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.

Bulgaria Cancelling Burgas-Alexandropolis Pipeline

After 15 years of planning, the government of Bulgaria has announced it will cancel the Burgas-Alexandropolis Pipeline in the next twelve months, because it is no longer financially viable. The argument is a bit disingenuous, since the costs escalated while the Bulgarian government used environmental concerns to delay approval of the project.

The pipeline was supposed to allow Russian crude to reach the Mediterranean while bypassing the straits of the Bosphorus. Bulgarian Prime Minister Boyko Borisov came to power in 2009 promising to cancel the project which had been opposed by residents of the towns the pipeline would transit. He returned proposals three times for inadequately addressing environmental concerns. Other investors in the project recognized this as a delaying tactic. Transneft spokesman Igor Dyomin said, "The Bulgarian side has three times given negative conclusions on the ecology (of the pipeline project) with the suggestion that the project should be improved. The last time their arguments were totally facitious, and we have got the impression that they intend to play for time instead of working on the project," according to Business Insider. Borisov's ecological bluff was called in November 2011, however, when the Environment and Water Ministry approved the last environmental impact statement.

Bulgaria owed $8.2 million dollars to its partners in the project. As a result of their failure to pay, Russian pipeline operator Transneft announced in July that it was freezing its involvement in the project. "God save anyone from partners like our Bulgarian friends," commented Transneft chief exectuvie Nikolai Tokarev.

Bulgaria is apparently blaming Transneft's freeze for the pipeline problems, rather than its own instransience. The Sofia News Agency quoted Energy Minister Traicho Traikov after a cabinet meeting: "Bulgaria's partners in the pipeline deal accused it of delaying the project quite a long time. But now it turns out it is not Bulgaria, but the other countries, which are at fault and this is the reason why we decided to walk out of this agreement. It is not Bulgaria which should be criticized for failing to meet its commitments." Traikov is proposing the dissolution without penalty of the trilateral cooperation agreement among Russia, Bulgaria and Greece; or, Bulgaria will withdraw unilaterally from the agreement.

For Transneft's part, they are considering other options to transit Greece while bypassing Bulgaria.

Bulgaria offers Lifeline to Burgas-Alexandroupolis Pipeline

The Bulgarian government of Prime Minister Boyko Borisov has thrown an unexpected lifeline to the Trans Balkan Oil Pipeline. Ever since he was elected Prime Minister in 2009, he has been on record as saying that the pipeline would never be built. Now, however, the government has provided the Trans-Balkan Pipeline Company with the minimum amount of money needed to keep the firm operating, according to the Journal of Turkish Weekly. The funds follow an April 2011 decision by the Bulgarian parliament's Law Committee that the contract creating the company does not contain any clauses giving Bulgaria the right to pull out. The situation remains confused, however, in that the Bulgarian Ministry of the Environment rejected the company's environmental impact statement for a third time.

The oil pipeline is designed to allow oil from the Black Sea basin to reach the Mediterranean without transiting the Bosphorus Straits. The pipeline was originally planned in 2007, when Bulgaria, Greece and Russia reached an agreement. The pipeline company was formed shortly thereafter, with 51% of the shares divided among three Russian companies. Today, the Bulgarian Ministry of Finance owns 24.5% of the shares, and the remaining 24.5% are divided among two Greek companies with a token 1% ownership by the Greek state.

Unfortunately for the pipeline, the ruling Socialist party in Bulgaria was replaced in 2009 by the GERB party whose leader has been opposed to the pipeline. The government immediately began setting up regulatory roadblocks, and stopped paying its share of the company's expenses (5 million Euros in 2010, and a total of 8 million Euros since the fourth quarter of 2008.) In November 2010, the Ministry of the Environment rejected the environmental impact statement for the first time. In addition, three municipalities (including Burgas itself) have voted in referendums against the construction of the pipeline because of environmental concerns.

The Greek Deputy Prime Minister, Theodoros Pangalos, rejected the environmental concerns, according to the European Energy Review. Pangalos saw an American-backed conspiracy to cancel the project to hurt Russian interests in the area. "Every time political forces which are under strong Western influence win in Bulgaria, Burgas-Alexandroupolis reaches a dead end," he told a meeting of the Greek-Russian Society. "Multinational oil companies connected with the American government use all means to prevent the realization of the Burgas-Alexandroupolis oil pipeline."

In February 2011, the former director of the Bulgarian branch of the company, Plamen Rusev, predicted the pipeline would be terminated because Bulgaria had not met its financial obligations, according to the Sofia News Agency. "I can confirm that the project is going to an end and this is a good outcome at present because Bulgaria's failure to pay its obligations has created tension between shareholders. As a result, Greece stopped paying its obligations, too. You cannot have only one side paying," he said. (Other analysts such as Vladimir Sokor believe Greece stopped making its payments because of the Greek debt crisis, and not because of Bulgaria's intransience.)

