European Oil & Gas Pipeline News

Ukraine Tt Allow Naftogaz to Create Joint Venture with RosUkrEnergo, Itar-Tass Reports

2006-01-28T23:05:00.000+01:00

According to Russia's Itar-Tass on Jan. 28, Ukraine's national oil and gas company Naftogaz Ukrainy will be allowed "...to set up a joint venture with RosUkrEnergo, registered in Switzerland, that will sell natural gas to domestic consumers."

However, there are "two conditions." One, "...the charter fund of the new company [must be at least] five million hryvnas (about one million U.S. dollars), 'with the Ukrainian founder having a share of no less than 50 percent, contributed solely in monetary assets.' The second condition is that 'Naftogaz Ukrainy has to get the founding documents of the company and changes to them approved by the Ministry of Fuel and Energy, the Ministry of Economics, the Ministry of Finance, and the Ministry of Justice.'"

Read the article in full here.

Russia's LUKoil discovers Major Caspian Oil Field

2006-01-28T22:55:00.000+01:00

Russian giant LUKOil has discovered a major new oil field in the Caspian Sea, according to a press release from the company on Jan. 25:

"LUKOIL opened a major multilayer oil and gas condensate field in the Severny licensed area, in the northern part of the Caspian sea. The field was discovered with the first exploration well in Yuzhno-Rakushechnaya structure, 220 km from Astrakhan.

The primary well gave inflow of light water-free low sulfur oil with over 800 tons per day flow rate at 0.2 MPa depression. Such flow rates in Russia are only known at few wells (average flow rate in Russia is 10.5 tons per day).

The reserves of the new field under the “probable” and “possible” categories are estimated to be 600 million barrels of oil and 1.2 trillion cubic feet of gas. Completion of exploration, preparation and approval of the design documentation for the development of the field will allow to upgrade the reserves in to the “proved” category.

The new field is the first predominantly oil field within the licensed areas of LUKOIL in the Northern Caspian. 75% of the total reserves of the field is oil, while all the other fields opened by the Company in the Caspian region are mostly gas fields.

The oil reserves of the new field considerably exceed those of the adjacent field after Yu. Korchagin which is prepared for development, and favorably differ from the latter by the main geological parameters. The new field surpasses the previously opened fields in the Caspian region in its oil production potential.

Preliminary calculations show that the maximum oil production rate at the new field will exceed 5 million tons and the accumulated production will be around 80 million tons (with the extraction ratio of 0.5).

The new field and the field after Yu. Korchagin set foundation for future vast off-shore oil production infrastructure with reliable crude material base and annual production rate of around 8 million tons.

The new field is the major oil field which was ever opened in Russia for the last 10 years and allows LUKOIL to essentially increase efficiency of the expensive works in the Caspian sea.

The new field was give the name of Vladimir Filanovsky, famous oil man who made a great contribution into the development of the national oil industry."

Bulgaria's Dnevnik: Gazprom Insisting on Renegotiating Natural Gas Transit Contract

2006-01-28T22:46:00.000+01:00

Bulgaria's Dnevnik reported on Friday that Russian gas monopoly Gazprom "...has persisted with demands to renegotiate the contract for the transit of Russian natural gas via Bulgarian territory to Turkey, Greece and Macedonia, Bulgarian economy minister Rumen Ovcharov said Friday in parliament. The government official said Bulgaria's position is unchanged from early December 2005 when Sofia refused to renegotiate the contract."

"...Sources from the economy ministry said on Friday that the Gazprom letter sent in response to Bulgaria's refusal to sit at the negotiating table admitted that the contract is based on market principles but pointed out that it no longer reflects the price fluctuations on the international markets. The letter also reportedly insists that the 10-year contract signed in 1998 should be revised in the context of the two states' future gas trade relations. The Russian side has also proposed a meeting at the level of ministers to discuss the situation. Ovcharov told parliament that he has an unofficial arrangement for a trip to Moscow."

Indebted Romanian Oil Refinery Faces Conflicting Ownership Claims, Says Newspaper

2006-01-25T22:55:00.000+01:00

The Bucharest Daily News reported today that the ownership of a refinery heavily in debt, Rafo Onesti, is the subject of an ownership dispute between two claimant shareholders. An excerpt follows.

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Heavily indebted oil refinery Rafo disputed by two owners

by Adrian Hamzescu
Jan. 26 2006
Rafo Onesti is currently disputed by Balkan Petroleum and Calder A International, each claiming to be the main shareholder of the Romanian refinery.

Calder A International, a company registered in Holland, issued a press release in which it states that it is the rightful owner of the local refinery through a contract signed with Balkan Petroleum to take over the entire capital of the refinery as well as the rights and shares owned by BKP in Rafo, together with the obligations stipulated in the privatization contract and all debts of the company.

The contract was recognized by Marian Iancu, the president of Balkan Petroleum (registered in Great Britain), but said that his company is still the owner of the refinery. According to Iancu, the contract needed to be approved by the Authority for the Recovery of State Assets (AVAS). "The Romanian state did not agree with the property transfer, thus the contract has no effect," said Iancu. The authority did not accept the offer and repayment of debt forwarded by Calder A International, considering them out of line with Romanian legislation, added Iancu. Moreover, AVAS announced last August that the Prosecutor's Office of the High Court of Cassation and Justice has levied a restraint on Balkan Petroleum's shares in Rafo and the stake's sale would not be possible without AVAS's approval.

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[End Excerpt]

Read the story in full here.

Planned Iran-Armenia Gas Pipeline: "a Very Important Geopolitical Development," Columnist Says

2006-01-25T22:43:00.000+01:00

In a recent article, Turkish columnist Fikret Ertan muses that the planned gas pipeline from Iran to Armenia is " very important geopolitical development."

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Iran-Armenia Natural Gas Pipeline

The harsh winter conditions we have been experiencing recently are causing a headache for Turkey. Thank God we have no energy problem under these difficult circumstances.

We have electricity and natural gas, however, the situation is not the same for some of our neighbors. They have no natural gas and also have electricity problems.

Georgia is one of our neighbors going through difficult times nowadays. This country is without fuel and electricity, due to last Sunday’s explosions which occurred on the natural gas and power transmission lines coming from Russia, hence, it is trying to purchase fuel and electricity from Turkey, Iran and Azerbaijan.

Our other neigbor, Armenia, is also facing similar problems these days, though not as much as Georgia. Because it buys the Russian natural gas via Georgia, there is a natural gas crisis in this country as well.

Since Armenia depends completely on Russia’s natural gas, just as Georgia, but had foreseen these problems, it wants rid itself of Russia’s Gazprom natural gas monopoly and so is looking for ways to make this materialize. Armenia’s search for other alternatives has made it have close natural gas ties with its neighbor Iran, where we also purchase natural gas.

This natural gas ties between Armenia and Iran will result in the completion of a new natural gas line that is expected to start operating at full speed towards the fall of 2006. Preparations for this new line began two years ago after an agreement between the Armenian government and the Iranian National Gas Company, (NIGC), and this line starts from the vicinity of the Iranian city of Tabriz and ends at Iranian-Armenian border. The line costs about $220 million. This 160-km line, expected to be completed ahead of schedule, will first go into operation in the fall of 2006 and then will start operating at full capacity towards the middle of 2007. Hence, Iran will ultimately rid itself of its dependence on Russia’s natural gas, thus obtaining a real trump card against Russia’s Gazprom.
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[End Excerpt]

Read the article in full here.

NTV: A Natural Gas Crisis for Turkey after Iranian Flow Ebbs?

2006-01-25T22:38:00.000+01:00

According to NTV, the severe reductions in Iranian gas coming to Turkey may develop into a real crisis.

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Turkey might face threat of natural gas crisis

Güncelleme: 09:32 ET 25 Ocak 2006 Çarşamba
Turkey’s faces the possibility of natural gas shortages just at the time when consumption has jumped due to severe cold weather, with the country’s main supplier cutting deliveries.

Using the excuse of cold weather in their own country, Iranian officials have drastically reduced shipments of natural gas shipment to Turkey, cutting supplies from 26 million cubic meters to six million cubic metres. Officials in Tehran have refused to answer calls from the Turkish natural gas officials to discuss the shortfall.

Added to the reduction in supplies from Iran, there has also been a drop in the amount of Russian natural gas being shipped through Ukraine.

While slightly increasing the amount of gas it ships to Turkey through a pipeline laid beneath the Black Sea, Russia has said this increase can only be gradual as it would not like to risk pushing the capacity of the undersea pipeline. The increase being pumped through the Blue Stream pipeline is minimal and is not able to cover Turkey’s requirements.

Officials of Turkish pipeline authority BOTAS are working to ensure supplies to private homes but concede that gas used by power stations may be reduced.

The Energy Ministry has sent a written complaint to Ukraine over the decrease in the natural gas shipments.

LukOil Discovers Major Oil and Gas Field in the Caspian, Says AFX

2006-01-25T22:36:00.000+01:00

LukOil finds major oil and gas field in Caspian Sea

01.25.2006, 04:36 AM
LONDON (AFX) - Russian oil giant OAO LukOil said it discovered a major oil and gas condensate field in the Yuzhno-Rakushechnaya structure, in the Northern Caspian, 220 km from Astrakhan.

The probable and possible reserves of the new field are estimated at 600 mln barrels of oil and 1.2 trln cubic feet of gas. About 75 pct of the total reserves are estimated to be oil.

Preliminary calculations show that the maximum oil production rate at the new field will exceed 5 mln tons and the accumulated production will be about 80 mln tons, it said.

Hungarian, Croatian Planned Gas Pipelines to Augment European Networks

2006-01-24T23:17:00.000+01:00

The Portfolio Online Financial Journal of Hungary reported earlier this month about a Hungarian plan to develop a new gas pipeline from Turkey to Austria (retracing the course of Ottoman expansion), but this time for the purpose of reducing Europe's dependency on Russian oil and gas.

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ANALYST VIEW - Hungary to favour Adriatic pipeline over Nabucco - KBC

Thursday, 5, January 2006 03:04:00 PM

Hungary appears to be giving priority to building a pipeline that would connect the CEE region with the Adriatic over the Nabucco plan, said Péter Tordai, analyst at KBC Bank on Thursday.

Russia and Ukraine struck a five-year gas supply deal on Wednesday morning, which will ensure stable supplies to Europe.

While the pressure of Russian gas arriving in Hungary via Ukraine remained stable yesterday, discussions about a more secure gas supply continued.

“Although the CEE4 countries did not support Hungary's original proposal to build a big joint natural gas storage facility to lower dependency on potential Russian gas supply interruptions, a meeting of experts in Brussels yesterday agreed with Hungary's proposal to consider building a pipeline connecting the CEE region with the Adriatic," Tordai said.

Croatia, Slovenia and Austria indicated they would support the construction of such a pipeline.

“It now seems to us that this solution will receive priority over the Nabucco plan for Hungary, mainly because of its much more immediate potential implementation," he added.

Hungarian fuels group MOL singed a joint venture deal in June 2005 with Austria's OMV, Turkey's Botas, Bulgaria's Bulgargaz and Romania's Transgaz to build a natural gas pipeline extending from Turkey to Austria. Each firm has a 20% stake in the Nabucco project, which could reduce Europe's dependency on Russian gas.

There is no formal decision to start building the pipeline, as the partners wish to secure potential buyers first.

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[End Excerpt]

Read the story in full here.

At the same time, an Austrian-Italian consortium announced plans to build a 195 km gas pipeline in Croatia- and finish it in just 6 months.

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Croatia: Austro-Italian Consortium to Construct Gas Pipeline

14:44 - 09 January 2006 - A consortium of Austrian construction company Habau and Italian pipeline company Ghizzoni announced plans to build a 195 km natural gas pipeline between two Croatian towns, according to Hina news agency reports.

The consortium needs to sign a contract worth €90 mln with gas transportation company Plinacro on January 10, 2006.

The pipeline construction is set to start in mid-January 2006 and is expected to be completed within six months.

Moreover, Croatian oil and gas company INA will build an underwater gas pipeline from the offshore platform Ivana K to the Adriatic coastline and into the mainland to the town of Vodnjan.
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[End Excerpt]

Read the story in full here.

Gazprom Looks to Belarus to Save Frozen Europe's Gas Needs

2006-01-24T23:09:00.000+01:00

According to the Moscow Times, Reuters reports that "Gas monopoly Gazprom is shipping more gas to Europe via Belarussian territory to compensate for losses in transit gas in Ukraine, a Gazprom official said on Tuesday.

'We have started shipping more gas via the Yamal-Europe [pipeline via Belarus] and the Blue Stream [pipeline to Turkey] to compensate for losses in Ukraine. We are still calling on Ukraine to optimize its gas use,' the official said."

The record cold spell gripping much of Europe has meant a concomitant rise in gas consumption, making for acrimonious accusations between Russia and Ukraine, recently locked in a price standoff. Georgia too has protested following a pipeline explosion in North Ossetia that crippled the country and drastically reduced its supplies of gas and electricity.

"Gazprom, which has been forced to dramatically boost supplies to Russian clients amid extreme cold, is blaming Ukraine for lower-than-expected deliveries to European customers as it says the state is burning gas above agreed levels," adds Reuters.

Bulgaria Heading for "Inevitable" Natural Gas Prike Hikes from Gazprom, Reports Sofia Echo

2006-01-24T23:01:00.000+01:00

The Sofia Echo reported on Monday that Bulgaria is facing the likelihood of "inevitable" price increases for natural gas from Russia's Gazprom, and probably by 2007; "accepting a price increase only after 2010 would mean a sharp price increase," they conclude, quoting an industry official.

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Mon 23 Jan 2006
Natural gas price hikes in Bulgaria loom
Business Staff

WHILE Bulgaria may be refusing to re-negotiate its contract to receive natural gas from Russian giant Gazprom, to stave off price increases, an increase in cost appears inevitable.

At a meeting on January 16 with the management of Bulgarian natural gas company Bulgargaz and the managers of 14 company managers, Economy and Energy Minister Roumen Ovcharov said that from 2007, natural gas would be subject to an excise.

