Director of Bulgarian Branch of Trans-Balkan Pipeline Plamen Rusev: Bulgaria Has No Good Reasons to Give Up Burgas-Alexandroupolis Oil Pipeline Project

Novinite Insider » INTERVIEW | Author: Ivan Dikov |June 25, 2010, Friday // 22:39
Bulgaria: Director of Bulgarian Branch of Trans-Balkan Pipeline Plamen Rusev: Bulgaria Has No Good Reasons to Give Up Burgas-Alexandroupolis Oil Pipeline Project

Exclusive interview of (Sofia News Agency) with Plamen Rusev, Director of the Bulgarian branch of Trans-Balkan Pipeline, the project company set up by Bulgaria, Greece, and Russia to be in charge of the construction and operation of the Burgas-Alexandroupolis oil pipeline. TBB was formally set up in February 2008, and is registered in the Netherlands.

The Burgas–Alexandroupoli pipeline is intended for transportion of Russian and Caspian oil from the Bulgarian Black Sea port of Burgas to the Greek Aegean port of Alexandroupoli. It would be an alternative route for Russian oil for bypassing the Bosporus and the Dardanelles. In mid June 2010, the Bulgarian government and Prime Minister Boyko Borisov suggested the country might not proceed with the project due to environmental and supply concerns. The government's decision is formally pending on the environmental assessment of the pipeline's expected in Ferbruary 2011.

The Burgas-Alexandroupolis oil pipeline has been cricitized on environmental, economic, and geopolitical grounds. In June 2010, the TBB launched a special website presenting visually the plans for its construction in order to fend off criticism on environmental grounds; it can be viewed HERE (in Bulgarian.)


What is the schedule for the construction of the Burgas-Alexandroupolis oil pipeline at present? Is 2013 still the deadline for putting the project into operation? What is the price of the construction going to be, according to recent estimates, and where is the funding expected to come from?

According to our schedule, the construction of the pipeline should be completed by the end of 2013 but since we also need to perform operational tests, our schedule says that the commercial operation of the facilities has to start in 2014.

The total cost of the Burgas-Alexandroupolis oil pipeline is estimated at about EUR 1.5 B. But these are only estimates because nobody knows exactly how much the construction materials and labor will cost in 1-2 years.

With respect to the funding – the agreement stipulates as first option – project financing, and as a second option – corporate financing. These options are currently being discussed within the Trans-Balkan Pipeline company.

Because of the changing of the principal of the Bulgarian share (i.e. in February 2010 the responsibility for the Bulgarian share of the Burgas-Alexandroupolis project was transferred from the state construction company Technoexportstroy to the Finance Minister) caused Bulgaria to fall behind in that respect. But on the other hands, that is a good thing because the Finance Ministry is expected to have the best experts on project financing. There is a possibility of switching to corporate financing.

I suppose that the Bulgarian government should already have experience in this area, for example with respect to considering sources of funding for the Belene Nuclear Power Plant where the Russian government at certain points offered to provide money for the start of the construction.

It is possible that the Russian side might offer to fund the start of the construction of Burgas-Alexandroupolis as well. In my view, this will be acceptable because such a large project always needs guarantees, and in a time of such economic uncertainty the guarantees should be higher.

Unfortunately, a large number of the Bulgarian companies do not have credit ratings, and therefore cannot bid for better loan interests. The Greek companies are shaken by the financial crisis, and they cannot vie for good loan conditions, either. So we are left with the Russian companies, which, as you know, have good resources – why shouldn’t we use these resources here under normal conditions, normal loan interest, and normal guarantees? But this is a decision that will be made by the Bulgarian shareholder.

The Burgas-Alexandroupolis project is facing fierce opposition. The arguments of its critics range from geopolitics to economic matters to environmental problems. Do you think that this criticism is rational and sincere, or that it is politically motivated?

For a long time the criticism of the project was entirely politically motivated. Unfortunately, it was tangled in the several election campaigns last year, as much as we regret that. But politics is everywhere, there is no way to avoid it.

