has not made a decision to use that corridor, at all.  Harry Sachinis, CEO of the Public Gas Corporation of Greece (DEPA-an ITGI member) said, the Italian pipeline portion of the Southern gas corridor is only a "provisional decision."

Critics of the project point out that TAP has no intergovernmental agreement among the three countries (Greece, Albania and Italy) through which it would pass, although it was included in an Albanian-Italian bilateral from 2009.  They also says that unless Enel or another Italian firm joins the TAP group, it would be difficult to get Italian government permission for the project, according to Reuters.

South Stream Advancing

While Western companies still compete over which route will be the Southern energy corridor, Gazprom's South Stream continues to plan for its construction.

In December, the company made a slight modification to its originally-planned route.  Following the EU's blocking of Gazprom's purchase of 50% of the Central European Gas Hub in Austria, a Gazprom spokesman told Reuters the project was no longer considering that country as a transit route.  "Only a spur will run to them," he said, adding that the route would now end in Italy instead of Western Europe.  Whether this decision will hold is uncertain, however, since in April 2012 the head of ENI (Italian energy company and South Stream partner) announced that the northern leg of South Stream to Austria will be built before starting work on the southern leg to Italy.  This report was contradicted by Gazprom in May, when they published a story that they might abandon the offshore section of the pipeline to Austria entirely.  The report added that the line would end in the northeastern Italian city of Tarvisio.

Gazprom CEO Alexei Miller confirmed in February that final investment decisions on the pipeline would be made in November, with construction scheduled to begin in December.  "We have entered into the stage of actual construction of South Stream," he said in a statement.  "I can say without exaggeration that Gazprom is working on the project 24 hours a day."

There had been a discussion within Gazprom whether it should be built for its maximum capacity of 63 bcm per year, or if the project should be started with a smaller pipeline that could be expanded at a later time.  In Winter 2012, however, Italy shivered without natural gas during some of the coldest weather in recent years.  Many analysts believed Russia had cut back deliveries to foreign customers while servicing their domestic customers.  In their review of the situation, however, Gazprom blamed the shortages on Ukraine's siphoning fuel from the transit line.  Gazprom CEO Alexei Miller told Russian president Demitri Medvedev, "On certain days, as much as 40 million cubic meters of gas remained on Ukraine's territory...  Our Ukrainian partners took as much gas from the export pipeline as they felt necessary."  In reply, Medvedev told Miller to build the pipeline at full capacity.  This decision will eliminate the need to use the Ukrainian pipeline to export Russian gas to Europe.  (Ukraine denied any diversion had taken place).

Julian Lee, senior energy analyst at the Center for Global Energy Studies in London, theorized as to why South Stream's tempo has increased.  In an interview with New Europe, he said "We are seeing a general sort of shift at the moment in the region of countries that are favoring South Stream.  There is a realization that Nabucco is not going to happen, at least in its original form...I think supporting or at least voicing support for South Stream is no longer perhaps seen as undermining Nabucco because I think the idea of Nabucco has largely evaporated now."

The European Commission continues to oppose South Stream because it is only a diversification of supply routes, instead of a diversification of suppliers.  Others, such as Russian energy consultant Mikhail Krutihin, oppose the project because of the price.  Citing a potential cost of construction of $40 billion, he told Nezavisimaya Gazeta, "This is madness.  It would be cheaper to strike a deal with the Ukranians."

Russia Buys Bulgarian Support for South Stream

Since coming to power in 2009, Bulgarian Prime Minister Boyku Borrisov has halted every Russian energy project in his country.  Before he was even sworn in, he asked former energy minister Petar Dimitrov to halt negotiation on all energy projects.  Since then, he cancelled his country's involvement in the Burgos Alexandroupolis pipeline, and the partially completed Belene nuclear power plant (one of the largest Russian energy projects in Europe).