According to a report by Ovcharov’s ministry, the imposition of the excise would mean a price increase of about six to seven per cent.

Another factor that could push up the price is the fact that, from next year, the Galata deposit, which currently supplies about 14 per cent of domestic consumption, will seriously diminish.

Bulgaria’s contract with Gazprom is to expire in 2010. Controversy was stirred up this month by reported statements by representatives of Gazprom and of the Russian government that Russia wanted to re-negotiate the term of the contract before its expiry.

Currently, Bulgaria pays a relatively low price for natural gas supplied by Gazprom, enabling it to keep domestic prices low.

In response to the likelihood of a hike in costs, specialist groups are to be set up to analyse the natural gas market and recommend steps to moderate the scale of post-2010 price increases. These groups will include representatives of Ovcharov’s ministry, Bulgargaz, and natural gas consumers, and have been given until early February to produce a report.

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[End Excerpt]

Read the story in full here.

Canadian Company Looks to Macedonia for Oil Discoveries: MIA

2006-01-24T22:55:00.000+01:00

Black gold in a small Balkan state? The Canadians think so...

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20/01/06

BANKERS PETROLEUM TO SEARCH FOR OIL IN MACEDONIA

Canadian company "Bankers Petroleum" is interested in the prospect of finding oil at Macedonian territory, and has already sent letters to the country's Government, to Prime Minister Vlado Buckovski and Economy Minister Fatmir Besimi, expressing its interest, MIA reports from London.

"Bankers Petroleum" is already present at the Balkans, researching oil fields in Albania. Company experts are aware that such research was conducted in Macedonia 30 years ago, and are ready to renew and intensify these tests. In the letters to Macedonian political establishment they introduce themselves and ask the Government to decide on initiation of research operations in order the Bankers Petroleum company to get the job. It is assumed that an oil vein coming from Albania goes further to east and midland Macedonia.

Macedonian government and the Parliament on their behalf are responsible for creating legal framework providing foreign companies with research licenses for oil exploitation.

Gazprom's Medvedev Accuses Ukraine of Hoarding European Countries' Gas, Says Itar-Tass

2006-01-24T22:46:00.000+01:00

According to Russia's Itar-Tass, Ukraine - which had previously forced Russia to blink first in a gas prices standoff - is guilty of withholding gas meant for other European destinations.

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Gazprom says Kiev takes more gas than it should, Kiev confirms

MOSCOW, January 23 (Itar-Tass) -- Ukraine takes away more Russian gas than it should under bilateral agreements, Gazprom Deputy CEO Alexander Medvedev has said. This creates hindrances to the Russian gas giant in honoring its contractual liabilities to European partners.

“The amount of gas that remains in Ukraine exceeds the originally expected amounts. This does not allow us to fully comply with our liabilities to foreign consumers,” Medvedev said Monday on a Russian television channel.

According to the Gazprom official the company over the past few days increased the amount of gas entering Ukrainian territory by 35 billion kilometers.

Prime-Tass quotes the Gazprom official as saying the Ukrainian partners should display a more responsible behavior and shift to alternative fuels, whenever and wherever possible.

Medvedev said that in this situation Gazprom was doing its best to meet the requests of foreign consumers. The company brings to the Ukrainian in-takes as much gas as is needed for honoring its contractual liabilities.

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[End Excerpt]

Read the story in full here.

Repair Work on Damaged North Ossetia Mozdok-Tbilisi Pipeline Hampered by Gas Leak, Says RIA Novosti

2006-01-24T22:34:00.000+01:00

According to Russia's RIA Novosti, repairing the gas pipeline exploded in North Ossetia has been hampered by technical difficulties, and welding work has not begun; the government hopes repairs can begin tomorrow.

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Still no welding on damaged Russia-Georgia gas pipeline

VLADIKAVKAZ, January 24 (RIA Novosti) - Welding work to repair a Russian gas pipeline to Georgia that was damaged in a suspected terrorist attack has not started yet, a spokesman in southern Russia said Tuesday.

Vladimir Ivanov, a representative of the Emergency Situations Ministry in the Republic of North Ossetia, said the welding on the Mozdok-Tbilisi pipeline had been postponed after gas condensate began to leak through a pipe in Georgia.

"As a result, workers failed to start the welding: they had to pump out the gas condensate all night and are continuing to do so," Ivanov said.

He said that pipe layers had planned to complete the welding by the morning, to blow compressed gas through the pipes, and then to gradually fill the pipeline with gas.

However, Ivanov said the welding work had been postponed until Georgia, which is currently experiencing a cold snap, installed a new hermetic plug.

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[End Excerpt]

Read the story in full here.

Ihlas News Agency: Turkish Energy Ministry to Purchase Gas from Azerbaijan, Egypt and Turkmenistan

2006-01-24T22:28:00.000+01:00

According to the Ihlas News Agency, Turkey is seeking to "diversify" its gas purchasing from other countries, as traditional suppliers Russia and Iran have become problematic in various respects.

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Turkey Seeks Alternatives To Iranian, Russian Gas -IHA

ISTANBUL (IHA)--The Turkish Energy Ministry said Tuesday that it wants to diversify its natural gas supplies by purchasing gas from Azerbaijan, Egypt and Turkmenistan as problems with Iran and Russia continue, the Ihlas News Agency, or IHA, reported Tuesday.

Iran and Russia, the country's two main gas suppliers, both reduced gas flow to Turkey last week just as the country faces harsh winter conditions.

A senior Energy Ministry official told IHA that Turkey initially aims to complete the construction of the Baku-Tbilisi-Erzurum natural gas pipeline on time. Previously, BP PLC (BP) warned Turkey it will face penalties if the BTE project isn't completed by the end of 2006.

"We have completed tenders to construct the pipeline and the compressor," said the official. "We will complete the BTE project before the end of this year." He added that the priority was to start to buy low-cost natural gas as soon as possible. "We will be able to buy 2 billion cubic meters of gas from this line when completed - we are trying to speed up construction," said the official.

The BTE pipeline will export natural gas from the Shah-Deniz deposit in the Caspian Sea region. Greek company CCIC is constructing the Azerbaijan part of the project (443 kilometers), the Spie Capag/Petrofac consortium is constructing the Georgian part (250 kilometers) and Botas is constructing the section in Turkish territory (225 kilometers).

The BTE pipeline has an annual capacity of 7 billion cubic meters and it will carry 6.3 billion cubic meters to Turkey a year.

The Turkish Energy Ministry considers Egypt and Turkmenistan as important gas sources.

However, various obstacles are delaying gas imports from these new sources.

Turkey, Syria, Jordan and Egypt agreed to construct a pipeline running through their countries to carry Egyptian natural gas to Turkey and Europe, but construction won't be completed by the end of 2007 as previously forecast, the official said.

The official said the amount of gas to be sold on to the European market is another problem with Egypt as it wants more concrete figures than Turkey is currently able to provide, the official said.

Turkey also wants to purchase Turkmen gas and transit it to Europe but it can't get the permission to transit the gas through Iran. "We have to persuade Iran first," said the official.

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[End Excerpt]

Read the story in full here.

Think-tank: Georgia, Russia Increasingly Estranged after North Ossetia Gas Pipeline Explosion

2006-01-24T22:22:00.000+01:00

The influential EurasiaNet.org argues that this week's explosion of a Russian gas pipeline in North Ossetia "has further embittered relations between Moscow and Tbilisi and accelerated the political debate within Georgia about the need to find alternative energy suppliers."

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AS GEORGIA LOSES GAS, RANCOR AT RUSSIA ON THE RISE

Diana Petriashvili
1/23/06

The explosion of two Russian gas pipelines that supply Georgia with its natural gas has further embittered relations between Moscow and Tbilisi and accelerated the political debate within Georgia about the need to find alternative energy suppliers.

Early in the morning of January 22, the main and reserve gas pipelines that supply Georgia and Armenia exploded 20 minutes apart on the territory of the Russian republic of North Ossetia. After several hours, the Kavkasioni high voltage transmission line, which supplies Georgia with power, also exploded. Some 800 grams of TNT were found at the sites, according to the Russian prosecutor-general’s office.

With Russia as Georgia’s sole source for natural gas, the explosions promised to wreak havoc on the country’s fragile economy. The blasts have reportedly left Georgia’s regions without gas supplies for at least a week. Some areas of the capital, Tbilisi, are experiencing spotty coverage or have had their supplies turned off. Power outages in the capital have also picked up pace. As temperatures dropped into the low 20s F on Sunday, some residents stood in long lines to buy kerosene as an emergency back-up heating supply.

Moscow expects the main gas pipeline to be repaired by the end of the day on January 23, the Russian news agency Interfax quoted Dmitri Kozak, President Vladimir Putin’s representative to the district that contains North Ossetia, as saying. Shipments to Georgia and Armenia are expected to begin again on January 24, an unnamed representative of the Russian energy transportation company KavkazTransGas told the agency.

But even with repairs underway, the repercussions from the explosions promise to be long-lasting.

The explosions have been described by Georgian officials as an "act of vandalism," implemented by Russia. In a televised address to the nation, Georgian President Mikheil Saakashvili claimed that the alleged sabotage was an attempt to force Georgia to sell its main gas pipeline to the Russian energy giant GazProm.

"Russia tried to force Georgia’s hand over its main gas pipeline and its other gas infrastructure," Saakashvili said late on January 22, speaking at the extraordinary session of the country’s national security council, "We are ready to study all mutually beneficial commercial proposals, but not in the circumstances of blackmailing," he added.

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Read the full article here.

Azerbaijan Gas Pipeline Network Delivers Gas to Georgia Following Russian Pipeline Explosion

2006-01-24T22:11:00.000+01:00

According to the US-Azerbaijan Chamber of Commerce, Azerbaijan's gas pipeline network is being used to deliver gas to Georgia temporarily, following the explosion in the Russian pipeline in North Ossetia earlier this week.

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Azerbaijan Supplies Gas to Georgia after Pipeline Blasts

01/24/2006

Following blasts in the Russian gas pipeline yesterday, Georgia turned to Azerbaijan to negotiate gas shipment and the Azeri shipment began by Sunday. Russia now uses Azerbaijan's pipeline network to deliver gas to Georgia until its main natural gas conduit there can be repaired after being devastated by several blasts, Georgian officials said Sunday.

Russian gas giant, Gazprom would transmit an additional three million cubic meters daily to Azerbaijan to keep Georgia supplied, the Interfax news agency reported, quoting Gazprom sources.

The two blasts, which ripped through the Mozdok-Tbilisi gas pipeline in the Russian Caucasus republic of North Ossetia early on Sunday, halted supplies amid freezing temperatures and sparked a war of words between Moscow and Tbilisi.

A third blast in the nearby province of Karachaevo-Cherkessia cut supplies along one of the main electricity cables supplying power from Russia to Georgia, the emergency situations ministry said.

Investigators are treating the gas pipeline blasts as sabotage but not terrorism, after finding fragments of improvised explosive devices at the site, said Sergei Prokopov, a spokesman for Russia's deputy prosecutor general.

Other officials said it could take up to four days to prepare the damage to the gas pipeline and at least a week to fix the power cable.

The explosions unleashed intense recriminations between Georgia and Russia, which have long been at odds over Georgia's breakaway province of South Ossetia, a territory just south of the site of Sunday's explosions.

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[End Excerpt]

Read the full story here.

Serbian Pipeline Signing in March, Greek Report Says

2006-01-24T15:00:00.000+01:00

The Greek news source Reporter.gr claims today that a key Serbian pipeline agreement will be inked in March. An excerpt of the story follows with link to the full story.

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Serbian Interstate Oil Pipeline Agreement to be Signed in March

13:10 - 23 January 2006 - Serbian Deputy Prime Minister Miroljub Labus said that Romania, Serbia, Croatia, Slovenia and Italy will sign an interstate agreement in late March in Italy enabling a speedier construction of the Constance-Trieste oil pipeline and the completion of the project.

Labus concluded his two-day visit to Italy with a conference themed "“Regional Cooperation, Securing Peace and Role of Contracts in the Balkans” organised by the Institute for Central and Eastern Europe and the Balkans.
During the conference, he stated that the energy issue has become not only a matter of the economy, but of politics and strategy as well.

Labus stated that the conference considered further steps that should be taken in the Western Balkans, the effects of international contracts to-date and expectations for the upcoming period. [End excerpt]

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Read the rest of the story here.

Environmental and Security Concerns Haunt New Baku-Tbilisi-Ceyhan Pipeline

2005-06-05T14:58:00.000+02:00

The newly coronated Baku-Tbilisi-Ceyhan pipeline has been dogged by all sorts of controversy, not least of which is the fact that its country of origin, Azerbaijan, is run by an all-powerful family dynasty which as with even worse dictatorships in other parts of the world, the US leadership has no problems cooperating with.

Now, a British environmental group has released a report (.PDF) which claims that environmentally concerned groups observing the pipeline construction process in Azerbaijan and Turkey were harassed, intimidated and at least in the case of one high profile activist, beaten.

Further, as Michael Dickinson over at Counterpunch! notes,

"...The pipeline will cause major pollution. Unlocking these vast oil reserves will directly contradict climate change commitments. The burning of these reserves will have a catastrophic impact on the earth,s climate for centuries. It will create more pollution each year than every power station in the UK, or the combined effect of every car, truck, bus and train in the UK, or twice as much as heating every house in the UK.

The pipeline route runs through the most serious earthquake zone in Turkey. The pipeline itself and the transport to markets will lead to greater risks of oil spills. Not to mention the risk of the pipeline becoming a target for guerrilla bombing campaigns."

Indeed, Dickinson notes that the pipeline route will pass through "8 different conflict zones," something which leads him to fear that "BP law" will be the rule of the land in the thousands of square miles around the length of the pipeline. As Hannah Ellis of Friends of the Earth notes, "...the pipeline legal agreements also give BP effective governing power over a strip of land 1,750 miles long, where the company will likely override all national environmental, social, human rights laws for the next 40 years."