People’s fear from every single new thing is only natural. It is natural to fear a potential disaster. But there is no infrastructure project that does not hard the environment.

I claim that the harmful effects from the construction of the Burgas-Alexandroupolis oil pipeline will be much smaller than if we are to construct a highway along the same route. In the very least because contemporary technology guarantees reduced environmental damaged.

There will certainly be temporary disruption of the nature at certain spots because this is construction but shortly after that the region will be re-cultivated, and it will be restore its previous condition as much as possible.

The environmental standards in Bulgaria are already the EU standards. In fact, in some areas Bulgarian environmental legislation is stricter than that in the rest of the EU, and you know that the European states put an emphasis on environmental protect. The technological solutions to be employed for the construction of the pipeline will be the latest ones available.

This practically means that we are going to apply the most modern technologies for environmental protection and response to emergency situations. Such technologies are employed by the Persian Gulf states where oil extraction and transportation co-exists with a lucrative tourism industry.

I point out this example to the representatives of the tourism sector who think that Bulgaria’s Black Sea tourism will suffer because of the pipe. And the Persian Gulf states are much more threatened because the seas there are warm, and if there is an oil spill, the oil remains in a liquid state, and even the slightest spill would render horrendous damages to the sea flora and fauna.

Our Black Sea is colder, and it will be easier to overcome potential damages from spills – something that we have seen happen in the Gulf of Burgas for 50 years since the construction of the oil refinery in Burgas (currently owned by Lukoil – editor’s note). Because we have had a lot of oil spills in the Gulf of Burgas for 50 years.

But now there has been a paradigm shift with respect to the unloading of crude oil which is reflected in our plans for the Burgas-Alexandroupolis project. 50 years ago people designed oil terminals so that any spills would be confined to a closed area where it will be easier to tackle them.

Nowadays, the unloading is done as far from the coast and out in the sea as possible because tankers have a greater freedom of maneuvering, and feel safer, and technologies are such that instead of being prepared to tackle spills, you are prepared not to allow any spills.

Of course, there are still emergency plans, everybody is prepared. But for example, in 8-9 years since the monobuoy oil offloading technology – similar to the one that we plan to use near Burgas – has been in use at the Russian port Novorossiysk, not a single drop of oil has been spilled. In Supsa, Gergia, where the buoy is a bit older, there are spills of about 50-100 liters per year. In Dubai or in America there have been no spills with this technology.

As far as our project is concerned, I should point out that since it is an international project, with international funding, the most recent and expensive technologies will be employed. If it was only one country or one company building this pipe, it might have been tempted to save some money.

But with Burgas-Alexandroupolis this is impossible because we have several countries with several jurisdictions. It is no accident that the project company, Trans-Balkan Pipeline, has been registered in the Netherlands, the country with some of the highest environmental standards.

The technology used in the Bulgarian section will be the same as the one used the Greek section so there is no room for concerns. The fact that it is accepted in Greece is a further guarantee that it is safe.

There is one single factor in the world at the moment that no one can forecast and that is international terrorism. Even natural disasters can be forecast to some extent but terrorism can’t, as we all know since 2001. There is no way to give a guarantee against a terrorist attack but we got a 100% guarantee against all other kinds of potential risks.

Critics of the project such as the Mayor of Burgas Dimitar Nikolov explicitly declared themselves against the monobuoy oil unloading technology, saying that it carries the greatest risks. Why has Trans-Balkan Pipeline selected this technology? Are the people’s worries justified? Would the company be willing to switch to another technology is it is proved safer?

We are conducting two absolutely separate and independent research tests with respect to the potential effect on the environment from the monobuoy unloading and the oil unloading on a port landing stage, i.e. a quay.

Our preliminary surveys based on international experience have shown that the monobuoy is preferable, especially under our conditions.

First of all, the buoy will be located off the coast, outside the Gulf of Burgas for two reasons. First, the tankers are more maneuverable and safe when they are out in the open sea, which allows them to revolve at 360 degrees so that they always face the wind, and stick to the required unloading procedure.

