Caspian oil seeks safe transit route

Sep 25, 2001 02:00 AM

by Marika S. Karayianni

The dependence of world oil demand from the Persian Gulf rates at 40 % and is expected to rise by 2010 up to 52 %, with the pre-condition that no alternative energy sources are developed. During this last decade, the developed countries, having realized the need to become more energy independent, especially after the bitter lesson of the two oil crises of the 70s, focused their attention to the exploitation of the oil fields of the Caspian Sea, in particular in Kazakhstan and Azerbaijan.
The transportation of the hydrocarbons from the distant and land-locked countries of the Caspian to Western Europe is the biggest challenge for the Western oil companies operating in the region. The increase of the tanker traffic in the Bosporus, as a result of the opening of the CPC line, along with the serious danger of an accident brings up the issue of transportation of oil through the West coast of the Black Sea with pipelines.
The issue becomes all the more impending, as US naval forces are gathering in the Persian Gulf in the aftermath of the appalling terrorist attack against the US in September 11. A potential second round of terrorist attacks followed by US retaliation not only against Afghanistan but also against Iraq will likely lead to overall destabilization of the whole Middle East. The price of oil will go up and the world markets will be desperately looking for alternative solutions, i.e. the Caspian oil.

In this context, the trilateral Greek-Bulgarian-Russian proposal to transport the oil coming from Novorossiisk through the Burgas-Alexandroupolis land pipeline gains a new momentum, as it represents the most viable and well advanced of the three pipeline proposals to bypass the Bosporus. The other two proposals are the Burgas- Vlore project, widely known as AMBO (Albania, "Macedonia", Bulgaria) and the Konstanza-Trieste project.
The comparative advantages of the Burgas-Alexandroupolis project lie primarily in the absence of any security danger for the safe transit of the pipe, as it crosses an absolutely stable region and ends up in a EU Member-State. Moreover, the construction cost is relatively low ($ 600-700 mm), due to the fact that the proposed route is a short one (260-300 km), which means that its completion will be rather swift and the transit tolls equally low.

What does the B-A project mean for Greece in real terms? The revenues for the Greek Merchant Navy will be enormous, new jobs will be created especially in Northern Greece with the subsequent upgrading of the port of Alexandroupolis. Furthermore, the creation of a pipeline along the Greek-Turkish and the Greek-Bulgarian borderlines in the Evros river is bound to contribute to the climate of mutual trust and cooperation among the three Balkan neighbours in the very fragile area of the Western Balkans. As a result, it is estimated that there will be a push to the activities of the SMEs in the regional level from both sides of the borders.
The Greek Minister of Development N. Christodoulakis paid an official visit to Bulgaria and held discussions with the new PM Symeon Sax-Coburg and his counterpart Minister Paskalev. There seems to be a positive shift of the new Bulgarian administration with regard to the realization of the final steps for the legal establishment of the Trans Balkan Oil Pipeline, the company, which will undertake the construction of the Burgas-Alexandroupolis pipeline. The previous Bulgarian administrations had been rather reluctant to move on with its implementation, claiming 25 % participation (a rather exaggerated claim) to the shares of the yet... unborn company.

However, the current developments and the new Bulgarian administration impose a rather pragmatic approach. It is worth underlining the statement of Minister Paskalev that in the final analysis the economic criteria will judge which of the pipeline projects the investors will choose to implement.
In this framework, the two following meetings will be crucial for the fate of the Burgas- Alexandroupolis project:
The trilateral meeting in Sofia in October 2001 between the experts and the high level meeting in Athens in December 2001 between President Putin and the Greek Prime Minister Simitis.
With respect to the Burgas-Vlore project, it is actively supported by the US as an alternative to the B-A project. It is indicative that the headquarters of the consortium are located in NY and not in the Balkans! However, due to current the destabilization and political turmoil in FYROM, Kosovo and Southern Serbia its realization is very unlikely. Moreover, the pipe will need to cross 950-1000 km through the three Balkan countries and to go up and down tow chains of mountains 1.500- 2.000 mm high in the borders of Bulgaria with FYROM and those of FYROM with Albania.
This fact will oblige the consortium to install numerous compression stations along the route in order to secure the unstoppable flow of the oil. For all the above reasons, the construction cost is estimated at $ 1,2 bn and the transit fees will be equally high. The only comparative advantage of this project, if it were to happen, is that the pipe will end up in the Adriatic Sea, much closer to the heart of the European markets.

Finally, the Konstanza-Trieste project: The comparative advantage of this project is the fact that 63 % of the pipeline infrastructure already exists. The negative part is that the route passes from an extremely long, difficult and volatile area through the Carpathian Mountains and the Western Balkans and cuts off the Mediterranean Sea. The statement of Minister Christodoulakis in this respect is characteristic: " For such issues, the map itself usually gives the best answers".

Source: Marika S. Karayianni, Lawyer, Political scientist ICBSS Research Associate
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