Even that American puppet and revolution-assisted Georgian president, Mikheil Saakashvili, has decried his country's agreement with BP on the BTC as “a horrible contract, really horrible.” Says Ellis, "...these agreements have largely exempted BP and its partners from local laws – and allow BP to demand compensation from the governments should any law (including environmental, social or human rights law) make the pipeline less profitable."

In addition, direct American pressure led the Georgians to give in to BP's chosen route, which crosses a protected nature reserve. As was always feared, it as already started to pollute the environment:

"...the Georgian government suspended work on BTC for a week last summer, following BP's decision to start construction in the ecologically vulnerable Borjomi region, despite its repeated failures to obtain the necessary environmental certification to proceed.

According to the UK-based Independent, the resumption of construction two weeks later came as a direct result of political pressure. In fact the decision was announced immediately after an unscheduled meeting between President Saakashvili and US Secretary of Defense Donald Rumsfeld."

Another little problem alluded to by Dickinson - that of maintaining pipeline security in a region where many (and quite diverse) groups would have an interest in taking a shot at it - is likely to prove very costly in the long term, as well as dangerous for whoever gets in the way of the hired guns of BP security. The likelihood that operating in this volatile area will necessitate armed intervention was posited recently by Antiwar.com's Justin Raimondo:

"...If American oil companies are due to make mega-profits in the Caspian region, then the U.S. military will be doing guard duty along every inch of the BTC pipeline, ensuring 'stability' in a land of nomadic herders and exporting 'democracy' to a region formerly ruled by pashas, sultans, and various and sundry dictators.

We are, in short, being set up for another major military intervention."

Actually, the US Army itself won't be monitoring the pipeline - only the US-funded militaries of the countries involved. The Asia Times recently noted that

"...the US has so far spent $64 million to train Georgians in 'anti-terrorism' tactics for safeguarding the pipeline and has earmarked another $100 million for training and equipping a Caspian Guard that will protect American oil facilities and key assets."

Even in the best case scenario of now overt turbulence, at very least the US, Great Britain and other interested parties will have to constantly keep an eye on their new creation, which like all networks in the globalized age, is as susceptible as it is powerful - after only, one breakage in its 1,750 mile length will spell disaster.

Aside from the military, one also suspects, however, that local chieftains with great power and private "security companies" staffed by former Western military and intelligence officers will be paid off by the corporations involved to protect (or at least not destroy) the pipeline. For more on the history of symbiosis between BP and its local toughs elsewhere in the world, check out this article. The implications are not encouraging.

Azerbaijani Stretch of BTC Pipeline, Named After One of "Our" Dictators, Opens At Last

2005-05-25T15:57:00.000+02:00

The opening of one of the biggest pipeline projects, the Baku-Tbilisi-Ceyhan (BTC) oil pipeline linking Azerbaijan with Turkey, came a step closer to realization with the commissioning ceremony of the Azerbaijani stretch of the pipeline today.

Named after late president Heydar Aliyev, the Azerbaijani section of pipeline runs from the Caspian Sea west to the Georgian border

According to Itar-Tass, the ceremony was held at the Sangachalsky oil terminal, 40 kilometers south of Baku "...where the strategic trunk line with the total length of 1770 kilometers starts." International and corporate dignitaries led by the presidents of Azerbaijan, Georgia, Turkey and Kazakhstan attended.

Azerbaijani President Ilkham Aliyev, son and appointed successor of the late Heydar Aliyev, claimed that the pipeline “...will change completely the political and economic panorama of the region... enormous funds of billions of dollars will begin transferring in Azerbaijan.”

Results won't be seen immediately, however. The AP cites local officials who say that it will take "...up to six weeks to fill the Azerbaijani section with oil. The Georgian part will be ready after that, then the Turkish stretch, which Turkish authorities have said should be filled by Aug. 15."

Approximately 10 million barrels of crude are required to fill the pipeline. This will take so much time that, according to one expert quoted by the AP, "you won't see exports until the later part of the year."

While all the reports continue to say that the BTC will be an economic boon for the countries it passes through, mainly with reference to transit fees collected, it does not say whether the oil passing through will be siphoned off by them. Yet otherwise how could stated claims (by Georgian President Saakashvili himself) about the pipeline reducing Georgia's dependence on Russian oil be justified?

The Asia Times criticizes today whether ordinary citizens will actually benefit, however. from what it describes as "...a supreme law unto itself - untouchable by national sovereignty, serious environmental concerns (expressed both in the Caucasus and in Europe), labor legislation, protests against the World Bank, not to mention mountains 2,700 meters high and 1,500 small rivers. BTC took 10 years of hard work and at least US$4 billion - $3 billion of which is in bank loans. BTC is not merely a pipeline: it is a sovereign state."

The article also points out that, while the US sponsored a 'Rose Revolution' in one of the countries involved, Georgia, to bring in the slavishly pro-American Saakashvili regime, it deliberately avoided bringing democracy to the helpfully "dynastic dictatorship" of the Aliyevs in Azerbaijan:

"...Azerbaijan was never about 'liberty and democracy' or color-coded revolutions in the style of Georgia, Ukraine and Kyrgyzstan. Just last Saturday in Baku, Azeri police beat up and arrested more than 100 opposition protesters demanding 'Freedom!' and 'Free elections!' This is a regime that according to Transparency International ranks 140th out of 146 in the global corruption index. From Washington's point of view, the Aliyev dynasty in Azerbaijan performs the same role as Islam Karimov in Uzbekistan: they are 'our' dictators."

Turkey To Take Lead in Central Asian Infrastructure Development, Pipelines

2005-05-07T01:59:00.000+02:00

At a high-level summit held yesterday by the Asian Development Bank in Istanbul, the Turks reaffirmed their interest in infrastructure investment in the strategic Central Asian region, in keeping with the trend we noted earlier.

Hilmi Guler, Turkey's Minister of Energy and Natural Resources, told the seminar that Turkey has a "special commercial role to play," because it bridges the gas reserves of Central Asia and the European gas markets. "The Baku-Tbilisi-Ceyhan Crude Oil Pipeline and the Bank-Tbilisi-Erzurum Natural Gas Pipeline projects show that the private sector, the state, and development banks can work together in infrastructure development," he said.

According to the Director-General of ADB's East and Central Asia Department Satish Rao, infrastructure spending, "excluding oil and gas" needs to increase from the current $1 billion per year to around $2 billion-$3 billion per year in 2005-2010 "to sustain growth and reduce poverty."

"...The region is booming, with GDP accelerating to 9.2% in 2002-2004, and Soviet era railways, roads, oil pipelines and telecommunications need urgent modernization to improve Central Asia's connectivity with international markets," said Rao. "Increasing demand and limited government capacity opens up potential for private sector participation in infrastructure in the region."

Meanwhile, Turkish Foreign Minister Abdullah Gul was in Bishkek yesterday where he gave the Turkish OK for Kyrgyzstan's new leadership, following the botched colorful revolution sponsored by the US. However, the Kyrgyz Foreign Ministry hastened to add that "...no bilateral agreements are being signed during his visit." World leaders have their eyes on the July 10th expected presidential elections in Kyrgyzstan, which is hoped to exacerbate the "democratic" values which apparently have now permeated the land.

The uncertainty of neighboring states over whether they too are in line for revolutions of their own is no doubt helping to keep the pace of investment slow as Turkish and other leaders wait and see who they will be dealing with in the future in the 'Stans.

The Pot, the Kettle, the Black Stuff

2005-04-30T14:54:00.000+02:00

Whenever the United States accuses any country of imperialistic tendencies, one's immediate reaction (after breaking into laughter, of course) is to question what is the motivation. In the case of Russia, which is coming under increasing fire from not only the Bush Administration but its yes-men in the mass media as well, the answer is plain enough: control of natural resources, and the pipeline routes by which they will be transported east, west and south.

RFE/RL recently reported the concerns of one Keith Smith, a former ambassador and now a Senior Associate at the Center for Strategic and International Studies (CSIS). Making the sensational revelation that "...Russia's status as a 'nuclear power and energy state' enables Russia to exercise political power over its neighbors," Smith fretted that "...the former Soviet states have remained dependent on Russia's oil and gas" and that "...energy companies are used as arms of Russian foreign policy."

Oh, the horror! As if states operated based on altruism alone and did not consider their strategic interests, leveraging the power and resources at their disposal as best they can. Surely the benevolent United States doesn't employ strong-arm tactics of its own? And of course, the US military buildup all around Russia's Central Asian borders, perpetual NATO expansion and the pre-selected Afghanistan campaign, have had nothing to do with the bottom line.

But Smith's perhaps best charge came when he accused Russian companies of being non-transparent: Enron? PG & E? Anyone?

The massive lobbying of American companies, media and thinktanks against Russia is fuelled by American displeasure at not being able to easily take over Russia's natural resources which, along with their remaining nuclear weaponry, remains the former superpower's last safeguards against total American hegemony. To the arrogant American imperial mindset, one which accepts no limitations on its power and world control, the concept of a foreign country attempting to safeguard its assets is incomprehensible as well as infuriating.

Meanwhile, the Russian government will delay announcing the final verdict in the Khodorkovsky trial until after the symbolic ceremonies marking the end of World War II, which will bring Dubya and many other world leaders to Moscow on May 16.

Condi Rice has threatened that "...everyone will be watching to see what the Yukos case says about the rule of law in Russia."

"Only in a non-democratic country can the president intervene so blatantly in a legal process," charges Leonid Nevzlin, the majority owner of Menatep Group, which controls Yukos. Nevzlin, who is placed well inside Forbes' list of the world's 500 richest people, fled to Israel to afford being arrested as was Khodorkovsky, and was automatically given Israeli citizenship, according to the 'right of return' policy for Jews.

In an interview last week, Nevzlin said that if Khodorkovsky is sentenced (most believe it is not a question of if, but for how long), "...I don’t want to get into politics, but I will have to." It beggars belief when the former oligarch compares himself and other multi-billionaires of his kind to "the weak" that are in danger of being "crushed" by the government. It was the same oligarchical class, of course, that enriched themselves off of manipulating the legal system in the chaotic early post-Soviet years.

Nevzlin has announced that he plans to sue the Russian government over the break-up of Yukos in the autumn, and probably in a British court. The UK is a favorite destination of Russia's robber barons. Uber-oligarch Boris Berezovsky has been sheltered there for years. Nevzlin in the above interview insinuated that the Russian government's pressure tactics against BP were due to the British refusal to extradite Berezovsky.

The Bush Administration, led by the neocons, have gushed over the righteousnes of the "weak" oligarchs' quest. They practically sanctified Khodorkovsky, for example, in full-page ads last year in leading American newspapers. But the yelping of the likes of Richard Perle is motivated sheerly by the administration's desire to to let American businessmen/politicians to their greasy little fingers on Russian energy assets.

Vladimir Putin recently lamented that the fall of the Soviet Union as "...the greatest geopolitical catastrophe of the century." And you know what? He was absolutely right.

Ironically, while the fall of the USSR might have been a good thing for former Soviet citizens who were opened up to all the "freedoms" and liberalization of the Western world (for whatever that's worth), it wasn't a good idea for the rest of us. It upset the happy little balance of bipolar relations and spun the world into a chaotic series of uncontrollable, vertiginous localized conflicts, starting with the Yugoslav wars, reaching a violent crescendo with Osama bin Laden and his colleagues, and climaxing with who knows what to come.

Indeed, much worse than the predictable "arms race" between America and the USSR is the current climate of freelance nuclearization within small states frightened of American might, and the sudden availability of nuclear materials to terrorists which also resulted precisely from the elimination of Soviet authority.

Nevertheless, the Americans are continuing to ratchet up the pressure on Russia, by propagating phony multi-colored revolutions in neighboring states. The energy-related aspects of this are quite obvious. First of all was Georgia, with its well-known strategic relevance with the BTC pipeline, designed to minimize Russian influence. And as for the more recent victim, Ukraine, the thinktanks were not long in offering advice on how this new client state - a key transit route for Russian oil - can be reapproriated for American interests.

Another tactic comes with the US clandestinely trying to chip away at Russian control of its own territory in its soft underbelly, the North Caucasus (we will see how this plays out in the next few years). But already the fugitive Nevzlin has disclosed that US strategy might be to try and send Putin to the Hague for alleged war crimes committed in Chechnya. But with three-time war criminal Tony Blair (Kosovo, Afghanistan, Iraq) and two-timer Dubya (Afghanistan, Iraq) apparently safe from any similar prosecution, one has to conclude that the pot has got to be downright choking on the fumes by now. Similarly, with the Bush Administration's criticism of the failure of "democratic" elections in Russia - do they really have the right to be steamed?

Another form of pressure is of course the more direct kind: calls for opening the Russian market. The CSIS's Smith urged the EU to convince Russia to sign an "energy charter," stipulating that: "...the building of privately owned pipelines, the resulting competition for oil and gas would help to normalize the energy markets -- and the politics -- of the region."

Note that "normalize" here really means, "allow the US to control completely."

However, there are signs that the Europeans might be turning a deaf air to these entreaties. At least some powerful states are conducting business as usual with Mr. Putin. The BBC reported earlier this month that Germany has given its blessings to a deal whereby Wintershall (part of BASF) will become the first foreign company to help develop a Russian gas field, partnering with Russian giant Gazprom to develop the West Siberian Yuzhnorusskoye gas field.

The gas field, which will yield an estimated volume of about 500bn cu metres, will supply the planned 3,000km pipeline, to be finished in 2010. "...It will supply gas mainly to northern Europe, Gazprom said."

The gas deal comes at a time of intensive cooperation between Germany and the Russians. Siemens plans to build high-speed trains for Russian intercity services. As for the pipeline, it will continue under the Baltic Sea to supply Northern Europe, allowing Gazprom "...to deliver gas directly to Western Europe and sharply reduce its dependence on its traditional transit routes through Ukraine and Belarus," according to the IHT.

