Putin gets the Burgas-Alexandrupolis pipeline moving - at last

Nearly one third of Russia's exports of oil and petroleum derivatives (Total 70 MN. Tonnes) pass through the Bosphorus and the Dardanelles (and Kazakh oil exporters are also a major users). Turkey, aware of the dangers of a major incident in downtown Istanbul are increasing controls and limits on the passage of tankers which not only restricts flows but increases costs by demurrage ( a warehousing cost paid to the ship owner whilst it waits to transit). It is claimed that in 2004 Russian exporters incurred unscheduled costs exceeding USD$400 Mn.

This has now resulted in focusing ther minds of the Russian oiligarchs and explains why Russian President Vladimir Putin was in Athens yesterday to meet Greek Prime Minister Costas Karamanlis and Bulgarian President Georgi Pyrvanov. The construction of a US$700 MN , 300 km Greek-Bulgarian-Russian oil pipeline bypassing the Bosphorus and the Dardanelles, talked of for over a decade, looks like it will soon start.

Whilst there is agreement on objectives there are still some hurdles to full and final agreement.Land has to be bought, the Russian exporters, LUKoil, Gazpromneft, Rosneft, TNK-BP, Transneft and others, have to sign up to make sure the rquired capacity of an annual 35 Mn Tonnes is committed.

TNK-BP have decalred an interest in the project but are also said to prefer that the Caspian Pipeline Consortium increase its Baku-Tbilisi-Ceyhan capacity, perhaps by building a second pipeline.

Putin's arrival in Athens will provide the necessary impulse for making the Burgas-Alexandrupolis project a reality, just as President Clinton's presence in Istanbul kick started the Baku-Tbilisi-Ceyhan pipeline ( and the Amoco end of the transformed BP also had it's mind change and spine stiffened).

As Bulgaria approaches EU membership, the time is ripe as the European Union is also interested - by 2030 most – 70% - of European Union’s energy needs will have to be met by imported energy. European Energy Commissioner Andris Piebalgs has said the EU is ready to finance part of the pipeline's construction.

Piebalgs has also been active in developing EU agreements with Kazahkstan and met the President of the Republic of Kazakhstan Nursultan Nazarbayev , the Minister of Foreign Affairs and the Minister of Energy and Mineral Resources, Vladimir Shkolnik on a visit in May this year to discuss gas and oil supplies. He also visited the offshore Kashagan oil field in which British Gas , ENI, Exxon Mobil, Royal Dutch/Shell, TotalFinaElf, are partners with 16.67% stakes.

Discovered in July 2000, Kashagan could be the world’s fifth largest oilfield. The field, 75km SSE of Atyrau, lies in just 3.7m of water. Temperatures can fall below -20°C in winter and a coating of ice, several metres thick, forms in this part of the Caspian Sea for many months of the year. Production dates keep being delayed as the problems of operating in these conditions present major problems.

However the Kazakhs are playing fast and loose, "keeping it's options open" as the British Gas share is/was up for sale and there is much talk of building pipelines to China ( a joint Kazakhstan and China 1,800-mile (3,000 km) oil pipeline from Western Kazakhstan to China costing US$3.5 Bn.)and the Persian Gulf to export Kazakh oil and gas.

STOP PRESS

Forbes reports today that Kazakh energy minister Baktyjoka Izmukhambetov says production from Kashagan which is being developed by the Italian Eni SpA could see commercial production of the Kashagan oilfield, delayed to 2010.

They state that the field has estimated reserves of 45 Bn. barrels, of which between 8-13 Bn. barrels are currently considered recoverable.

Pic 1515Tonne Arcticaborg icebreaker which can continuously break ice 1m thick at work in the Caspian.