As Andrew McDowall reports in his Financial Times blog, however, this has not landed Bulgaria in hot water.  One day after announcing suspension of the power plant, Bulgarian Minister of economy and energy Delyan Dobrev held meetings with Gazprom chief Alexey Miller.  At the end of the meeting, the leaders announced that Bulgaria would receive a price reduction for natural gas purchases of 11.1 percent for nine months.  This is a significant saving, since Bulgaria imports 100% of its natural gas from Russia.

Prime Minister Boyko linked the price reduction to the construction of South Stream.  He said that the only condition for the price discount was "honest and open relations" between the two sides, but that Bulgaria was ready to provide "full cooperation" for the South Stream project.  "You bring in pipes, you bury them underground, you take taxes, for many years, this is budget revenue for decades.  In short, full cooperation on the project," he told Darik national radio

By securing Bulgaria's cooperation, South Stream can speed up its construction plans, as Russian President Vladimir Putin has ordered.

Tuesday, June 12, 2012

Turkey's Pro Russian Polarity

In granting Gazprom the right to lay South Stream through Turkey's economic zone in the Black Sea, Ankara has taken its latest step in reversing a centuries' old policy of opposing Russian expansion.  The Ottoman Empire fought the Russian Empire twelve times in the 19th Century, and the Republic of Turkey was a major NATO member throughout the 20th Century.  Now, however, despite its continuing NATO membership, Turkey is realigning itself with its Northern neighbor.

In January 2012, Turkish Foreign Minister Ahmet Davutoglu met with his Russian counterpart, Foreign Minister Sergei Lavrov.  The two held the second Joint Strategic Planning group meeting, in which members of the Russian and Turkish foreign ministries met to align their policies.  Lavrov expressed his view that bilateral relations between the countries were developing in a constructive and confident environment.  He also opined that the two countries could devise solutions to every problem.

Davutoglu was even more enthusiastic.  Noting that relations had moved from routine to one that included joint strategic planning, the Turkish Foreign Minister described the relationship as a "paradigmatic change" for the country.

Part of the willingness to support Russia is ideological:  Turkey has strained relations with America's ally Israel; it opposed the US invasion of Iraq; it does not support a military solution to the Iranian nuclear question.  More importantly, however, is Turkey's reliance on Russia as a source of energy.  Turkey imports almost 80% of the fossil fuels it consumes, and about 50% of that oil and gas comes from Russia.  According to energy analyst Emre Isleri, this means that Turkey has been acting against its own national interests by not diversifying its sources of energy.  The result is that Turkey has restricted its foreign policy options with over-dependency.  "This means you cannot act against Russian interests in your neighborhood.  For instance, you cannot solve the Nagorno-Karabagh issue, and you will have limited say on the future of Syria, Cyprus, Armenian genocide allegations, etc."

Monday, June 11, 2012

Transcaspian Edging Closer to Beginning

The long-awaited Trans Capian Pipeline (TCP) continues to edge closer to a start date.  As recently as August 2011, Turkmenistan President Gurbanguly Berdymukhamedov remained cagey about his commitment to the project.  Told of European Union interest in building the pipeline, the President said that cooperation with the EU was a "strategic priority" for his country, and that any proposals would be studied.
Things changed on 12 September 2011, when the EU proposed a binding, union-wide treaty with Azerbaijan and Turkmenistan to support the pipeline. EU Energy Commissioner Gunther Oettinger issued a statement that "Europe is now speaking with one voice.  The trans-Caspian pipeline is a major project in the Southern Corridor to bring new sources of gas to Europe.  We have the intention of achieving this as soon as possible."  In reply, Italian Industry Minister Paolo Romani commented, "Now, with the mandate of 27 countries, Oettinger has sought to bring...clarity, calling (Gazprom-backed) South Stream an atempt by Russia to hamper the realization of the alternative Nabucco gas pipeline, actively supported by Europe."

Berdymukhamedov flew to Austria to discuss the project  "Today, we get down to work on the contractual and legal basis for supplying Turkmen energy to Europe," he said.  "We are inclined to hold a constructive energy dialogue with Europe."  Separately, EU Special Representative for Central Asia Pierre Morel said that the EU is willing to fund a good part of the TCP.