In opening Hanover's International Trade Fair, where the pipeline project was announced earlier this month, Chancellor Schroeder stated that "...we have now a very deep cooperation... It is known that both countries are very close when it comes to energy. But we are developing a strategic partnership, and the European Union and Russia will have one too."

Southern European states like Greece and Bulgaria, of course, are keen on winning the support of the current Russian government to get started as soon as possible with the Burgas-Alexandroupolis oil pipeline project.

And, far on the other side of Russia's sphere of influence, China and Japan are quite eager for the Russians to build them a pipeline too. With the world's oil consumption center of gravity tilting towards Russia's massive Asian periphery, the US finds itself in a less than opportune position - but ironically one of its own making. Bogged down in useless wars, its forces overextended in a string of Central Asian bases that are not useful for anything more than providing terrorist targets, the US is going to find achieving its "energy security" perhaps too exorbitant of a proposition. No doubt, it's much easier just to keep the blackened pot steaming.

US Client State Georgia to Develop Gas Pipeline to Iran, Other US Allies Do the Same

2005-04-26T21:02:00.000+02:00

Even as Georgia steps up its anti-Russian activities with the help of the other US client states in the resurrected GUUAM (Georgia/Ukraine/Uzbekistan/Azerbaijan/Moldova, but the Uzbeks bailed in 2002 ), the Saakashvili government plans to embark on energy projects that would hardly seem acceptable to Washington - because they involve that 'axis of evil' charter member, Iran.

Six memoranda of understanding on future economic cooperation were the result of Monday's meeting in Tbilisi between Iranian First Vice President Mohammad-Reza Aref and Georgian Prime Minister Zorab Nogaideli, according to Iranian media.

"...Among the issues we discussed at our fourth session I can refer to transfer of Iran's oil, natural gas and electricity to Georgia," stated Georgia's Economy and Finance Minister Jula Shevid at the meeting. According to the report, it was also agreed that Iran will build Georgia a new power generator station.

Civil Georgia quoted PM Nogaideli as saying "...the Iranian government is ready to allocate USD 2.5 million to Georgia for the rehabilitation of the Iran-Azerbaijan-Georgia gas pipeline."

Iranian Vice-President Mohammad Reza Aref confirmed that Iran is interested in the export of gas to Georgia. “If Georgia considers Iranian gas very expensive, I will personally try to revise the tariff,” he added.

According to the Iranian government, with reserves of 27.5 trillion cubic meters of gas, Iran is "...the second major gas rich country and fourth major gas producer in the world." The article contains detailed information about the development of Iran's enormous South Pars gas field in southern Assalouyeh port in Bushehr province, which contains 8 percent of the world's gas reserves.

It's not just Georgia who is jumping on the Iranian gas bandwagon. The US looked on with consternation last week as Pakistani President Pervez Musharaff, who has recently signaled a chance for warmer relations with India, said that his country was enthusastic about the planned 2,600-kilometre gas pipeline connecting Iran and India, which will involve 760 kilometers of transit through Pakistan on the way. Four days earlier, the Chinese also expressed their desire to become part of the project.

"...New Delhi is likely to open dialogue on transit issues with Islamabad next month," reported Italy's AKI on April 18th. "Pakistan is also hoping to use the same pipeline for importing gas from Iran for its own purposes and is also hoping to earn millions of dollars in transit fees for allowing the pipeline to be on its soil in its passage to India."

The US has called on India and Pakistan to shun the Iranians, and instead build a pipeline from gas-rich Turkmenistan. However, Musharraf summed it up bluntly when he said that "...the whole world was buying oil from Iran and entering into agreements with it on petroleum products." Tough luck for Uncle Sam.

Another American ally, Turkey, is Iran's biggest consumer of natural gas, and has signed a contract in 2001 that stipulates at least 25 years more of gas deliveries.

Turkey, however, has bigger plans, and would like to export surplus gas to the West, either through southern Mediterranean ports or through the Balkans. Several majors which would like to create new pipelines in Balkan/Central Europe are all agreed that new pipelines traversing Turkish soil, and any increase in gas transit, is a good thing - no matter where it may come from. Further, there is a school of thought that insists Western companies should try to avoid dependence on Russia, the world's current top gas producer, because of concerns over long-term supply.

At the end of the day, business is business. Oil and gas companies want to get the most efficient, most cost-effective pipeline they can - no matter whether it comes from Russia, Iran or anywhere else. But for the American administration, political games come before free enterprise.

Greece Banking on $30-50 Million Annually from Burgas-Alexandroupolis Oil Pipeline; Gas Network Improves, Greece-Albania-Italy Pipeline Considered

2005-04-18T21:38:00.000+02:00

According to the Athens News Agency, the just-agreed Burgas-Alexandroupolis oil pipeline should incur a profit of somewhere between $30-50 million. Maybe this will be a start towards paying off those Olympics bills.

Greek Deputy Development Minister George Salagoudis presented these figures on Sunday, and claimed that by the end of 2008 an estimated 35-50 million tons of crude oil would be flowing through Alexandroupolis. When asked whether the project was a go, Salagoudis "...ruled out the prospect of cancellation of the project, although he did say there could prospectively be a delay."

The Deputy Minister tried to portray this event as an apparent victory for the Nea Demokratia government, which after winning parliamentary elections one year ago has also overseen a strong increase in the national gas grid: the Attica natural gas corporation EPA "...had made 1,600 links to the natural gas grid in 2003, while the number of link-ups jumped to 7,000 in 2004, while in Thessaloniki the link-ups with the grid more than doubled from 6,200 in 2003 to 13,000 in 2004, Salagoudis said."

This has already started to pay off, he said, citing the case of AHEPA (a hospital in Thessaloniki), which this winter saved roughly a third of the 520,000 euros for heating oil it had spent during the previous winter, as a result of its link-up with the natural gas grid. However, Salagoudis did not mention that this winter was somewhat milder than last, with its record-setting snowfall.

The government has another reason to be confident about energy-sector developments. On April 7, it was reported that a Swiss company plans to build an Italy-Albania-Greece gas pipeline to service electrical stations in Italy to be built by its parent firm. The company, EGL (Elektrizitatz-Gesellschaft Laufenburg AG), is carrying out feasibility studies for the 230 KM route termininating, like the proposed AMBO oil pipeline route, in the deep-water Albanian Adriatic port of Vlore.

If completed, the pipeline will carry 10 billion cubic meters of gas annually. EGL parent company AXPO, Switzerland's largest energy company, will need 3.5 billion cubic meters of gas for the 4 power plants it is building in Italy, says the Associated Press. Robert Klein, head of EGL European logistics, told the news service that the company will spend $322 million on the land segment of pipeline and compression station in Vlore, and $232 million on the offshore section of pipeline in the Adriatic.

BP Consortium in Azerbaijan Using Russian Pipeline- For Now

2005-04-11T21:33:00.000+02:00

Bloomberg reported yesterday that British Petroleum and its partners involved in developing the Azeri-Chirag-Gunashli fields have "...started oil exports from Azerbaijan through a Russian oil pipeline to the Black Sea port of Novorossiisk after the group boosted production by installing a second offshore rig in the Caspian Sea."

However, AzerNews reported a month ago that "...the produced oil will initially be transported to the market via existing export routes (Baku-Supsa western and Baku-Novorossiysk northern pipelines) until the Baku-Tbilisi-Ceyhan (BTC) pipeline is commissioned." This is expected to be in the fall. The enormous BTC is not the most cost-effective solution to exporting oil west, but it is Washington's favorite as it undercuts the position of competitors Iran and Russia. It is a wonderful example of when the concerns of the state override the market logic of cost vs. profit.

Russia is concerned over the impact this will have on Azeri exports to Novorossiisk. While the BTC pipeline "...is expected to pump more than 50 million metric tons of oil a year after completion," reports RIA Novosti, "it will be hard to fill it to capacity during the initial stage:"

"Consequently, Baku has decided to find additional oil for the new pipeline, which means Novorossiisk will stop receiving Azerbaijani oil. Reverse oil flows are, at best, possible.

Sergei Markov, the director of the Institute of Political Studies, believes that Azerbaijan is not simply suspending sending oil through the Baku-Novorossiisk pipeline to the north, but now attaches priority to Mediterranean oil exports. The Baku-Tbilisi-Ceyhan pipeline heralds the diversification of the entire pipeline network. The Russian route will gradually be frozen out."

According to the September 1994 ACG Production Sharing Agreement, the Azeri-Chirag-Gunashli fields are to be developed over a 30-year period. According to AzerNews, "...it is estimated that 5.4 billion barrels of oil will be recovered during this period."

The ACG Caspian project is being undertaken at a cost of $15 billion, with BP leading the consortium with a share of 34.1%. According to AzerNews, the share percentages for other members of the consortium are as follows: Unocal (10.3%), SOCAR (10%), INPEX (10%), Statoil (8.6%), ExxonMobil (8%), TPAO (6.8%), Devon (5.6%), Itochu (3.9%) and Amerada Hess (2.7%).

Energy Turkey's "Trump Card" in Talks With EU, Says Columnist

2005-04-08T14:40:00.000+02:00

In this interesting article, Turkish columnist Murat Yetkin brings up a relatively little-cited phenomenon at play in the world of Turkish-EU negotiations: the leverage Turkey will increasingly have as a transit route and supplier of oil, natural gas and electricity to Europe. In January, the government opened oil prices to free competition. Prime Minister Recep Tayyip Erdogan in a recent speech claimed that "...before we [the ruling Justice and Development Party) came in to power, Turkey wasn't able to find a loan for nine months. Now, we can borrow for up to 30 years."

Yetkin points out that energy may be a decisive factor in Turkey's relations with the West, citing first of all the the nearly-completed Baku-Tbilisi-Ceyhan pipeline project, which by the end of June will be operational.

In addition, "...‘Turkey also acts both as a corridor and a terminal for natural gas reserves. With the Sahdeniz project, Caspian natural gas will be transferred to and distributed from the port of Ceyhan."

By the year 2020, some 35 billion cubic meters of Europe’s yearly natural gas could come from Turkey, with potential to increase to 100 billion.

Regarding electricity, Yetkin cites Turkey's recent deal to buy electricity from Turkmenistan. "...We’re also about to join the EU’s Union for the Coordination of Transmission of Electricity (UCTE)."

At the earliest, EU membership for Turkey is not expected until at least 2015. However, with each passing year the importance of Turkey for Europe - and not necessarily the other way around - becomes clearer.

Uncertain Burgas-Alexandroupolis Oil Pipeline Project to be Solidified with April 12 Signing

2005-04-08T14:14:00.000+02:00

The proposed Burgas-Alexandroupolis oil pipeline, whose fate has seemed up in the air due to Russian ambivalence, got a breath of life on April 7, when it was announced that Bulgaria, Greece and Russia will finally sign the trilateral memorandum for its construction on April 12.

Bulgaria's Regional Development Minister Valentin Tserovski, his Greek colleague Demetris Sioufas and Russia's Minister of Industry and Energy Viktor Borisovic Khristenko will ink the official document, reports Novinite.com.

"...This is a historic moment which sums up the results of the 13-year-long negotiations," attested Sioufas at a Thursday press conference in Athens, reported RIA Novosti. "This project will strengthen cooperation between the three countries and will contribute to the strategic development of the region."

The 300 km, $700 million pipeline is envisioned to pump at first 15 million tons a year, moving on to 24 million tons, with a final volume of 35 million tons a year, says Novinite.

Although its backers have long held that Burgas-Alexandroupolis is not a competitor, the backers of the AMBO (Albania-Macedonia-Bulgaria) project cannot be overjoyed at the news of this apparent new commitment to the Bulgarian-Greek venture - especially considering that they recently had reason to believe they'd seized the momentum. A few days ago, the Macedonians were reprimanded by the Greeks over the name issue, and urged to not underestimate the power of Greek diplomacy and lobbying. Is the apparent rebirth of the Burgas-Alexandroupoli project a manifestation of this reminder?

2 Tons of Oil Spilled at Ukrainian Port Make Black Sea Blacker

2005-04-08T13:43:00.000+02:00

According to Interfax today, the Benin-flagged Pyotr Zavyalov oil tanker has disgorged more than 2 tons of fuel oil while loading at Port Yuzhny, Ukraine's second-biggest port.

Interfax cited Pavel Bulanovych, "...a regional head of the government agency in charge of protecting the Black Sea's natural resources," laying the blame on the tanker's crew.

The disaster goes to show that, while trans-Balkan pipelines may go a long way towards relieving the congested Bosphorus bottleneck and avert spills there, the Black Sea - which feeds through the narrow Turkish waterway - is itself endangered by the necessary traffic of oil every day.

Is the Oil Economy Nearing Meltdown?

2005-04-02T21:48:00.000+02:00

"...The cost of crude oil approached record levels today as markets were unnerved by a Goldman Sachs report predicting a 'super spike' in oil prices to $105 (£55.66) a barrel," reported the Guardian on Friday. But it wasn't an April Fool's joke.

Such a "super spike" is part of the scenario envisioned by scientists and analysts tracing the possible timeline inherent in the "peak oil" hypothesis. Different people draw different repercussions from it, one being that surging demand for a finite resource is causing sharp geopolitical tensions as major powers like the US, EU, Russia and China stake their claims on the precious black liquid. Most proponents of the theory see a bleak future of economic shock and failure in an increasingly industrialized world after it becomes unable to meet its growing energy demands. According to the SMH, peak oil is "...the theory that the world will face a sudden, cataclysmic decline in supplies after global production peaks in the next 20 years." The US government is starting to take the threat seriously.

Adds the Guardian: "...the bounce in prices came after Goldman Sachs, one of the world's biggest traders of energy futures, issued a report yesterday saying that markets had entered a period in which strong demand and tight supplies could cause a 'super spike' in prices. According to the report, energy prices will only return to lower levels once they hit a level at which demand weakens and spare capacity is created."