Second, as surprising as they may sound, the protected areas network NATURA 2000 encompasses the entire Gulf of Burgas, including the existing oil refinery port. In order to meet the EU requirements, we are going out of the Gulf. Thus, the underwater section of the oil pipeline from the buoy to the coast will be 18 km, which is the maximum possible. If we go further, we will have to install special pumps on the tankers because the oil has to be pumped to the shore.

As I said the modern technologies for locking, preventing spills, etc. are basically the same for the buoy and the quay in terms of safety. The problem with the unloading stage, i.e. quay is that some of the big tankers will be about 150 000 tonnes, 280 meters in length, and will have a draft of 21 meters, will have to come very close to the city. The depth of the Burgas Port currently is about 13-14 meters.

An oil tanker becomes inert in inclement weather. Of course, we could dredge a corridor, which is 800 m wide in order to allow large tankers to come into the port. But this will mean ending up with ten million cubic meters of dredging material, which will be a huge environmental problem for the Gulf of Burgas, because these fine particles will accumulate and will affect the sea fauna and flora for years to come.

But when there is inclement weather, a tanker, as modern as it may be, become more vulnerable going through an 800-meter-wide corridor. Especially, if we have two tankers which both have to leave the port in bad weather.

Secondly, there are a lot of other ships going in and out of the port which will be crossing the corridor for the tankers. There are ships lying at anchor at roadsteads. A couple of months ago a ship’s anchor broke, and it sank in the harbor right where the tankers would have to pass. So this way it is much more dangerous.

I am one of the founders of the Burgas Sea Association, and we have commented this issue with my colleagues. There are no sailors that are not convinced that it is much safer to unload the oil out at sea.

In this respect, I believe that the Mayor of Burgas has been misled because he is not a sailor but has been given a kind of incorrect “advice.” We have launched visual materials about what the tanker unloading will look like at a monobuoy and at a quay. I hope that the Mayor and everybody else will be able to grasp the difference in this way.

What is your view of the fact that a large number of local residents of Burgas and the resort towns of Sozopol and Pomorie voted against the construction of the Burgas-Alexandroupolis oil pipeline in local referendums? If this project is benefits for Bulgaria, why are so many people opposing it so vehemently?

This is not exactly true. The referendum in Burgas took place in 2008, about ten days after our company, Trans-Balkan Pipeline, was registered in the Netherlands. It was unsuccessful because fewer than 50% of the eligible voters participated in it but it did demonstrate that there are a lot of people expressing their concerns.

I am underscoring the fact that the referendum in Burgas took place shortly after our project company was set up because we did not have any technical surveys or environmental assessments available. So the process was unilateral, there was no dialogue.

By the way, in Burgas – like everywhere – there is a small but vocal group of people who are against everything, no matter what it is. They have managed to stall a number of very good initiatives including of Mayor Nikolov only to endorse them at a later stage. I hope that the same will happen with the Burgas-Alexandroupolis project. As I already said, the pipeline became an election campaign issue last year, and was a tool for publicity for many people.

Basically the same happened in the town of Sozopol at almost the same time in 2008 but, frankly, we paid little attention to the referendum there because we don’t plan to have any facilities on the territory of the Sozopol Municipality.

There was a third referendum, this time in Pomorie, in 2009. The situation there was more interesting because they asked us if we are going to use their municipality’s territory. We said we weren’t going to but they nonetheless wanted to hold a referendum just to make sure. So basically the referendum was in support of our company’s position that we don’t want to have any facilities in Pomorie.

Because the respective zones for oil industry in Bulgaria were determined some 50-60 years ago. The Burgas region is a tourism-dominated region. There is no way we can have oil refineries and hotels in the same spot, there are designated zones for each.

This was the position of the previous government- and I suppose – of the current government as well – only the zones designated for certain industries can be used by them. If those are insufficient, their expansion could be considered but not in a chaotic way.