The media soon began to speculate that Russia would cancel its involvement. In response, a spokesman for one of the Russian owners, Transneft, said the shareholders had not agreed to scrap construction. Igor Dyomin, a Transneft spokesman, said that the project would focus on minimising expenses, according to Ekathimerini. The Bulgarian Finance Minister, Simeon Djankov, also denied a Russian withdrawal, according to the Sofia News Agency. "There is a meeting of the project company Trans Balkan Pipeline and the withdrawal of the Russian party is not on the agenda," he said. While not wanting to kill the project, however, the Russians insisted that Bulgaria pay its fair share. In February, Russia's energy minister Sergei Shmatko told Ria Novosti that it may sue Bulgaria if it drops the pipeline. "The status of the project is such that we have practically frozen all activity," he said. "We are waiting for the final official decisions from the Bulgarian government and we will proceed according to the relevant inter-governmental and corporate agreements in place."

Things became dire on February 17, when shareholders voted to lay off staff and give up its rented office space. They also demanded that Bulgaria should repay its debt by March 20, according to Prime-Tass.

But the Bulgarian government neither paid its dues, nor did it reject the company's environmental statement entirely. On March 31, the Ministry of the Enviroment extended the deadline by two months for corrections to its second statement, according to the Sofia Echo. The company submitted a third statement, changing its plans on how to offload the oil in Bulgaria. The environmental ministry again returned the statement, however, seeking additional details. The government again gave the company an additional two months, according to UPI.

In May, 2011, the Greek Deputy Minister for the Environment tried to raise the ante. Yiannis Maniatis told New Europe that the construction of the pipeline was an issue for the entire European Union. He said Greece had agreed with the European Commission to examine the basic environmental issues that Bulgaria was citing as the reason for delay.

Given the Borisov administration's opposition to the pipeline, and its continuing efforts to block its construction by rejecting its environmental statements, it is surprising that the Bulgarians have made a partial payment on its membership dues to the company. While it would be easy enough to starve the company financially, making a partial payment would allow the government to represent itself as a defender of the environment instead of someone opposed to a pipeline for political reasons.

Caspian Pipeline to Double Capacity

On July 1, worker symbolically welded a joint on the Caspian oil pipeline, officially marking the commencement of an upgrade designed to double its capacity by 2015. Chevron corporation, 15% owner of the pipeline and 50% owner of the Tengiz oil field that feeds it, issued a statement: "The capacity of the 900 mile pipeline, which carries crude oil from Western Kazakhstan to a dedicated terminal in the Black Sea, will increase to 1.4 million barrels a day from its current capacity of 730,000 barrels a day," according to the statement. Chevron added that the project will take place in three phases.

"CPC is a key strategic asset for Chevron and adds to our strong position in the region. Chevron greatly appreciates the efforts of all shareholders, especially the representatives of Transneft and KazMunaiGaz, in reaching this important landmark." said Neftogaz President Andrew McGrahan. "CPC is a model of cooperation between Russia and Kazakhstan and is an indication of the confidence we have in Russia and in oil transportation from the Caspian region. This groundbreaking event represents years of dedication and commitment to expanding the commercial links between the two countries and sends a powerful signal that Russia and Kazakhstan are countries where major, long-term capital investments can be made with confidence."

According to the statement, the project will consist of the refurbishment of the existing five pump stations, the addition of 10 new pumping stations, the replacement of a 55-mile (88-km) section of the line, six new storage tanks and the addition of a third offshore mooring point at the Black Sea terminal, six miles (10 km) north of the Port of Novorossiysk. CPC awarded all the major construction contracts in May 2011.

The expansion was approved unanimously in December 2010 by the members of the Caspian Pipeline Consortium. In March 2011, Kazakhstan President Nursultan Nazarbaev renewed his pledge to Russian President Dmiitry Medvedev to expand the pipeline and continue to use Russian territory as a transit corridor, despite the lack of a binding oil transit deal, reports the Asia Times.

The doubling of oil shipments to Novorossiysk may double the risk of a potential oil spill in the Bosphorus straits. According to Kairgeldy Kabyldin, Chairman of the Board of the Kazakhstan state energy firm KazMunaiGas, "Today we are transporting about 26 million (tons per year) of Kazakhstani oil through this pipeline. It mainly goes through the Bosporus to the Southern Europe countries," reports the web site New Europe. Faced with the possibility of an ecological disaster, Russia had previously said they would not approve the expansion of the pipeline unless the Burgas-Alexandroupolis were built to bypass the waterway. Russia relented, however, because they will be diverting some of their production to China, and they claim the amount of oil transiting the Bosphorus will remain about the same.