Nothing is said about the likelihood of such a possibility. Considering the rising needs of industrializing India and China, it doesn't seem likely that demand is going to come down anytime soon. Some see a looming chaos of looting and violence as people suddenly have to deal with failures in transportation, services and products in a powerless world without oil.

Russia Still Reticent About Bourgas-Alexandroupolis Pipeline

2005-03-28T13:52:00.000+02:00

Novinite.com reported Saturday that Russia continues to stall on signing an agreement to build a $70 million oil pipeline between the Bulgarian port of Bourgas and the Greek Aegean port of Alexandroupolis. Sergey Oganesyan, chairman of the Russian Federal Energy Agency, was quoted by Russian media as saying that Moscow "...had not made its decision yet over the project."

This leeriness would seem to affirm previous concerns, including the statements made by Gligor Tashkovich of the rival AMBO pipeline project (envisioned to run across Bulgaria, Macedonia and Albania). In an interview with Balkanalysis.com, Tashkovich stated that "...the Russians withdrew their support" for the Bourgas-Alexandroupolis project. This interview resulted in furious charges from the Greek side that actually nothing was wrong and the Russians were on board.

According to Novinite, however, the planned signing date of April 15 might come and go without a result. "...Moscow has kept on insisting for more preferential taxation concerning the oil pipeline construction. It claims to receive a greater amount of revenues compared to the other participants in the projects - Bulgaria and Greece."

While both pipeline projects plan to transport Russia and Caspian Sea oil to the West, the value of the Bourgas-Alexandroupolis route is limited, in that it does not cut out all of the dangers of marine shipping that both projects aim to prevent. The danger of an oil spill in the Bosphorus was highlighted recently when a "...vessel carrying seven tanker trucks loaded with 138 tonnes of liquefied petroleum gas (LPG) sank in the narrow waterway." Even though the Bourgas-Alexandroupolis pipeline avoids the Bosphorus, it still leaves the question of shipping dangers in the Aegean Sea open.

At the same time, critics of the Bourgas-Alexandroupolis project cite economic concerns. Despite being a shorter pipeline than the AMBO route, it may not have lower tariffs, as it must amortize the costs of transferring crude oil from tanker to pipeline in Bourgas and reverse this process in Alexandroupolis over the pipeline tariff. The pipeline tariff could thus be higher than it should be because of the relatively short distance between Bourgas and Alexandroupolis. In short, less bang for the buck

Hungarian Opposition: High-pressure Gas Pipeline Sale to Germans Endangers Competition

2005-03-24T21:52:00.000+01:00

A German company already involved in the Hungarian gas distribution business plans to purchase a majority stake in the country's high pressure gas system and trading operations. However, controversy surrounds the planned €2.2 billion deal between MOL and E.ON Ruhrgas.

The Budapest Sun reported on 24 March that the Hungarian opposition, led by Fidesz MP and energy expert György Balla, fears the sale will hurt competition in the sector. "...The sale of the high-pressure gas pipeline system may have serious consequences with regard to free trade and competition because of the limited capacity of the pipelines, which is already stretched to the limit in winter due to high [demand] levels.... whoever owns the pipeline grid may easily have a leverage over free trade, even if the owner fully respects the legal regulatory framework."

Last year, MOL sought bids in for a majority share of its gas pipeline, wholesale and storage subsidiaries. According to the newspaper, "...MOL seeks to use the cash from these sales for further regional expansion into the oil sector, which it sees as a more lucrative segment." The agreement with E.ON Ruhrgas was made in November 2004. But the German company already has, through its local subsidiaries, "...a significant presence in Hungary's gas distribution companies, which own and control the lowpressure networks. These GDCs deliver gas to households and other end-user customers across the country. The sale of the gas assets to E.ON Ruhrgas would also give the company additional presence in both gas and electricity in Hungary - Eon Hungaria and Ruhrgaz already hold controlling stakes in three of Hungary's six GDCs, while E.ON Hungaria owns three of six electricity distributors."

However, the deal must still win the approval of both Hungary's Energy Office (HEO) and Competition Authorities. Gábor Szörényi of the former told the newspaper that "...This is a very serious transaction and we are analyzing the case very thoroughly... there was a scandal when I spoke to a news agency last December. This affects the share price of MOL, and so we have decided not to discuss this publically."

Turkey, British Petroleum Hunting for Oil and Gas in the Black Sea

2005-03-16T21:33:00.000+01:00

A multinational venture determined to find out whether large quantities of oil or gas exist in the Turkish Black Sea is to begin in June, reports Turkish Daily News on March 16.

The "Eastern Black Sea Drilling Research Project," which involves the Turkish Petroleum Corporation (TPAO) and British Petroleum (BP), plans to dig a new oil well offshore and is centered near Trabzon, in northeastern Turkey.

The plan has precedent. In 2002, two-dimensional seismic exploration began, followed a year later by three-dimensional seismic exploration. Analysis of data collected last year has led to the decision to drill this June.

Known as Hopa-1, the new well should determine whether the area contains any petrochemical riches. The Black Sea is more often mentioned as a transit route for Russian and Trans-Caucasian oil and gas to the Balkans.

A Turkish official noted that "...this would be the first deep-water drilling (4.600 meters) project in the region, expected to be completed in about four months' time."

Turkey Vs. Iran in Gas Price Arbitration War

2005-03-07T13:33:00.000+01:00

“Arbitration is a very difficult and expensive process...but there is no other option left for Turkey,” a Turkish energy ministry official told Reuters, in laying out the case for why Turkey's national gas pipeline company, Botas, is challenging Iran over a recent natural gas import price hike.

Iran, the second-biggest supplier of natural gas to Turkey (after Russia), signed a 25-year deal with Iran in 2001 for some 4 billion cubic metres of gas. "...It is expected to raise its purchase from Iran to 10 billion in 2007 from 6.689 billion in 2005," reports Reuters. "Iran raised the price of gas it exports to Turkey by 4.5 per cent on January 1." This is in contradistinction to Russia, whose gas monopoly Gazprom actually lowered export rates to Turkey last year.

Now the International Court of Commerce (ICC) is set to take the case; according to the official cited by Reuters, "...the arbitration process takes six months before a result."

One wonders not only how the ruling will go but even if there will still be an independent Iran, at least one with much bargainaing leverage, by September, 2005.

In any case, it will be fascinating to watch: a battle between a strong US ally wishing to have enough gas to sell on ot Israel (albeit an ally feeling increasingly alienated by US policy in neighboring Iraq), versus a card-carrying member of the Axis of Evil, one which could quite conceivably come under the guns of America and/or Israel well before the arbitration hearing wraps up...

Energy Market's Creation to Benefit Bourgas-Alexandroupolis Pipeline Project?

2005-03-05T18:56:00.000+01:00

The Bulgarian News Network today quoted a Kathimerini report which claimed that the troubled Bourgas-Alexandroupolis Pipeline Project may be back on track after all, with the announcement of a planned regional electricity and natural gas market. But are they getting ahead of themselves?

According to the paper, energy ministers of the Black Sea Cooperation Council agreed to create the market at a Friday meeting in Alexandroupolis, where they "...committed to work for free and secure transport of oil and gas through the Balkans as well as to speed up linking their national electricity grids."

Among regional energy projects specified in the article are "...natural gas pipelines connecting Turkey, Greece and Italy as well as Greece to Slovenia and Austria" and, most important for the Greek paper, the "...delayed oil-pipeline project meant to link Bulgaria’s Black Sea port of Burgas with Alexandroupolis."

Is Bourgas-Alexandroupolis awakening from its slumber? Greek Deputy Development Minister Giorgos Salagoudis, the article says, will go to Moscow to meet with Bulgarian and Russian officials "on a memorandum of cooperation."

At bottom, B-A has been plagued by indecision and ambivalence, reportedly, mostly from the Russian side. There has been speculation over the level of interest big Russian companies might have in the project. However, going by a March 1 ITAR-TASS report, for LUKOIL at least, any interest would be preliminary at best: speaking from Skopje, company VP Dimitry Tarasov said that despite a Greek claim that LUKOIL was interested in the project, the company "...has not received a commercial offer for construction."

And, while Tarasov said LUKOIL will "...have to take part in the pipeline construction," because it owns the port infrastructure and oil storages, they can do so "...only after its feasibility has been studied."

If correct, this quote would seem remarkable, as it would appear to be rather late in the game for feasibility studies.

BTC Recompensation Rates, Imported Workers Rankle Georgians

2005-03-03T14:15:00.000+01:00

Eurasianet.org reports that dissatisfaction lingers in Georgia over British Petroleum's paltry property compensation rates, as well as the fact that the company is using imported Asian laborers to perform "tasks that Georgians could do just as well."

While the project has long been plagued by environmental concerns, the article also quotes a protestor named Zura who says, “'Look, we’re not against this pipeline,'... the only thing we would like to know is the status of our compensation money." He describes the amount of money BP is forking over (from $1,500-5,000) as "a joke, really."

However, this is not small money in a poor country such as Georgia. BT has also pledged $10 million for "...a range of projects, including education, healthcare, cultural heritage, energy sector revitalization and the promotion of business and civil society links between Georgia and the European Union. On February 1, the Georgian government received the first $9 million of the BTC grant."

According to the article, Georgians themselves admit that they are partly to blame for cultivating excessively optimistic expectations regarding the extent to which the project would enrich them peripherally.

Locals and foreigners agree that the biggest potential problem regarding the pipeline is that while it offers some employment opportunities now, these are not sustainable:

"'I’m indeed worried about what’s going to happen once we’re gone,” said one foreign, Akhaltsikhe-based British Petroleum engineer who asked to remain anonymous. 'Once the pipeline is ready and operational, the number of sustainable jobs will remain even more limited than they are now. I can imagine that it will lead to more frustration.'"

Russia, Kazakhstan Agree on CPC Pipeline Expansion

2005-03-03T14:07:00.000+01:00

According to Bloomberg, a project that had been delayed for more than a year between Kazakhstan, Russia and the CPC (Caspian Pipeline Consortium) on how to expand the oil pipeline between the two countries has been resolved.

This was decided Wednesday in Astana, after (the ChevronTexaco-led) CPC's shareholders met with Kazakh Energy Minister Vladimir Shkolnik and Industry and Energy Minister Viktor Khristenko. According to the latter, "...the key conditions to complete expansion of the CPC are that it's profitable, pays dividends on time and pays taxes into the treasuries of its government participants."

BTC Pipeline 93% Completed, Major River Crossings to Go

2005-02-24T20:00:00.000+01:00

The BTC News Bulletin reports today that "...construction of the BTC pipeline and associated facilities is around 93% complete, with just 72km of the pipeline trench remaining to be backfilled and 4 km of the line still to be welded."

Tunnelling projects involving rivers - 46 in all cross the pipeline route - remain to be completed.

In February work began to tunnel under the Azeri Kura West River. The Bulletin adds that the Kura West River crossing in Georgia "...is now around three quarters complete."

Russia to Use Private, Public Security to Defend Chechen Pipelines

2005-02-24T12:21:00.000+01:00

According to RIA Novosti, the Russian government plans to safeguard its Chechnyan oil pipelines with a combination of security guards from private companies, as well as "...transport police and anti-economic crimes officers."

Last year, the Russian security services discovered "...56 oil pipeline cutting-ins [and] destroyed over 2,000 improvised oil refineries and storage tanks, detained 65 trucks carrying stolen oil, prevented 96 oil theft attempts." In addition, "over 628 metric tons of oil products were seized from illegal turnover." This has led to 119 criminal cases so far.

Announcing European Oil & Gas Pipeline News

2005-02-23T15:19:00.000+01:00

This new blog offers daily updates of the latest developments in oil and gas pipelines and projected pipelines in Europe (including Russia, Turkey and the Caucasus).

AMBO Pipeline Moves Forward: Interview with Gligor Tashkovich

2005-01-09T00:50:00.000+01:00

(This article is from the balkanalysis.com archive)