So we told the people in Pomorie back then – yes, technically, it would be more convenient and cheaper for us to build the oil pipeline through Pomorie but at the end of the day the environment and the tourism sector have to be preserved so there is no way to go for this option.

Of course, as a serious company, we considered the Pomorie route as well, and we told the people there – which led to some panic – but we are obliged to consider all technical solutions – but we decided against this option.

They reacted by saying that if we are considering their territory, this meant there was a chance the pipe would go through their town. I remember that they had prepared a map with 20 circles around Pomorie where the pipeline would go through – there wouldn’t be enough oil in the world to fill that many pipelines!

Referendums are a nice thing but unfortunately they are abused and many people use them to resolve their personal problems.

The critics of the Burgas-Alexandroupolis oil pipeline project say that Bulgaria will benefit from it least of all three participating states, while it risks the most. They say that the transit fee of USD 1 per tonne of crude oil is too small; and that an oil refinery will be built in Greece at the end of the pipe, while Bulgaria will be simply a transit country. How do you respond to this criticism? What does Bulgaria really stand to win from this project? Do the benefits outweigh the potential risks?

These claims are not very correct. First of all, Trans-Balkan Pipeline is a company where the representatives of the each of the three countries have equal rights, and decisions are made with consensus. There will be contracts between the company and each of the “receiving governments” so there is no problem for the Bulgarian Cabinet to see the conditions signed by Greece, and to demand the same if somebody thinks that the Bulgarian interests are not protected.

Does this mean that the conditions such as the transit fee could be re-negotiated?

They have never really been negotiated yet. So there is no way of talking about re-negotiating. There is the big issue about the oil transit fee. Nobody has ever negotiated its exact amount. Our company assumed for internal accounting purposes that the fee will be the same for Bulgaria and Greece but it has not even been decided yet whether it will be US dollars or euro. We have just assumed that it will be one and the same currency unit.

The other major question is the transit fee. People say that the revenues will be only USD 35 M. This is actually the minimum transit fee, which Bulgaria will receive and it is not even clear yet if that will be in EUR or USD.

35 million per year will be the fee that the Trans-Balkan Pipeline will be paying to the Bulgarian state without the latter moving its finger. This is just for the right of passage through Bulgarian territory, and the same goes for Greece.

Just to compare, I want to mention that all the combined taxes paid by all the banks operating in Bulgaria to the government in 2009 amounted to BGN 80 M.

So only the fee from Trans-Balkan Pipeline – which is Bulgaria’s direct revenue – equals the taxes paid by all Bulgarian banks. But we will also be paying taxes, customs duties, we will open new jobs and there will be many other benefits such as the development of the sailing business. As you know, Bulgaria hasn’t had an oil tanker fleet for decades, and the pipeline is one way to get it back.

Then, there are these accusations that refinery will be built in Greece as part of the Burgas-Alexandroupolis oil pipeline, while nothing will be built in Bulgaria.

This is a misrepresentation because if the pipeline is a transport system. If some of owners of the oil that will go through our pipe – because the oil is not owned by Bulgaria, Greek or Russian companies, it will be property of Chevron and other importers – they can build a refinery wherever they want, and to pay us to transport the crude oil. But we aren’t building any plants. We are only responsible for transporting the oil from Bulgaria to Greece.

Of course, it is important to create employment and which could will get more jobs – Bulgaria or Greece. Another issue is also key – we are EU’s entry point, and we have to stand our position that the Bulgarian customs will be in charge of the oil from the moment it fills the pipe till the time it reaches the EU consumers or is loaded on tankers to head for third countries. And this is something that I tell my Greek counterpart very often.

These are real issues that have to be resolved and I hope that with the support of the Bulgarian government we will be able to resolve them according to international best practices, and in Bulgaria’s interest.

When will the important details such as the precise amount of the transit fee be agreed upon?

As soon as possible, because the draft for this agreement has been ready since May 2009. There was no point in considering it then because Bulgaria was just about to hold regular general elections, which meant that there will be a new minister in charge of the project. We hope that now that a new minister has been placed in charge of the Bulgarian share in the Trans-Balkan Pipeline company, these delayed administrative matters will be settled.

