Talks between Bulgaria and Russia on Burgas-Alexandroupolis oil pipeline.

Sept. 8, 2010

This week Bulgaria’s Deputy Prime Minister is scheduled to discuss Russian proposals in Moscow to try and get agreement for the long delayed construction of the Burgas-Alexandroupolis oil pipeline.

The pipeline is one of two planned to circumvent the congested straight of Bosphorus which separates the European part from the Asian part of Istanbul. 30Km long, with a width of only 700m long it is the world’s narrowest strait used for international navigation to connect the Black Sea to the Mediterranean Sea.

The proposed project is to construct an oil pipeline from Burgas, on Bulgaria’s Black Sea coast, to Alexandroupolis, on Greece’s Mediterranean coast. The total length of the proposed pipe is 280 kms. The planned initial capacity is for 700,000 barrels per day, rising eventually to 1.0 million barrels per day. The project was agreed between Russia, Bulgaria and Greece in 2007 and a deal to construct the pipe was signed in 2008. Construction was due to start in October 2009 and with a scheduled completion date in 2011.

The project never started. The proposed terminal and pipeline quickly became a contentious issue in Bulgaria and local governments on Bulgaria’s Black Sea voted against it. The current Center-Right government in Bulgaria won the July 2009 election and one of its promises was to review the proposed, and very unpopular, pipeline. In June of this year, Bulgaria’s prime minister unexpectedly said that his government was “giving up” on the project. Some phone calls later (from Brussels and Moscow for sure) and the government quietly backed off from this comment.

Since then, there has been a flurry of political activity. The Greek Prime Minister visited Sofia in mid July to push for the project and PM Putin spoke with both his Greek and Bulgarian counterparts concerning “energy projects” in late July. Transneft then invited the Bulgarian delegation to Moscow for the talks that are scheduled for this week.

Freeing the Bosphorus from oil tanker traffic will provide Russia with alternative routes while allowing it to remain a key player in the Central Asian energy sector.

It is also a necessary pre-condition for the planned expansion of the CPC pipeline that carries Caspian oil via Novorossiisk.

This prospect is more difficult than Russia would like as the Bosphorus is the only way for ships from Russia’s Black Sea ports (plus those from Ukraine, Georgia, Romania and Bulgaria) to exit into the Mediterranean Sea.

Currently the channel handles traffic at three times that in the Suez Canal. But, unlike Suez and the Panama Canal, Turkey cannot charge transit fees as the use of the Bosphorus is governed by the 1936 Montraux Convention, which set free passage for all commercial vessels. Turkey can, however, control the flow of vessels for safety reasons.

The big problem is the almost 2.0 million barrels of oil carried through the channel each day, most of which is from Russia’s Novorossiisk Seaport. In the past, Turkey has regularly held up the oil tankers for weeks citing safety factors. The political relationship between Moscow and Ankara is clearly much improved under the AKP's government but the environment issue about oil tankers using the Bosphorus is very sensitive and needs to be resolved.

The oil tankers need to be removed from the channel. That is partly because of the risk of an accident that could block Russia’s Black Sea exit route for a very long time and partly because Russia wants to send more non oil traffic through the route. It cannot do that until the oil tankers are removed or, at least significantly reduced in number.

In addition to the proposed Burgas-Alexandroupolis route, Russia has also agreed to supply oil to a second by-pass pipeline. This route will take oil across Turkey from the Black Sea town of Unye (previously it was to have come via Samsung but the terminal has been moved) to the country’s main oil terminal at Ceyhan on the Mediterranean.

The Samsun-Ceyhan oil pipeline is a project to transport Russian and Caspian oil from the Black Sea to the Mediterranean by circumventing the Turkish Straits. This pipeline will be 550 kms long and has a planned capacity of 1.5 million barrels per day.

While the Unye-Ceyhan pipeline – at full capacity - would take the bulk of the current oil volume out of the Bosphorus, it would not allow for any additional oil volume. Russia wants to remain a key transit country for Caspian oil and that means it has to allow for the planned doubling of the CPC pipeline capacity. Otherwise that oil might go either along a new pipe built in parallel to the existing Baku-Ceyhan pipeline or across a new pipeline to China.

The shareholders of CPC recently announced that the current 700,000-barrel per day capacity is to be doubled to 1.4 million barrels by 2014. For that to happen, both the Burgas-Alexandroupolis and the Unye-Ceyhan pipes will have to be operational. Otherwise the Bosphorus will be even more congested; delays longer and greatly limit Russia’s ambition to grow other exports from Novorosiisk