The project for the construction of the Burgas-Alexandroupolis oil pipeline is expected to be terminated because Bulgarian shareholders have not performed their financial obligations.

The statement was made Wednesday by Plamen Rusev, ex-director of Bulgarian branch of the project company, Trans-Balkan Pipeline, the joint Bulgarian-Greek-Russian venture that should construct and manage the pipe, the Bulgarian National Radio reported.

"I can confirm that the project is going to an end and this is a good outcome at present because Bulgaria's failure to pay its obligations has created tension between shareholders, As a result, Greece stopped paying its obligations too. You cannot have only one side paying. There has to be a balance," Rusev said.

He added that the final decision on the future of Burgas-Alexandroupolis will be made at a meeting of all shareholders in Rome on February 17.

According to Rusev, the direct damages for Bulgaria at this moment are about BGN 15-20 M, as the obligations of the Bulgarian shareholders are. The money would have to be paid by the Bulgarian Finance Ministry, since it has taken the responsibility for the project.

The indirect damages cannot be calculated, according to the ex-director of Trans-Balkan Pipeline. He said that the other countries might demand compensations over Bulgaria's violation of the international agreement, which could reach up to BGN 200-300 M.

"The most unpleasant thing is that Bulgaria has already lost about EUR 800 M," Rusev said.

Bulgaria's Economy Minister Traicho Traikov has stated he did not know anything about Russia writing off the project. He said, however, that in his opinion Russia is trying to pressure Bulgaria with regards to the Belene nuclear power plant project.

In December 2010, Mikhail Barkov, Vice President of the Russian oil company Transneft, said that Bulgaria has failed to pay the EUR 6 M that it owes as its contribution to the joint project company with Greece and Russia, but it has pledged to pay its dues by December 15, 2010.

Experts have stated that Bulgaria might escape paying compensations if it withdraws the project on the basis of a negative environmental assessment.

In November 2010, the Bulgarian Environment Ministry said the environmental impact assessment of the Burgas-Alexandroupolis oil pipeline is inadequate and needs to be reworked; the ultimate decision about whether Bulgarian will take part in the project is expected after the results of the environmental assessment, which is to be revealed in February 2011.

Bulgarian Prime Minister Boyko Borisov, however, has written off the project on a number of occasions, declaring that there is no way the ultimate environmental assessment would be positive.

The 280-km pipeline, with 166 km passing through Bulgaria, would have an initial annual capacity of 35 million tons of crude oil, which could be later expanded to 50 million tons. Its costs are estimated at up to USD 1.5 B, up from initial estimates at USD 900 M.

The Trans-Balkan Pipeline company, which is in charge of the construction and subsequent operation of the future pipeline, and is headquartered in the Netherlands, was set up in 2008.

The Russian participant in the project, Pipeline Consortium Burgas-Alexandroupolis Ltd, has a share of 51%. It was founded jointly by three companies: AK Transneft (33.34%), NK Rosneft (33.33%), and Gazrpom Neft (33.33%).

The Bulgarian Joint stock company "Project Company Oil Pipeline Burgas-Alexandroupolis – BG" AD has a share of 24.5%. It was initially founded as jointly by two state companies, Bulgargaz (50%) and Technoexportstroy (50%) but was transferred in full to the Finance Ministry in February 2010.

The Greek participants are Helpe Thraki AE with 23.5% and the Greek government with 1%. The Helpe-Thraki AE was founded jointly by "Hellenic Petroleum" (25%) and "Thraki" (75%).

Three Bulgarian Black Sea municipalities - Burgas, Pomorie, and Sozopol - have voted against the pipe in local referendums over environmental concerns.

Municipalities neighboring Pomorie and nearby Burgas are also harboring fears that the pipeline could damage their lucrative tourism business, while environmental NGOs have branded the existing plans to build an oil terminal out at sea a disaster waiting to happen.