In this exclusive interview with Gligor Tashkovich, the Executive Vice President for Government & Media Relations for the AMBO (Albania-Macedonia-Bulgaria Oil) pipeline project, Balkanalysis.com readers are treated to the inside story on the pipeline’s progress from one of the project’s leaders. Mr. Tashkovich, contacted last week soon after the Sofia summit on AMBO, shares the following insights with Balkanalysis.com director Christopher Deliso.
Christopher Deliso: First of all, congratulations. You have been working on this for a long time, since 1994, and it must feel great to finally be getting official agreement on the AMBO project.
Gligor Tashkovich: Thanks. Well, it certainly isn't the first agreement. There was the initiative signed in July 2003 by the three presidents [Alfred Moisiou of Albania, Gjorgi Parvanov of Bulgaria, and the late Boris Trajkovski], for example, and there are several others.
CD: Yes, but can you tell us what is the precise significance of this current signing? Is it simply an agreement towards a common initiative, or does it hold any leaders or countries responsible for anything, establish a time line, etc?
GT: There were two trilateral signings that took place, one at the Prime Ministerial level and one at the Ministerial level. The collective significance was that AMBO moved into the FEED stage with these signed agreements. FEED is an acronym for Front-End Engineering and Design. Typically once you enter the FEED stage, the project will be built – a 95 percent-plus likelihood. The signed agreements also trigger commitments from some of the larger interested vendors to join our efforts.
CD: Can you name any of these interested parties?
GT: No, I can't name them at this time - sorry. Check back in 4-8 weeks.
CD: Looking back over the past year, can you say if there were any individuals, either from the US side or from the Balkan governments who really made a difference in getting things moving?
GT: Yes, Dr. Peter Watson, President of OPIC has been a terrific cheerleader for us within the Bush Administration. Also Albanian Prime Minister Nano, former Macedonian Minister of Economy Boris Rikalovski, and several high-level people in the Bulgarian government.
CD: Along the same lines, was there any particular "breakthrough" point, action or decision that you can point out as having been vital for things to get to where they are today?
GT: Yes, the public withdrawal of support for the Bourgas-Alexandroupolis [pipeline project] by both the President of Transneft (the Russian oil pipeline operator) Simeon Vainshtok and LUKoil Vice President Leonid Fedun. There was another breakthrough point too, but I will be able to speak on that at a future time.
CD: We all know that Balkan governments change with the weather. Have you sought any specific institutional safeguards, either from them, the EU or other bodies to make sure that the project goes ahead efficiently no matter who or what parties are in power over the next 2 years?
GT: All three governments are party to the Energy Charter Treaty which regulates the construction of oil pipelines across national and supra-national territories. We also have multiple agreements from each county over the past 11 years - so no matter which party comes to power in which country, a previous government affiliated with Party X has already given support for the project.
CD: What is the current state of play with Burgas-Alexandroupolis? They can't be overjoyed to see you surge ahead.
GT: All I can tell you is that the Russians withdrew their support. The Greeks keep acting like nothing is happening - but all of their lobbying efforts are falling on deaf ears. The Greek media continue to illustrate one side of the story, and the Greek Government Ministers keep putting up a brave face. Bourgas-Alexandroupolis was always a reactive project to AMBO. Therefore, we must always set the pace.
CD: Bulgaria is EU-bound and stable. Albania is poor and somewhat chaotic, but has no enemies either. Macedonia on the other hand is in danger from Kosovo Albanians who wish to break the country apart. In this light, how will the pipeline project be affected if unrest in Kosovo continues to seep across the border - especially in 2005, the year when "final status" is supposed to be negotiated in the increasingly volatile province?
GT: I predict that the 2005 deadline you cite will slide based on what I have been reading over the last several months. The most important thing to keep in mind is that oil companies work in considerably more unstable parts of the world than the Balkans. The Balkans are reasonably peaceful in comparison. So it is a matter of relativity.
CD: Have you sought any specific guarantees regarding Macedonia's stability? If so, who or what will vouch for the country? Will US policy change if mischief-makers start causing trouble in a pipelined Macedonia?
GT: You could make the case, somewhat easily I suspect, that America will care what happens to Macedonia if an oil pipeline carrying oil supplying America runs through it. Gosh knows there has been plenty of commentary on the web about the intersection of oil and international politics in general.
CD: What view do international pipeline insurers take about working in this part of the world? Do they have reservations? What is the cost comparison compared with other European regions?
GT: You can probably go to the websites of the Overseas Private Investment Corporation (OPIC) and the Multilateral Investment Guarantee Agency (MIGA) and look up this information. I don't have it handy, sorry. These entities (and also the U.S. Export-Import Bank) have what are called County Limitation Schedules that discuss the level of coverage, if any, that they have for certain countries or certain types, i.e., public or private projects within countries.
CD: The BBC cited AMBO President Ted Ferguson as saying some $900 million has already been guaranteed for financing. Is this correct, and is there a higher target goal to be reached? Can you give more details?
GT: This is debt financing. We have also raised some equity and we need to raise more. The debt-equity ratio is approximately 75 percent/ 25 percent. The year 2000 construction estimate for the pipeline was $1.13 billion within a margin of error of -10 percent and +20 percent.
CD: I know you have said many times in the past that all the major oil companies are potential players. But now that the initial inter-governmental signing is done, you have some cash and are talking about completing the pipeline in the foreseeable future, do you have any updates on prospective oil companies to work with?
GT: Nope, sorry! You are a subscriber to the AMBO News Service. You know which companies are exporting oil from the Caspian region into the Black Sea. Ask them. We will put out a press release when we have news that we can share on this. I can't tell you when that will occur - except to say that I expect it to be in 2005 - and hopefully sooner rather than later.
CD: Finally, on the environment. I know the point of AMBO is partially to avoid the environmental dangers of the Bosporus, and that your pipeline construction and valve structure makes leaks rare and, even if occurring, localized. Nevertheless have you run into any opposition from local environmentalists, the way BTC was hampered by people in Georgia over Borjomi? And has the re-planned route caused any more concerns?
GT: No - no objections of any kind. And if you should be in touch with any local environmentalists, please tell them that we would like to engage them sooner rather than later in a constructive conversation where we can address any fears they have up front and be confident of our pledges concerning the environment. The Macedonian government did change the route to move it away from Lake Ohrid. A Microsoft Powerpoint map shows the before/after changes between the two routes.

AMBO Trans-Balkan Pipeline Agreement Finally Signed

2004-12-29T10:00:00.000+01:00

(This article is from the balkanalysis.com archive)

Top representatives of Macedonia, Bulgaria and Albania met on Tuesday in Sofia to ink a memorandum of understanding with Ted Ferguson, president of the AMBO (Albania-Macedonia-Bulgaria Oil) pipeline project. The American-based corporation has been struggling since 1994 to get the attention of key political and industrial backers, in order to begin construction.
The first obstacle was the preoccupation of relevant parties during the Clinton Administration with the massive Baku-Tbilisi-Ceyhan pipeline in Anatolia. Then came the wars in Kosovo and Macedonia in 1999 and 2001, which left investors jittery. Now that the situation seems to have stabilized, however, the future looks bright for AMBO.This week’s gala event in Sofia brought together the major leaders of the countries involved: the Macedonian, Bulgarian and Albanian Prime Ministers, Vlado Buckovski, Simeon Saxe-Coburg-Gotha and Fatos Nano respectively. On Monday they signed a political declaration confirming their countries’ support for the pipeline. At the same time, reports the Macedonian Information Agency (MIA), Macedonian Minister of Economy Fatmir Besimi, Bulgarian Minister of Regional Development and Public Works Valentin Cerovski, Albanian Minister of Industry and Energy Viktor Doda and AMBO’s Ferguson signed a memorandum of understanding.
“…The construction of [the] AMBO oil pipeline is of strategic interest for Macedonia, the region and beyond, while the project is concrete proof that the climate of solidarity and understanding exists in this region, and I believe that it will improve the citizens' living,” declared Buckovski. For his part, Nano called the project “…an excellent example for partnership” as well as “more than exchange of material energy.”
But is the signing merely symbolic? After all, a rival pipeline that looked good to go until recently – the Burgas-Alexandropolis deal between Russia, Bulgaria and Greece – appears to have stalled due to internal disagreements. However, AMBO president Ted Ferguson (erroneously named as “Pat” by the BBC) claims that his project has received $900 million of investor funds “…from the Overseas Private Investment Corporation (OPIC) - a US development agency - the Eximbank and Credit Suisse First Boston, among others.” A big mystery until now had been whether the AMBO project actually had any solid backers. While the cash now appears to be there, an announcement has yet to be made regarding the committing parties among the oil industry.
The construction of the pipeline should take three or four years and when finished will transport 750,000 barrels of oil per day. According to the Sofia News Agency, some 25 percent of the oil to be used has already been supplied.
As could be expected, the Greek government is pushing for the Burgas-Alexandropolis alternative, citing its relative cost-effectiveness and time-saving qualities. However, as backers of AMBO have long pointed out, the Greek project does not really take care of the prevailing environmental concern (that is, avoiding the congested Bosporus shipping lanes), as it merely transfers the problem to the island-congested Aegean. An oil spill in the Aegean would be devastating for Greece’s vital tourism industry.
The AMBO project, on the other hand, avoids the sea entirely, crossing the Balkan Peninsula overland and terminating at the Adriatic port of Vlore.

Oil: Bulgaria Talks Transit, Greece and Macedonia Make Up

2004-10-14T17:00:00.000+02:00

(This article is from the Balkanalysis.com archive).

Owing to its geography, Bulgaria is a natural choice for all future Black Sea oil export routes from the Caspian to the Balkans. As has by now become a usual event, Bulgarian President Georgi Parvanov continued to point this out, this time in talks held last week with Azerbaijani counterpart Ilham Aliyev.

Parvanov concentrated specifically on the proposed AMBO (Albania-Macedonia-Bulgaria) pipeline and the Burgas-Alexandropolis (Greece) pipeline - twin priorities for Bulgaria and other Balkan states with an interest in the future of oil transit through the region.Stating that “Europe is interested” in Azeri oil and gas, Parvanov characterized Bulgaria as “…a country through which these products can be supplied, and all parties involved are interested in working in this direction.” Aliyev responded by saying that such cooperation “…could be very useful.” The same subjects were broached during this week’s visit to Sofia of Greek President Kostis Stephanopoulos.

On 1 October, Novinite.com reported that Russia, Bulgaria and Greece will sign an agreement on Burgas-Alexandropolis within a month, after meetings were held between the head of the Russian government staff, Sergey Naryshkin and Bulgaria's Regional Development Minister, Valentin Tserovski. The three parties have equal shares in the project, the major advantage of which would be to decrease dangerous Bosporus freighter traffic. However, while the risk of an environmental disaster due to an oil spill would therefore be reduced, the problem would not be eliminated entirely: tanker traffic will still have to resume from Alexandropolis westward, through Greece’s island-cluttered Aegean Sea.

In contrast, the proposed AMBO route bisects the Balkans, starting also in Burgas but ending up in Vlore, Albania – thereby sparing the Aegean of any possible spills. It would thus seem eminently preferable on environmental grounds.

The difficulty with establishing such pipelines has long been due, backers contend, to unresolved problems on the part of the Caspian producers. But even pipelines that have made it past the planning stages – such as the controversial, $3.6 billion Baku-Tbilisi-Ceyhan project – tend to get mired down in political and other protests. Environmental concerns over the Borjomi Nature Reserve have vexed project leaders BP and slowed construction in the Georgian section of the pipeline. This week, in a bid to placate the Georgians, the British company announced an additional investment of $10 million in providing pipeline security. In general, two more credit lines will have to be opened by early 2005 to finance the expected $2.6 billion in loans to international financial bodies backing the project.

Environmental concerns have also slowed work on a Balkan pipeline under expansion, the Druzhba-Adria pipeline project meant to integrate oil flow from Russia to the Adriatic. The two pipelines are to meet in Hungary, and represent a joint effort by the governments of Russia, Belarus, Ukraine, Slovakia, Hungary and Croatia. Plans made in December 2002 to have the pipeline completed one year later look to have been over optimistic.

In Croatia, public outcry over possible damage to the country’s vital Adriatic coast led to the creation of an environmental impact study. While the report was finished in June, it awaits official confirmation on the ministerial level. Croatia’s spokeswoman in the Ministry of the Environment Ministry, Kata Gojevic, told Reuters on Monday that the ministry must form an assessment commission to consider the study, and that “…it is not easy to set up an independent commission. Croatia is a relatively small country and does not have too many experts, and most of them have already participated in preparing the study.” Gojevic declined to give any timeline for completion of the whole exercise.

This tiring talk of exploiting new transit routes comes at a time when the big international oil companies are seeing exploration costs outweigh value. The Financial Times this week quoted research by energy consultant Wood Mackenzie which “…shows the commercial value of oil and gas discovered over the past three years by the 10 largest listed energy groups is running well below the amount they have spent on exploration.” The “record levels” companies are budgeting for exploration worldwide can guarantee production growth for only about another five years.

Similar bad news was announced last week in Bulgaria, when the British gas drilling company Melrose announced abandonment of an offshore, 1,032 meters-deep exploration well near Varna. According to the Sofia News Agency, the company remains undeterred, and hopes to strike it rich in other locations in the vicinity by “…extending the 3-D seismic survey, currently being acquired in the area immediately to the south of Varna West, to cover the Varna East prospect in order to give a direct comparison with the Galata structure,” where an exploration well may be dug. Preliminary testing has left company officials optimistic. Despite the “disappointment” of the Varna West failure, Melrose Chairman Robert Adair stated that “…we are delighted by the excellent early results from the 3-D survey and we remain on schedule to drill an exploration well on a channel system prospect by late second quarter 2005.”

In other Balkan oil news, the Athens News Agency reported that Hellenic Petroleum and the Macedonian government have agreed on a new management scheme for the existing Thessaloniki-Skopje pipeline. According to Economy Minister Stevco Jakimovski, a new joint company will commence operations from 1 November, with Hellenic retaining an 80 percent share and the Macedonian government, 20 percent. While no solution was announced regarding longstanding revisions to the OKTA refinery privatization, and Hellenic’s request for international arbitration, the ANA argues that “…a suspension of legal action could allow both sides' experts to work out a compromise deal.”

Oil Discovered in Bosnia: Find Hushed Up for Years, Official Says

2004-06-01T10:55:00.000+02:00

(This article is from the Balkanalysis.com archive)

Four years ago, the Bulletin of Atomic Sciences described Azerbaijan as “…the focal point of the next round in the Great Game of Nations, a dangerous, hot-headed place with a Klondike of wealth beneath it. It is Bosnia with oil.”

What then, we might ask, would actually constitute a "Bosnia with oil?" We will soon find out.Macedonia’s A-1 TV reported yesterday that two major oil deposits have been discovered in Bosnia. While oil exploration there dates back over one hundred years, little results have emerged until now. The Balkan wars of the 1990’s put a temporary halt to modern efforts, many say.

However, a veteran Bosnian oilman has told Bosnian daily ‘Nezavisne Novine’ that officials first knew they had a significant find before Bosnia’s independence war, but were told to keep quiet about it.

“…The foreign consultants back in 1991 advised us to not say anything in public yet and that we should wait for a better time,” said Brod Refinery’s Mika Sukurma. “But for that ‘better time’ we had to wait almost 13 years.”

According to ‘Nezavisne Novine,’ the oil discovered is of a “very good quality.” Officials believe that it amounts to 50 million tons near Tuzla and 500 million tons near Samac. According to A-1, this total would serve to supply the country for the next 10 years. Bosnian officials believe that from the Samac hoard alone $300 million of profit can be made annually. But they have yet to equate how much excavation and infrastructure costs will cut into profits.

Interestingly enough, the US oil giant Amoco (now part of BP) has been on the job for the past 12 years. Since then, it has been cooperating with the one of the biggest Bosnian corporations, Energoinvest.

Tuzla was also conveniently located in the SFOR American sector, and served as a key logistics area for the covert importation of Iranian and Saudi mujahedin by the US during the 1990’s. The area was home for the Bosnian Army’s “9th Muslim Brigade,” composed of local and foreign religious warriors used against the Serbs (as well as for a time a rival Muslim militia). Tuzla is also located in the east of Bosnia, near where the RS border dips down alongside Serbia proper.

