By Kakia Papadopoulou
The Burgas-Alexandroupolis pipeline project seemed on hold for now following a series of disagreements between Moscow and Sofia on issues like who will control the Burgas and Alexandroupolis port storage facilities and for how long. However, industry observers see deeper disagreements stemming from Russia’s desire to have the absolute say in the whole process and finally the management of the pipeline.
On the other hand, the bickering between Russia and Bulgaria practically leaves Greece with the least expectations and claims, despite Athens’ initial plans- which masterminded the idea of the project back in the 90’s- to control the operation of the pipeline’s management.
“We are not optimistic at all. The Russians are playing it hard, and it seems that they will get the full control of the pipeline,” said a senior government official.
Earlier in the month, the Greek Development Minister Dimitris Sioufas admitted that there will be delays in the signing of the final agreement for the construction of the pipeline.
“There are some different approaches on the matter between Russia and Bulgaria and the two governments should work together for their settlement,” Sioufas had said.
The construction of the 280-kilometer pipeline was scheduled to be signed before the end of the year. The pipeline will carry Russian oil through Bulgaria and Greece avoiding its transit through the Bosporhus busy straits.
The issue is getting more complicated as Bulgaria which will hold a 24.5% stake in the pipeline might move it and sell it, or part of it to foreign companies and has held initial talks with Kazakhstan oil company KazMunaiGas and U.S. Chevron, as the country’s Energy Minister Asen Gagauzov admitted ealier in December.
According to the initial agreement, Russia, would hold the majority 51% stake while Greece will control the remaining 24.5% share. However, if Russian’s pressure on either Athens or Sofia to put other foreign partners of their choice into the two countries’ already appointed coordinators of the project, it is obvious that the Greek and Bulgarian shares will be further diluted.
Initially, Bulgaria had appointed Neftochem to participate in the construction of the pipeline.
The Russian tool of pressure is the old, known story: natural gas. Athens has been committed to the construction of the Greece-Italy gas pipeline, a project which for the time being has been stalled as simply there is no gas to flow into it. The energy-rich resources of the Caspian Sea seem to have been drained for the particular pipeline.
The pipeline which would carry gas from the Caspian region through Turkey to Greece and then to Italy and from there the fuel would hit the western markets, supposedly would transport gas from the huge Shah-Deniz field in Azerbaijan which will start production in the beginning of 2007. However, the expected production has already been contracted by Georgia, Turkey and Azerbaijan itself. Larger quantities will be available beyond 2014, but it is unlikely Baku to sell any left over supplies, if there will be. In early December, Azerbaijan announced that it will stop importing Russian gas beginning January after Moscow asked for more than double its previous price, putting more pressure on the first phase of Shah Deniz. The move would result in a deficit of 4 billion to 4.5 billion cubic meters.
Taking the angle from the Burgas-Alexandroupolis project, it is clear that Moscow pushes Athens to agree on a wider energy package.
Given that it is not Athens that has an arbitration role in the Greece-Italy pipeline as the main buyer will be Italy’s Edison, there is less room for maneuvering. In addition, Turkey will have to agree on gas transit terms, both technical and financial.
In the meantime, only last week, Gazprom signed a memorandum with the Serbian government to study building a gas pipeline running from Bulgaria through Serbia and Croatia to Italy.
The project, which Serbia has said could cost more than $800 million is designed to increase Gazprom’s exports to Europe, which already gets a quarter of its gas from Russia. It appears that Gazprom is using the potential Serbian route as one more pressure point in its efforts to secure a major south axis for transporting gas to western Europe.