WITH rising oil prices and traffic in the Bosphorus Strait every year, there has been much talk recently about the pipeline project Bourgas-Alexandroupolis. Since 1994, Bulgaria, along with Greece, has been locked in discussions with Russia over the project designed to create a new transit line from the Black Sea port of Bourgas to the Aegean port of Alexandroupolis. Certain developments in the past few weeks have shown that the project might be nearing its launching moment.
The trilateral memorandum for the construction of the oil pipeline will be signed in Sofia by April 15, a tripartite committee of Bulgaria, Russia, and Greece has decided in Moscow. The Bulgarian Ministry of Regional Development and Public Works said in a press release on March 11 that the Greek and Russian partners have accepted the new philosophy about the project which the Bulgarian side had expressed on a number of occasions.
The parties accepted Regional Development and Public Works Minister Valentin Tserovski's initiative to adopt a "project financing and market principles" approach, which will involve a feasibility study. The medium and long-term reliability of oil transit via the pipeline will be among the primary considerations.
The governments of Greece, Russia and Bulgaria will sign an agreement in April for the construction of a trans-Balkan oil pipeline, Associated Press (AP) reported quoting the Greek development ministry.
"We have set April 15 as the final date for the signing of the memorandum," Greek deputy development minister Giorgos Salagoudis said after the meeting in Moscow.
The group of companies that will take part in the construction "advised wholeheartedly" that the three governments sign the memorandum, Salagoudis said.
The group had found "satisfactory" the economic parameters of the project and the answers to the questions the group had submitted to the representatives of the three governments, Salagoudis said.
The $700-million Bourgas-Alexandroupolis pipeline is expected to have an initial capacity of 15 million tons rising to 40 million tons over three years, but progress on the project has been slow since its proposal in 2000.
In January, Russia said UK oil major BP's Russian joint venture TNK-BP would co-ordinate the project with Russian gas monopoly Gazprom, oil major LUKOIL and pipeline monopoly Transneft as partners.
Salagoudis said other private participants may include Russian state oil firm Rosneft, Greek refiner Hellenic Petroleum, Latsis group, Gazprom's Greek unit Prometheus gas as well as the Bulgarian port of Bourgas.
He also said the governments would not become shareholders in the project, as this was "a purely private initiative".
Though its crude production has boomed to over 400 million tons, Russia has focused on new export projects on its north-western Baltic and Arctic coasts, particularly the flagship port of Primorsk on the Gulf of Finland, Reuters said.
TNK-BP has already successfully co-ordinated another foreign pipeline project for Russia - the reversal of Ukraine's Odessa-Brody link to pump Russian crude oil to the Black Sea.
That proposal met strong resistance from some Ukrainian officials keen instead to ship Caspian crude oil from the Black Sea to Europe, but TNK-BP lobbied hard and is now a major shipper on that route.
The 300km Bourgas-Alexandroupolis pipeline will help Russia boost exports through the Black Sea to Mediterranean markets. It will bypass Turkey's Bosphorus straits, a notorious shipping hold-up running through Istanbul - the only gateway to the Black Sea and many of Russia's biggest oil-exporting ports.
With 2.9 million barrels of Russian and Caspian oil passing through the straits each day, the route is running at capacity and prone to expensive delays and bad weather.
Ankara has repeatedly urged oil exporters such as Russia to find other routes in order to reduce chronic congestion, Reuters said.
While the negotiations on Bourgas-Alexandroupolis have been very slow, Russia is also proposing another alternative route. This would see a pipeline from Kiyikoy on Turkey's Black Sea coast to Ibrikbaba on Turkey's Gulf of Saros in the Northern Aegean. According to preliminary estimates, this route would be much shorter than Bourgas-Alexandroupolis and would give Russia the same access to the Mediterranean. Experts also claim this project would be much more cost-effective. It would also involve only one other country - Turkey.
Yet, sacrificing the Bourgas-Alexandroupolis pipeline in favour of Kiyikoy-Ibrikbka would impact Moscow's relationship with Sofia and Athens, because the alternative pipeline bypasses both Bulgaria and Greece.
