By Kakia Papadopoulou
The Russians are rolling up their sleeves for the Burgas-Alexandroupolis pipeline. They want the project done soon, fast and tailor-made.
In less than a month’s time, since the Russian President Vladimir Putin visited Athens for the official signing of the much-touted and long-delayed pipeline, Kazakhstan’s Energy and Mineral Resources Minister Baktykozha Izmukhambetov said only last week that his country wants a stake in the pipeline and the government will start talks next month with Greece and Bulgaria after it finishes consultation with Russia on the deal. Yesterday, Gazprom’s CEO Alexei Miller passed by Athens and held talks with the Greek Development Minister to extend Gazprom’s gas supply contract with Greece through 2040 from its expiry date in 2016.
It has been rumoured for time that Russians were pushing Athens and Sofia to pass some of their stake – each side holds a 24.5% share in the project- either to Kazakhstan oil companies or even other partners that will be useful for future agreements to Russians. Russia holds a 51% stake in the 280-kilometer pipeline, which bypasses the busy Bosporhus Strait. The stake in the hands of three state-controlled companies, one of which is Gazprom’s oil subsidiary Gaz Neft.
“The tentative understanding is that we will get part of the 49% stake of Greece and Bulgaria in the project,” said the Kazakh Energy Minister.
By taking stake in the pipeline, Kazakhstan will be able to further increase crude exports, shipping to world markets via the Russian Black Sea port of Novorossiisk.
Clearly, industry observers see Kazakhstan’s involvement in the Burgas-Alexandroupolis pipeline as a trade-off for Russians’ increased participation in the Caspian Pipeline Consortium pipeline
Izmukhambetov also said Kazakhstan, which is steadily increasing production as its Tengiz offshore fields, wanted to speed up talks to expand the CPC project running along the Caspian's north to Novorossiisk.
Russia and Kazakhstan have long been at loggerheads over plans to double the pipeline's capacity to 1.34 million barrels per day. The expansion is vital for Kazakhstan to increase its oil exports to some 3 million barrels per day in the next decade. Russia, however, has resisted the move, which would put millions of tons of oil in competition with Russian oil for the limited number of tankers allowed from Novorossiisk through the overcrowded Bosporus.
Izmukhambetov said Russia had indicated a willingness to expand the CPC pipeline in parallel with the Burgas-Alexandroupolis pipeline.
Russians are playing it hard, and their pressure tool in this case is natural gas. Miller’s visit yesterday in Athens should be seen in that context.
Athens has been committed to the construction of the Greece-Italy gas pipeline, a project which is seen completed by 2011. Still, there are supply problems which poses serious impediments for the operation of the 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 started production in the beginning of 2007. But it is highly unlikely, for Baku to have adequate gas supplies for export before the second phase of the project in 2014.
Gazprom’s gas will be valuable. 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.
Gazprom already supplies a quarter of Europe’s gas and its share will rise in coming decades. It is clear that it wants to expand its reach by getting access to end users.
The company said that Miller discussed the Burgas-Alexandroupolis pipeline on his trip to Athens, but gave no further details.
What remains to be seen is the final stake that the Greek side will end up in pipeline-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.
By the way, Athens should be prepared for more visits from Russian top government officials until the deal is done. After all, the Russians are keen and effective players of international diplomacy.