Are the quantities of crude oil to be transported through the Burgas-Alexandroupolis oil pipeline guaranteed? In addition to Russia, where else will the oil come from?

It is clear where the oil will originate from. There are two options. One, through the Russian pipelines owned by Transneft leading to the Black Sea Port of Novorossiysk, and two, through the CPC (Caspian Pipeline Consortium) pipeline leading to the south of Novorossiysk, to a buoy terminal.

So this means that it will be oil from Russia and Kazakhstan?

Yes, in terms of its origin. For the time being we are envisaging 50% of the oil will come from Russia, and 50% from Kazakhstan. But this ratio might change.

Under an intergovernmental agreement, Russia is obliged to provide the oil, i.e. our company will be working on the principle “pay and ship”. We are selling our transport capacity, not an amount of transited oil.

Russia has committed to providing the oil, and the Russian oil reaching the Novorossiysk Port might reach as much as 70 million tonnes per year, and the Russians have negotiated to ship half of that amount though the Burgas-Alexandroupolis pipeline, and there are no obstacles to that.

As far as the CPC Pipeline is concerned, its annual capacity is 32 million tonnes of oil, of which 17 million have been guaranteed to be channeled through out pipe with an intergovernmental agreement. By 2014-2015, its expansion will be completed, and its annual capacity will reach about 67 million tonnes, and it could go as high as 70-80 million tonnes subsequently. Everything depends on the number of oil wells in operation around the start of the CPC pipeline along the Russian Caspian Sea coast.

So there is plenty of oil to transit, and that is not a problem. There is even enough oil for the Samsun-Ceyhan pipeline, our competitor in Turkey. There has been more and more talk about it precisely because the for months the Bulgarian government has not made clear it final decision on the Burgas-Alexandroupolis oil pipeline project.

Actually, in the face of Prime Minister Boyko Borisov, the Bulgarian government has stated that the pipeline will be constructed only if there is a positive environmental assessment. Well, there is no project that can be realized with a negative environmental assessment.

So we will fulfill this requirement, and the assessment will be internationally sanctioned because it is a trans-border project, and is monitored by the EU institutions in Brussels.

The problem for a long time was the fact that there was no minister in charge of this project, who would handle the current issues. There has been no Bulgarian position on the funding, and it is not even clear who is in the governing board of our company to represent Bulgaria.

So this last change placing the Bulgarian share of the pipeline under the responsibility of the Finance Minister is positive?

Of course, this is a step forward, we are finally getting out of the administrative crisis, to put it this way.

How do you answer criticism about Russia’s geopolitical influence and its connection with the Burgas-Alexandroupolis project? The critics even claim that Russia will be acquiring rights of extraterritoriality. Is it justified to claim that this pipe will give Russia enormous influence in Bulgaria and in the entire region?

The territory through which the pipeline will go has a status of land servitude, i.e. acquired right of passage. The land is Bulgarian. The ownership of the land will be changed only in the spots where there are large facilities, i.e. the coast pumping station and a mid-way pumping station, and the minor plots where the faucets control stations will be located. These will probably become the property of the Trans-Balkan Pipeline company where Bulgaria has full rights.

Given that the Russian company Lukoil is the owner of the major oil refinery in Bulgaria, I just don’t see any base for comparison between the influence of the refinery and of our project. What can Russia really do? Turn off the faucet and stop the oil of the American companies? This is ridiculous! And thus have its companies lose money? This is totally unrealistic.

People in Bulgaria should be rational and should understand that in our case the term “Russian project” is not meaningful. This is a joint project of three countries, two of which are EU member states. About 70% of the oil to be transited through it will go to the EU, 20%-30% to the USA, and a very small percentage to other markets. There is just no logic in such criticism.

With respect to what you just said, could you compare the Burgas-Alexandroupolis oil pipeline project with the dormant project for the Burgas-Vlore oil pipeline (also known as AMBO Pipeline)? Do you think the two projects have identical risks? If so, do you think the AMBO project, if activated, would enjoy a greater public support in Bulgaria given that it will be constructed and sponsored by American companies, without Russian participation? i.e. does Bulgaria have double standards with respect to the two projects?