In February 2012, Azerbaijani Minister of Industry and Energy Natiq Aliyev confirmed the legal framework was being established to build the pipeline.  He said the three parites were preparing a political document to support the Southern Gas Corridor, and an inter-governmental agreement on the TCP.  Aliyev predicted the documents would be completed by the end of the year.  By March 2012, energy consultant Robert Cutler was reporting that he had heard from multiple sources that Azerbaijan and Turkmenistan had overcome bilateral diplomatic disputes, and had reached an agreement to build the TCP.  Cutler reported that Turkmenistan would rely on the EU to overcome Russian opposition to the project.

With the TCP moving closer to reality, other countries are expressing an interest in Turkmen gas.  Ukraine, which is involved in natural gas price disputes with Russia and being eclipsed as a transit route by Nord Stream and (possibly) South Stream, wants to join the TCP project.  Ukranian Prime Minster Mykola Azarov told Azerbaijan's President Ilham Aliyev that "Ukraine is interested in the implementation of the Trans-Caspian gas pipeline project." Turkmenistan had previously offered to sell Ukraine its gas for $5 per thousand square meters less than the price they charge China but, until now, there has not been any serious discussions on how the gas would be delivered.

To stop construction, the Russians have offered to renew their purchases of Turkmen gas.  Before 2009, Russia had been Turkmenistan's principle purchaser of natural gas.  When they cut back on purchases, pressure in the pipeline dropped which caused an explosion.  Previously, Russia had been buying 48 bcm of gas from Turkmenistan; in 2010 it was only 10.5.  According to the Russian newspaper Kommersant, Russian President Dmitry Medvedev and Berdymukhamedov met in December 2011 and Medvedev planned to offer to buy 80-90 bcm per year.  This would have effectively taken up all the spare Turkmen gas production, leaving it unable to support the TCP.

Russia continues to oppose the project, and this opposition makes Azerbaijan nervous.  According to Alexander Karavayev, deputy general director of Moscow State University's Information and Analytical Center, Moscow's attitude toward the TCP has been negative from the beginning.  "I find it hard to imagine the conditions under which Moscow would be happy to agree to alternative access for European consumers to Central Asian gas...Moscow will try to prevent the emergence of this pipeline.  The talks on commercial competition and transparency of access to resources are fair and important, but behind them lie the tough games and interests of the superpowers...Baku fears possible confrontation with Moscow over the Trans Caspian."  Alexander Ruhr, director of the Russian/Eurasia program, German Council, on Foreign relations, concurs.  He warns that the opposition to the pipeline from Russia and Iran is so intense, "If Turkmeistan were to lay out the pipeline a conflict might break out."

Russia and Iran have cited a number of reasons for their opposition:  the legal status of the Caspian has not been resolved, meaning all littoral states needed to approve any pipeline project; their is an environmental risk if the pipeline ruptures; there is a possibility that the pipeline could be destroyed by earthquake, etc.  All these arguments are negated by the two countries' own construction in the Caspian of offshore oil platforms and connecting pipelines.  As an example, in April 2012 a Lukoil susidiary gave a contract to build a 40 kilometer contract to build upderwater pipelines linking the Filanovskoye and Korchagin deposits.

Saturday, June 9, 2012

Plans for an Armenian-Iranian Fuel Pipeline

Construction is scheduled to begin in 2012 of an oil pipeline between the Iranian city of Tabriz and the Armenian city of Eraskh, reports the Agence France Presse.  The oil pipeline follows the opening of a gas pipeline between the two countries.  Armenia has been looking for an alternative to Russian energy imports since 2008, when Russian supplies were interrupted during the Russian-Georgia conflict.

Armenian energy minister Armen Movsisian told a news conference in February that "The diversification of energy sources is a guarantee of our country's eenergy security.  The pipeline will provide the country with stable fuel imports."