With oil prices reaching new heights and greater demand to secure non-OPEC supplies, the Russians know they have the upper hand when it comes to the Bourgas-Alexandroupolis pipeline project.
However, it looks as if a decision could be reached if a compromise can be made on equity stakes, tax and land concessions, and maybe the Belene power plant construction, where Russian companies want to have some serious participation.
The first visit to Bulgaria by Russian prime minister Mihail Fradkov in October 2004 was met with mixed feelings in Sofia, as it failed to resolve the matter of Bourgas-Alexandroupolis. Fradkov came to Sofia to seek a deal by which Russia would get preferential treatment in taking part in the construction of Belene nuclear plant, against giving its approval for the launch of the oil pipeline project.
Fradkov said that the launch of the pipeline project "depends on its economic effectiveness".
After talks with Prime Minister Simeon Saxe-Coburg, Fradkov said that while the project was "attractive", Moscow still had its doubts whether the Russian-Bulgarian-Greek venture would suit Russian interests.
"We need a complex analysis of this project's expedience," he said and insisted that "the distribution of the three countries' shares in the venture should justly reflect Russian interests".
Before Fradkov's visit to Sofia, President Georgi Purvanov and his Greek counterpart Constantinos Stephanopoulos pledged "to find together a solution" for the implementation of the Bourgas-Alexandroupolis project.
Saxe-Coburg reportedly was not keen to promise preferential treatment to Russian companies that want to participate in the construction of the second Bulgarian nuclear plant near the Danube town of Belene.
Bulgarian-language media reported in the days leading up to the Fradkov visit that Russia wanted an "oil for nuke deal" and would give a push to the pipeline only if there were advantages for Russian companies on Belene. Meanwhile, clear signs appeared that there might be some encouragement for the Russian companies. That is because the consultant on the project - the UK-based Parsons International recommended that Belene be built with Russian-type reactors.
Russia''s AtomStroyExport, in partnership with Framatome of France, is one of three candidates to supply the technology for the Belene nuclear facility but the vendor will be selected through a competitive tender on the basis of the offered price for the future electricity output and in accordance with international nuclear safety standards.
The "oil for nuke deal" however does not seem to concern the Russian oil companies that are more focused on their business. In early February, Russian sources reported a possible setback on Bourgas-Alexandroupolis, as LUKoil was opposed to the project on profitability grounds it has yet to identify.
Transneft reacted by saying that "currently no information was available on the Bourgas-Alexandroupolis pipeline". What this really means is that Transneft is still hoping to win approval in Ankara for the Turkish pipeline project of Kiyikoy-Ibrikbka in which Transneft would control the oil flow, and stand to make a much greater share of the profits than is possible with the Bulgarian-Greek pipeline.
Meanwhile, Bulgarian state-owned construction company Technoexportstroy is in talks to form a consortium with US firm Unicol to pursue an oil concession in Kazakhstan. The news was reported by Tserovski. The tie-in will involve state-owned Kasmonai Gaz as well.
Tserovski travelled to Kazakhstan last year when the Central Asian state indicated it was interested in joining the Bourgas-Alexandroupolis project. Kazakhstan considers the Bourgas-Alexandroupolis project as an alternative to the Baku-Ceyhan pipeline, which will also avoid the passage through Bulgaria in favour of Turkey.
However, this means that another player, not Russian, will possibly enter the game and that only works in favour of Bourgas-Alexandroupolis.
But, just to make the picture even less clear, Bourgas-Alexandroupolis is competing for attention with another pipeline project - Bourgas- Vlore - being proposed by the US AMBO Corporation.
That 900km, $1.13 billion pipeline would have roughly the same capacity, but pass through Bulgaria, Macedonia and Albania. Its backers also seek private financing.
Bulgaria, Albania and Macedonia signed a tripartite support deal for the project, but investors have yet to confirm their investment intentions.
So far, oil corporations such as ExxonMobil, ChevronTexaco and British Petroleum have expressed interest in the pipeline between Bulgaria and Albania.
Whatever the outcome of the recent developments might be, it shows that Bulgaria is still able to gain some advantages of its geo-strategic location if only it manages to stay inside the balance of interest of different players in the highly-profitable oil sector.