Russia Lacks Oil for Burgas-Alexandroupolis Pipe - Report

Business » ENERGY | March 17, 2010, Wednesday // 10:14
Bulgaria: Russia Lacks Oil for Burgas-Alexandroupolis Pipe - Report Transneft CEO Nikolay Tokarev has complained of lack of oil for Russia's trans-Balkan pipeline. Photo by lenta.ru

Russian companies appear to be in lack of enough oil in order to fill the Burgas-Alexandroupolis oil pipeline, according to Moscow newspaper Vedomosti.

The CEO of Transneft, Nikolai Tokarev, complained to the Russian Deputy PM Igor Sechin in a letter from September 2009 that there was not enough oil for the planned pipeline in Bulgaria and Greece, the Vedomosti has reported claiming to have a copy of the letter.

Tokarev is said to have pointed out that the actual economic benefits from the project will become clear only after its completion, and that it is geopolitical rather than an economic endeavor.

The Russian participants in the project, Rosneft and Gazprom Neft, want to clarify the economic issues such as the transit fee, and state they do not have sufficient amounts of oil for the pipe, Tokarev says in his letter to Sechin.

The 280-km pipe from Bulgaria’s Burgas to Greece’s Alexandroupolis is supposed to start operating in 2014, and to transport 35 million tons of oil annually.

The project has been stalled for years after the initial agreement between Bulgaria, Russia, and Greece in 1995.

The Vedomosti paper cites a representative of Russia’s Energy Ministry as saying that there are still no guarantees for the realization of the project, and that Russia is expecting the decision of the Bulgarian government which made its participation conditional on the environmental assessment expected in a few months.

According to an unnamed source close to the Russian oil companies, Gazprom Neft can provide no more than 3 million tons of oil for transit through the pipe.

The Vedomosti stresses the expected new political difficulties – the potential construction of the Samsun-Ceyhan pipeline in Turkey.

An analyst of the Bank of Moscow, Denis Borisov, is quoted as saying that Transneft is building two other oil pipelines, and there was no way it could provide enough oil for all pipes. In order to fill all of its planned pipelines, the company will have to increase the oil extraction by 30% compared to 2009, which will be very hard to achieve.

Another analyst, Alexander Ershov, has commented that oil from Kazakhstan will be sufficient to fill either Burgas-Alexandroupolis, or Samsum-Ceyhan, depending on which one is more competitive in terms of prices.

The paper explains that experts cannot provide a forecast of the future transit fees for Burgas-Alexandroupolis, and that it is still unclear how it will be funded, and when it is expected to start making profit.

The Vice-President of Transneft, Mikhail Barkov, has stated the tonnage of the tankers going through the Bosphorus Straits will have to be decreased from 140 000 down to 60 000 in order to guarantee that Burgas-Alexandroupolis and Samsun-Ceyhan will generate profit.

A representative of Transneft, Igor Demin, has described the letter obtaioned by the Vedomosti paper, signed by the company head Nikolai Tokarev, as resulting from ”the imagination” of the paper’s correspondent.

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Tags: Nikolai Tokarev, Transneft, Burgas-Alexandroupolis oil pipeline, oil, pipeline

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