The AFP article states the pipeline will be completed in 2013, and is scheduled to deliver 1.5 million liters a day of Iranian gasoline and diesel fuel.  Armenia will pay $100 million for its share of the construction costs.

While Iran may look upon these energy links to Armenia as symbolic of it having non-Muslim friends willing to ignore sanctions, the Armenian motives appear more basic.  Both Russia and Iran support Armenia in its conflict with neighboring Azerbaijan over the Nagorno-Karabakh region, so diversification of sources should not be considered as either favoring Iran or slighting Russia.  It appears, instead, exactly what it says it is:  an effort to make sure that it will have a fuel supply regardless of what happens with its neighbors.

Russia Eyes Exemptions to Third Energy Package

Russian Ambassador to the EU Vladimir Chizhov

Vladimir Chizhov has explained that the European Union's Third Energy Package is harming European energy markets and customers, in remarks he made before the 3-4 June EU-Russia summit.  "There is a paradox now in the EU energy market.  We see that major companies involved in infrastructure projects are prepared to invest only in those projects, which are guaranteed to be exempted from the provisions of the Third energy package," he said.  "This is a clear indication that this particular set of rules runs counter the interests of business and I would add, of consumers, too." 

Chizhov insisted that the countries holding back on investment were not just Russian.  Faced with the negative reprecussions to the EU's actions, Chizhov speculated on the EU's inability to reverse course:  "I understnad it might be difficult for the EU to backtrack on its own decisions.  Well, some people compare the EU with a crocodile," he said sarcastically.  "Not because of its teeth, but because of its inability to move backwards."

Chizhov continued to lobby for the EU to make exceptions that benefit Russian oil and gas interests.  He insisted that the EU should name South Stream a TEN-E project, which would accord the pipeline the status of a "project of European interest" and therefore eligible for EU assistance.  Russia in the past has lobbied for this status, which was enjoyed by the Russian-sponsored Nord Stream project and by South Stream's rival, the Nabucco pipeline.  The EU has maintained that Nabucco, and not South Stream, is the preferred project because Nabucco gives the EU access to additional sources of energy other than Gazprom.

Despite the opposition in European corners, however, Gazprom plans to ask that South Stream be exempted from the Third Energy Package.  "we have a legal opportunity to do so," Alexey Golubnichiy, Deputy Head of Gazprom's subsidiary Gazprom Export, told RT.  "Commissioner Oettinger indicated the European Commission will look at the possibility of granting South Stream these exemptions."  (Gunther  Oettinger is the European Commission's Minister of Energy.)

Golubnichiy worries that the appeal will take to long.  "The main problem is that giving us such exemptions will take from four to eight years.  And this is too long for South Stream."  South Stream is currently scheduled to go on line in 2014-2015.

While Russia has continued to push its campaign to have its oil pipelines exempted from the Third Energy Package, Europe has remained resolute in denying the exemption.

Transneft keeps hope for Burgas Alexandroupolis

Russian oil pipeline giant Transneft has decided to wait out the term of Bulgarian Prime Minister Boyko Borisov who has killed the Burgas Alexandroupolis oil pipeline.  Transneft vice chair Mikhail Barkov, who also serves on the Trans-Balkan pipeline consortium advisory board, said that the company will build the pipeline at a more propitious time.  "We will not leave the project behind," he said.  "We are just freezing it, leaving the requisite amount of resources in it."
Referring to the Prime Minister, Barkov told news reporters, "Boykos come and go, but Bulgarians' love for Russia is forever."    Another news source quoted Barkov as stating, "Bulgaria cannot be reduced to Boyko Borisov."

This is not the first time that Transneft officials have stating their continuing interest in the Balkan pipeline project, but it is unusual for the attacks on the Prime Minister to be so personal.  Barkov seems to have learned from the Ukranian experience that a new electoral cycle can put a pro-Moscow man back in the drivers seat--and he is prepared to wait.