This border area was one of the most strategic locations on the whole Balkan war chessboard.
As for Bozanski Samac, this important inland port of the River Sava is located in the north of Bosnia, within the Republika Srpska and just south of the Croatian border. In 2002, the EU financed a 17.5 million euro bridge reconstruction near the town, to connect with Croatia’s Slavonski Samac on the other side. The area is located on the important “…road/rail axis E-73 (M17)” which connects Sarajevo and Budapest.

All things considered, it should come as no surprise to learn that the Bosnian state “…for now can’t finance the project and so they may give concessions” to Amoco for developing the country’s energy riches.

Oil exploration in Bosnia is said to date back to 1890 by ‘Nezavisne Novine.’ Disrupted by WWII, it continued under Tito but without success. From 1964-73, leading Yugoslav energy company INA tried its hand at unearthing Bosnia’s oil riches, thereafter passing over the task to the Brod Refinery, which continued until 1984. That year marked the beginning of the first “serious investigations,” with the creation of a special company within Brod Refinery tasked with searching in two areas of the republic, north Bosnia (now Republika Srpska) and Dinaridi.

Bosanski Brod is located not far to the west of Bosanski Sabac, also along the river and again with a Croatian counterpart having the same name. (‘Brod’ in Serbo-Croatian means ‘boat’).
Back in 1995, when the Balkan wars were nearing conclusion, keen observers noted one of the reasons for America’s pro-Croatian strategy. At the time, Michel Chossudovsky wrote that “…Chicago-based Amoco was among several foreign firms that subsequently initiated exploratory surveys in Bosnia. The West is anxious to develop these regions.” Further, he reported that there were “substantial petroleum fields” in the then-Serb held territories “…just across the Sava River from the Tuzla region.” The area would be incorporated into Croatia subsequently. Croatia’s state-owned oil and gas corporation, INA, was finally privatized in August 2003, though not to an American company.

While Croatia has been pacified and is well on the way to fully embracing Western consumerism, economically sluggish Bosnia’s future is still an open question. Whether or not this multi-ethnic experiment- a miniature Yugoslavia created paradoxically out of a denial that the same values could ever have held together the former state- can survive is an open question. Thanks to Clinton’s organized mujahedin summer camps, it remains a potential breeding ground for terrorists even today.

It’s hard to imagine that the “new” oil discoveries will lessen the country’s factional discord, though. Now we do have yet another reason, however, for the Americans’ never-ending bullying of the Bosnian Serbs over compliance with the kangaroo court at the Hague.

Note: A note regarding the city named Samac mentioned in this article: "...its old prefix 'Bosanski' has been dumped, and the replacement 'Srpski' was recently ruled "discriminatory," says Bosnian-born Nebojsa Malic.

Analysis: South Balkan oil transit- II

2003-01-06T00:00:00.000+01:00

(This article is from the Balkanalysis.com archive)

All but forgotten, the South Balkan region lacks visibility and urgency. And so pipeline planners need to keep their chins up and persevere.

Their best argument is the need to bypass the ecologically sensitive Bosphorus Straits. At present, all east-west oil transit is conducted by tankers. But new Turkish regulations are making it both more difficult and expensive for shippers in the Bosphorus. A pipeline bypass, supporters say, would increase profitability and preclude the danger of mishaps.

Today's oil pipelines are virtually indestructible. Composed of thick steel pipe buried 12 feet underground, protected by state-of-the-art coating technology, and regulated by a myriad of shut-off valves, pipelines are more environment-friendly.

For example, the AMBO route (from Bourgas, Bulgaria through Macedonia to Vlore, Albania) would have automatic shut-off valves every kilometer. "If the system senses a drop in pressure, the valves close," says AMBO Vice President Gligor Tashkovich. "In a worst case scenario, assuming one break point, the most oil that could leak would be 612,000 liters (161,700 gallons)."

Also, terrorist attacks are unlikely -- buried pipelines can't be located without inside information. "Besides," states Tashkovich, "there would be video monitoring and military guarding the whole corridor."

Another argument for pipelines is transit fees, which countries through which the pipeline passes like. But if the Bosphorus requires a cost-efficient bypass, why not build it on Turkish soil? Having coastline on both the Black and Aegean seas, a European Turkey pipeline would be shorter and incur less transit fees.

Norway's StatOil proposed such a pipeline in 1994 -- but found dredging the harbors a Sisyphean labor, as strong currents returned heavy deposits of silt.

The Latsis Group's Christos Dimas, chief of the Bourgas-Alexandroupolis project, told United Press International that "while it was politically in American interests to have a major oil route (BTC) through Turkish territory, they don't want Turkey to monopolize all the routes." Other industry experts debate this argument.

Regarding cost, Dimas contends that "our studies and the studies of major oil companies in the 1990's proved that there is almost no cost difference between a European Turkey route and ours. Besides, unlike European Turkey we have an excellent existing refinery (Bourgas) and better ports."

Herein lies the question of infrastructure -- which has its own challenges and benefits.
Most secure is Burgas' Neftochim refinery, acquired by LUKoil in 1999. Martin Ganev, deputy general manager in Bulgaria, says the company will continue heavy investment. "We view LUKoil Neftochim Burgas' infrastructure as part of future regional projects ... these investments are expected to reach $192 million by the end of 2002 -- a threefold growth over last year."
Russian support helps enhance Bulgaria's prestige. The country is stable, reforming and pro-Western.

Albania has for a decade received millions of dollars in American aid. While still reforming, the country at least remains predictable in its unpredictability.

However, infrastructure is the problem here. The country has three dilapidated refineries of which only one is operational -- barely.

To get from Bourgas to Vlore, of course, AMBO must pass through Macedonia -- which remains somewhat of an unknown commodity.

On Nov. 27, the Caspian Business Weekly claimed that lingering fears of violence in Macedonia following the 2001 war are still keeping investors away. This analysis, which cited anonymous "observers," failed to mention that AMBO wouldn't traverse areas affected by the long-ended conflict. Strangely, it also alleged that Albania suffered a "resulting upheaval" from the war next door -- something that never happened. Misplaced fears of violence shouldn't deter investors in either country.

Indeed, reminds Tashkovich, "oil companies operate in far more dangerous areas of the world than Macedonia." He recalls an old statement from Lucio Noto, former chairman of Mobil: "oil is found neither in multicultural, pluralistic societies, nor in beachfront resorts." The only thing to be leery about here is Macedonia's litigious spirit, specifically, the unresolved dispute over Skopje's OKTA refinery.

Unlike Albanian refineries, OKTA works. The only danger -- for both AMBO and any possible pipeline continuation -- is the ongoing furor over the 1999 privatization that gave 54 percent of the state-owned refinery to Hellenic Petroleum.

The highly controversial sale sold OKTA at a low price ($32 million), and reduced crude oil tariffs from 20 percent to 1 percent. According to government spokesman Saso Colakoski, this has caused Macedonia losses of up to $120 million since 1999. And despite completing a 230-mile Thessaloniki-Skopje pipeline, Colakoski said recently, Hellenic hasn't followed through on other promised investments. Hellenic was allowed to monopolize oil imports -- meaning that Macedonia was essentially frozen out of its own market.

Another Greek company, Mamidoil-Jetoil, then sued OKTA, claiming that it unfairly abrogated a 10-year contract to accommodate Hellenic. A London court has ruled that Macedonia must pay up. The cash-strapped government may relinquish its minority share in lieu of payment. Mamidoil-Jetoil expects from $2-12 million in restitution.

In a recent interview, Mamidoil-Jetoil chairman Kyriakos Mamadakis claimed that the 1993 contract granted his company "the right of precedence in regards to the refinery supply with raw oil."

Mamadakis also maintains that the Thessaloniki-Skopje pipeline is "an old and good idea ...if we assume that the refinery shall refine 2 millions of tons/year." However, this amount now hovers between 600,000-700,000 tons/year. Mamadakis believes that it will decrease further, and that transport costs will rise precipitously. The pipeline has also meant major work losses (48 percent) for Macedonian Railway, which formerly transported raw oil.

Significantly, OKTA owner Hellenic itself is 25 percent owned by Balkan-hungry LUKoil.
Of course, in the end it all comes down to funding- and that means attracting investors.
AMBO President Ted Ferguson is optimistic. "I do agree that strategically speaking, the Balkans are no longer at the forefront of U.S. priorities. This has slowed business down," Ferguson told UPI. "But I'm optimistic we'll advance the funding."

Dimas also believes, with Ferguson, that his project will find funding. Indeed, Bourgas-Alexandroupolis is further along because of strong Russian commitment and harmonious country relations (AMBO was slowed in 1998-99 by Bulgaria's non-recognition of Macedonia's name).

"Personally, I think that our pipeline has the strongest possibility," says Dimas, who nonetheless concedes, "the decision will be taken mainly by the oil shippers. Anyway, it is too early to talk about investment -- these projects have to confront other priorities first."

Both pipelines have already shown their regional and environmental value. However, in the end the name of the game is cold hard cash. Can these eminently worthy projects really capture the interest of investors?

John Roberts, chief editor with Platts Energy Group, offers the following wry observation: "there is an inherent contrast," cracks Roberts, "between projects that are good ideas and need backers, and projects that have backers."

Only the future will show whether South Balkan oil projects can make the leap from the first category to the second.

Note: This article was originally published on 6 January 2003 by UPI.

Analysis: South Balkan oil transit- I

2002-12-30T00:00:00.000+01:00

(This article is from the Balkanalysis.com archive)

In today's post-conflict Balkans, integration is the keyword for Western policymakers. The region's less attractive qualities -- smuggling, corruption, war and economic sluggishness -- will significantly diminish when it is brought into the fold. Political, and especially economic integration are the priorities. So says the West.

That said, why haven't the South Balkan oil pipelines conceived almost a decade ago been built? What has caused this holdup, and will the situation change?

Several problems -- some financial, most not -- have stymied two apparently competing pipelines, the Albania-Macedonia-Bulgaria, or AMBO, route connecting the Black and Adriatic seas, and the Bourgas-Alexandroupolis line between the Black and Aegean seas.

The latter, a joint project of the Russian, Bulgarian and Greek governments, has a target capacity of 40 million tons per year. The 175-mile project would cost from $630 million to $700 million, and would involve Russian oil interests. LUKoil owns Bourgas' Neftochim refinery, and Yukos has recently weighed in with a $200,000 investment. According to project chief Christos Dimas, "Yukos is considered one of the supporting oil companies -- they have participated from the beginning."

Despite environmental concerns, Dimas is optimistic about Bourgas-Alexandroupolis: "Without any question at all it can handle all types of tankers, including VLCC's," he told United Press International. "The problem is not unique to the Aegean, but to the whole Mediterranean. The increased use of double-hulled tankers will help, but having both our pipeline and the Bosphorus route is the most advantageous solution for getting Black Sea oil to Western markets."

AMBO backers, however, claim that Greece's Alexandroupolis port isn't deep enough to handle VLCC supertankers, and not large enough to comply with international turning radius requirements -- whereas Vlore (in Albania) is. The 560-mile AMBO pipeline would cost $1.2 billion and have a target capacity of 35 million tons/year.

According to Gligor Tashkovich, executive vice president for government and media relations, AMBO's great advantage is that it crosses the entire Balkan peninsula, thus eliminating completely the danger of an oil spill in the Aegean. This threat was driven home on Dec. 13, when a tanker off the coast of Attica caught fire. The blaze was extinguished by firefighters after three hours, and no environmental damage was reported. Yet with an economy dependent on tourism and the 2004 Athens Olympics fast approaching, can Greece continue to afford the risk to its environment (and image) that accompany tanker traffic?

At some point, arguing between the two is futile. The projects have such widely differing lengths and purposes that it's not really possible to compare them by citing affordability. At the end of the day, the interests of private corporations and those with a personal stake in the countries involved will decide whether these pipelines get built, not the desire to cut costs.

The first and most fundamental problem both face is the question of how future Caspian oil will reach Bourgas. Both projects would run a tanker shuttle service from eastern Black Sea ports to fill their tank farms, and ultimately their pipelines. But until this delivery problem is solved, downstream solutions remain hypothetical.

Yet even assuming that Caspian outlets will be found, hypothetical problems still arise. John Roberts, chief editor with the Platt Energy Group, speculates that Balkan export routes may not even be needed. Citing expected capacities of the BTC (1 million barrels/day), CPC (700,000 barrels/day), and potential Caspian-Russia pipelines (400,000-500,000 barrels/day), Roberts raises a provocative question:

"Without any other pipelines, these can in principle handle at least 2.2 million barrels/day -- and so probably cover all the exports of the Caspian/Azeri region. This doesn't leave much room for other export lines ... and, there may be lesser volume going to the Black Sea than we expected -- so is it going to be worth building Balkan transit pipelines, considering the region's low local consumption?"

The second major reason for the holdup has been the Baku-Tbilisi-Ceyhan, or BTC, pipeline connecting the Caspian and Mediterranean Seas. Conceived almost simultaneously with the two Balkan routes, BTC was also tortured by speculations until relatively recently, due to its own drawbacks. But for mostly political reasons, the U.S. government prioritized it. The Balkans were conveniently forgotten, and the BTC's construction began on Sept. 18. Ironically, it was current AMBO President Ted Ferguson who provided the initial impetus for BTC, when he was with Halliburton subsidiary Brown & Root in 1994.

Now that the Turks (the major beneficiaries of BTC) are no longer anxious about competitors, Balkan supporters hope for a fair hearing. Yet the strategic importance of the region has declined for the United States, which now has military outposts throughout Central Asia -- where other pipelines may someday be built. And, Russia has started direct tanker shipments to America. The only producer capable of defying OPEC has big plans here. On Oct. 19 former Prime Minister Yevgenii Primakov announced that Russia hoped to export 50 million tons of oil to the United States in 2003 alone. Remarkably, LUKoil has even bought up all the Getty Oil gas stations in America. The once-feared Russian invasion has turned out to be economic, not military.