Look, Americans are rich people. Rich people only buy fully furnished homes. It is more expensive but this is what they prefer. Poor people buy greenfield apartments.

So don’t be surprised – once the Burgas-Alexandroupolis oil pipeline starts running – when you see American companies acquire shares in it. They will buy shares – either from Bulgaria, or from Greece, or from Russia.

They are carefully observing the project, and are awaiting its completion and start of operation. They will pay more but they won’t leave it outside of their control because it is their oil that will be running through it. This is the truth.

As to the Burgas-Vlore oil pipeline, this is a very economically complex project. It is very long and goes through territories facing much political and economic uncertainty, and until those are cleared, there is no way it can be realized.

I mean my questions in terms of the reaction on part of the society and the political forces in Bulgaria, both pipelines will be the same in their starting point, the Gulf of Burgas, and could harbor the same risks, but their sponsors are different?

Yes, I am aware of that, I can say that there has been a negative reaction against our project, and perhaps there won’t be the same type of negative reactions against the AMBO Pipeline.

Perhaps one of the reasons for that is that there is a lot of uproar over the fact that one of the projects is Russian, and the other is American but I think that people will see that the Burgas-Alexanroupolis pipeline is a good and feasible project and they will accept it much more easily once it is completed.

Even though I would like to point out that it is very unlikely that to expect that if one of these two projects is realized first, the other one will be realized as well. Perhaps there will be another similar project elsewhere in the region such as Samsun-Ceyhan in Turkey, which might have better revenues and better fees compared to Burgas-Vlore.

Some media reports have suggested that US companies such as Chevron and Exxon Mobil and the Kazakhstan state company Kazmunaigaz are interested in buying the shares of Greece and especially of Bulgaria in the future Burgas-Alexandroupolis oil pipeline. How likely is this? Do you know of any indications of interest on part of these companies?

Yes, all of them at certain moments expressed desire to purchase shares, and they are watching the project closely. As much as our Russian colleagues might not be happy with this, there will probably be participation on part of these companies in the future.

Who can decide to sell shares of the pipeline? Why do you say that the Russians might be unhappy with the acquisition of shares by American companies?

Each shareholder can decide to sell by themselves, they just have to notify the others. I am saying this because our Russian companies are concerned that Bulgaria or Greece might sell their shares in Trans-Balkan Pipeline, which will that instead of with two other parties, they will have to work with several more partners. This would increase the difficulties.

The Russians have a lot of international projects, including the CPC Pipeline, where Chevron participates, and they know that it is more complicated when you have more participants.

But this is a matter of national policy, why not sell if you think you can profit more this way?

How likely do you think it is that Bulgaria might scrap the Burgas-Alexandroupolis oil pipeline project?

I think this would be a mistake because we will suffer all the negative consequences of such a decision.

The Bulgarian shareholder will have to compensate all expenditures made so far on this project, probably about EUR 70 M, because there are historical and other expenses.

The second thing is that since this is an international contract the practice of renouncing such a deal is very unclear because such contracts are signed in order to be followed.

There is a certain likelihood to see a repetition of what happened with the construction of the Gorna Arda hydro power cascade. You know that Bulgaria was sentenced to pay the Turkish consortium Ceylan about EUR 75 M for terminating a project for EUR 500 M.

If you multiply this by three, because our project will cost about EUR 1.5 B. you will get the sum that Bulgaria might have to pay for scrapping it, according to arbitration rulings in similar situation.

But all this is just a conjecture, I hope that this won’t happen in the very least because there are no good reason for Bulgaria to give up the Burgas-Alexandroupolis oil pipeline.

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Tags: Burgas-Alexandroupolis, Burgas-Alexandroupolis oil pipeline, greece, Russia, oil pipeline, pipeline, Burgas, Trans-Balkan Pipeline, Plamen Rusev

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