In the Balkans, the United State's final strategic goal was achieved in 1999, with the forcible acquisition of a permanent military presence -- Kosovo's enormous Camp Bondsteel. After the terrorist attacks of Sept. 11, 2001, already downsized peacekeeping forces were depleted even further. American offensives in Afghanistan and (soon) in Iraq have meant a massive redeployment of forces. At the same time, the logistics crews that accompany them have been shifted. In Macedonia, NATO's 700-strong force has dwindled to about 450 soldiers. Logistics and civil engineering crews for KFOR and Bondsteel have seen large staff cuts of late. The foreign media have all but deserted the place.

The current low visibility of the South Balkan region has made it necessary for pipeline backers to work even harder on project promotion. As will be seen in part two Tuesday, their hunt for investors must first address the questions of infrastructure, political stability and the business climate of host countries.

Note: This article was originally published on 30 December 2002 by UPI.

Analysis: Murky Balkan oil movements

2002-12-02T00:00:00.000+01:00

(This article is from the Balkanalysis.com archive)

The recent sinking of the Prestige oil tanker came only 2 months after construction began on the Baku-Tbilisi-Ceyhan pipeline, which will connect the Caspian and Mediterranean Seas. In regards to the future of oil transit and supply in Eastern Europe and the Balkans, the symbolic relationship here is telling indeed.

At bottom, the issue linking the two events is how the black stuff should flow. It raises significant questions, regarding use of pipelines versus tankers, interconnection and environmental safety. Questions of geographical strategy -- the future role of Russia, the BTC project and the Balkans -- have also become very pertinent.

These topics were debated at a conference held last week in Sofia. The conference brought together leading figures in the European oil and gas industries.

Big producers Russia and the Caspian states are seeking new energy outlets to Europe and the United States. Increased cost and risk are making corporations more keen on linking existing pipelines -- besides building new ones -- and less enthusiastic about tanker transport.

Thus renewed attention to as-yet-unrealized Balkan oil pipeline projects. First is the $1.3 billion AMBO pipeline, which would connect Bourgas, Bulgaria with Vlore, Albania, by way of Macedonia. A second is the much shorter, $600 million Bourgas-Alexandroupolis (Greece) pipeline, backed by the Russian government. A third, still hypothetical route, would extend the existing Thessaloniki-Skopje pipeline to Central Europe, through Yugoslavia.

The Bulgarian government is quite sensibly supporting both. The Bourgas-Alexandroupolis pipeline would start at 15 million tons per annum, and eventually reach 40 MTAs. The AMBO project could, after a similar ramp-up period, reach its target capacity of 750,000 barrels/day, or 35 MTAs.

Critics of the former say VLCC supertankers at the small port of Alexandroupolis couldn't comply with international turning radius regulations. The Aegean is also filled with submerged rocks and island populations that, like the Spaniards ruined by the Prestige spill, depend on fishing and tourism for their livelihood.

So AMBO supporters say their route is safer, as it begins and terminates in deep-water ports. Bulgaria likes the fact that AMBO crosses all of its east-west territory -- meaning higher transit fees. In total, Bulgaria hosts 51 percent of this 560-mile pipeline. However, given the shorter distance (187 miles) and Russian support (Yukos recently broke a funding deadlock with a $200 million investment), Bourgas-Alexandroupolis may receive more attention for now.

Of course, should both come into existence, the Bulgarians won't complain. Minister of Economy Nikolai Vassilev would only state -- rather diplomatically -- "we cannot say which will come first or be more successful."

These projects are only now emerging from the shadow of BTC. Until fairly recently, critics believed that this colossal, $2.9 billion project wouldn't be realized. However, BTC always enjoyed U.S. government backing -- mainly, for political rather than economic reasons. Removing future Central Asian exports from both Russian and Iranian hands, and rewarding Turkey (a key American ally) accounted largely for BTC. Indeed, its route is less direct and more expensive than either the Russian or Iranian options.

Due to this priority, Balkan projects were deliberately slowed. The U.S. government has pressured its own oil companies not to publicly discuss projects west of the Black Sea.
Until now, this had marginalized Balkan pipeline ideas. Now that BTC will happen, the Turks are less anxious about "competition" and the Balkans can be reconsidered.

The Prestige disaster has redoubled attention to the dangers of Bosphorus transit. Turkey is increasingly wary of allowing supertankers through the heavily trafficked, narrow straits separating Europe and Asia. An oil spill here would be catastrophic. Tighter Turkish regulations are discouraging shippers. Yet although Bosphorus shipping is becoming more expensive and everyone agrees on the environmental risk, there's been little action on alternatives.

Russia is growing tremendously as an oil exporter to Europe and the United States. The Russian government announced 6 weeks ago it could supply the latter with 50 MTAs in 2003. Russian oil accounts for 15 percent of European consumption, and 22 percent of total European oil imports. This amounted to 2.7 million barrels/day in 2001.

The top three Russian companies are therefore showing large export increases. Yukos claims a 27 percent increase over 2001, while LUKOIL and TNK registered 15 percent gains.
"In years to come, we'll see continually huge increases in exports," stated Davor Stern, the adviser to the president of Tyumen. " So if you can transport it, we can supply it."
According to Transneft Vice President Igor Solyarskiy, "integration of Russian and European pipelines is key."

Most significant is the 2,982-mile Druzhba pipeline, which carries Russian oil to Hungary through Ukraine, Belarus and Slovakia. An agreement to link this with a northern branch of JANAF's Adria pipeline (terminating in Croatia's Omisalj port) is near completion. According to Solyarskiy, the signing will be conducted soon (Dec. 16).

Adria's proposed eastern branch will connect the Black Sea port of Constanta with Omisalj, by way of Serbia. The 746-mile pipeline would have an initial output of 660,000 barrels/day, and a capacity of 10 MTAs. However, Croatia's two Omisalj refineries still require investment -- reckoned before as $360 million.

Besides, the Constanta pipeline is estimated to cost $1 billion -- almost one-third of the $2.7 billion required for the much bigger and more popular BTC project. At the end of the day, the fundamental challenge remains that of selling the Balkans to investors. Ironically, the chief selling point of Druzhba-Adria is its connection with Central Europe.

A big factor in the emerging trends in pipeline construction is the relationship between corporations and governments. Differing laws, languages and interests mean brokering transnational agreements requires patience and tact.

All sorts of roadblocks arise. AMBO suffered a one-year delay in its route agreement signing in 1998-99, when the four parties involved did not recognize the Republic of Macedonia by the same name. According to Solyarskiy, Ukrainian government haggling over tariffs endangered the Druzhba accord. The BTC project has been shackled by Georgian concerns over environmental impact.

Funding for new pipeline projects depends largely on whether the host governments can minimize bureaucracy and expedite construction. No wonder the delegates in Sofia sought to assure that their countries were "business friendly." Given the still blemished view of the Balkans and Eastern Europe as regions of conflict, corruption and economic torpor, corporate decision-makers need reassurance their investments will flourish. Coaxing the cash out of them is the goal for today's pipeline backers. Convincing would-be funders that the projects are viable remains the challenge.

Note: This article was originally published on 2 December 2002 by UPI.

Analysis: LUKoil in the Balkans

2002-06-26T00:00:00.000+02:00

(This article is from the Balkanalysis.com archive)

It is a giant among oil companies, with the world's largest proven reserves (14.23 billion barrels). It operates in 25 countries, owns more than 2,600 gas stations worldwide, and accounts for 24 percent of Russia's oil production. Now LUKoil plans to storm Europe -- by way of the Balkans.

Lukoil's expansion in the Balkans is a microcosm of its worldwide plans. The Russian company seeks to capitalize on its strengths, while also addressing its weaknesses. No longer is it confining itself to scavenging off the carcasses of post-communist Eastern-bloc countries. Aggressive recent action in Greece, Cyprus and even Croatia reveals a new sense of confidence.

Although it has vast reserves of crude, LUKoil's refining capability is limited. Currently, it refines less than half of its 80 million tons annual crude output. Through the acquisition of refineries -- its major strategy in the Balkans since 1998 -- LUKoil hopes to boost this figure to 100m tons annually by 2005, reports Worldfuels.com.

These acquisitions are complementing needed organizational changes. The company has inspired pessimism among investors because of its lackluster annual growth rate (2 percent-3 percent).

Recently, company Vice President Leonid Fedoun revealed to the Financial Times LUKoil's main challenge: "We should not only be supplying crude oil, but also process and distribute oil products. We want to process up to 60 percent of our total oil at our refineries, compared with 40 percent now." Currently, LUKoil exports only 55 percent of its production, compared to 70 percent for Yukos, Russia's other oil giant.

Expanding the foreign distribution network is therefore key. Since the price at the pump in Russia is sometimes half of the world price, LUKoil has increased its acquisition of gas stations throughout Europe -- and even in the United States, where it currently owns 1,500.

In Romania, the company has plans to take over up to 250 gas stations over the next three years. LUKoil was also recently offered a 51 percent stake in Avanti, an Austrian retailer with more than 700 gas stations in Europe. Successful negotiations with Hungary's MOL could bring up to a five-fold increase in LUKoil's Polish gas stations. According to Interfax, the company also plans to acquire a major chain of gas stations in Bulgaria. A day earlier, LUKoil President Vagit Alekperov told ITAR-TASS about a recent tender victory for gas station development in Cyprus.

The Balkans is an attractive market. Transport prices are lower than in Western Europe, and forced privatization in many Balkan countries means great steals on refineries. LUKoil's strategy has generally been to scavenge the old and sick leftovers of the Soviet and Yugoslav countries. This started in 1998 in Romania, with the purchase of an 87 percent share in the Petrotel refinery. This $300 million deal was followed the next year in Bulgaria, with the acquisition of a 58 percent stake in Burgas' Neftochim refinery ($509 million). Also in 1999 the company picked up 51 percent of Ukraine's Odessa refinery, for $49 million.

Although these high-profile acquisitions -- complete with promises to invest -- seemed to guarantee future success, results have been slow. According to a FT report of May 29, the biggest headaches are in Romania, where Petrotel consistently loses money, "...because the market remains regulated with low prices and dominant state-owned companies." Here, Fedoun holds the Romanian government accountable for failing to come through on privatization promises.

The initial results in Bulgaria -- a $200 million loss in 1999 -- were equally disappointing. Although this was followed the next year by a $50m profit, some remain wary.

In March, the Greek government was warned by a group of international investors not to accept LUKoil's bid for a 23 percent share of Hellenic Petroleum. LUKoil had allegedly devalued the Neftochim refinery, by overcharging for crude oil and undercharging for refinery processing, reported The Russia Journal on March 1. LUKoil has reduced the value of Neftochim to less than $100 million, the investors charged, "while a comparable refinery in Poland is currently valued at $2 billion." In its defense, LUKoil pointed to the $200 million of debts that came along with Neftochim in 1999, and that $90 million of investments have been made since.
Despite these warnings, the Greeks did sell. The purchase fits LUKoil's general plans in southeastern Europe. The company is reportedly interested in a pipeline linking Bulgaria's Black Sea port of Burgas with Greece's Aegean port of Alexandroupoli. A joint venture of the Russians, Bulgarians and Greeks, the pipeline will cost more than $600 million and is set to be completed by 2007.

Farther south, LUKoil has moved aggressively into Cyprus. Besides winning the new tender for gas station development, LUKoil now controls 25 percent of the island's oil market.

Up in Macedonia, the Greeks have made major acquisitions in the banking, telecommunications, retail and oil sectors. In regards to the last, however, they may just be passing the torch to the Russians. Hellenic Petroleum purchased the state-owned Okta refinery in 1999, in a controversial deal that left Macedonians doubting the motives of their leaders.

It has been rumored that OKTA will be resold. But even if it is not, LUKoil's large stake in Hellenic Petroleum means that Macedonia too will fall under Russian influence.

LUKoil shows no signs of slowing down in the Balkans. The latest move is in Croatia, where the government is selling 25 percent of its oil and gas monopoly, INA, under privatization pressure from the World Bank and the International Monetary Fund. Some 20 international bidders -- including LUKoil -- are interested.

INA would seem to fit the LUKoil bill. It was a money-loser until just last year (when it turned a $44 million profit). But its two refineries will need some $360 million in investments through 2005, reported the FT on June 4.

In the end it may be worth it, however. INA has 450 gas stations in Croatia, and also a 16 percent share in Janaf, the state pipeline company. Janaf owns the Druzhba -- Adria pipeline, which provides key access to the Adriatic Sea.

LUKoil and INA's other suitors will have to wait a couple more weeks for the Croatian government to announce its shortlist. They will be cooling their heels much longer, however, where Poland's top refinery PKN Orlen is concerned. Here, the government is cautious, and talks are being postponed until 2003. Both Hungary's MOL and Austria's OMV are bidding for the 17.6 percent share of central Europe's largest refining group. Yet these companies are simultaneously actively soliciting INA. Their case will be weaker with the Croats, however, since the Polish postponement makes their future plans and capabilities uncertain.

This is not without irony. The Polish government's wariness -- basically, an understandable concern for getting a decent price -- has itself resulted from observing LUKoil's past Balkan buyouts. Yet since it is not vying for Poland's premier refinery, LUKoil is unaffected by the delay and thus stands a better chance in the Croatian bid.

To complete the coup, LUKoil will likely win in Poland, in a bid for 75 percent of the smaller Rafineria Gdanska. Thus would LUKoil prevent PKN Orlen from swallowing up Gdanska, which it reportedly would like to do.

Polish government opinion on the two deals differs remarkably, and seems to confirm the idea that LUKoil is on a lucky streak. Explaining the PKN Orlen postponement, officials have said the government doesn't take the deal for granted, but if LUKoil's expected bid comes in soon the Gdanska deal could be closed by the end of the year.

Note: This article was originally published on 26 June 2002 by UPI.