Greece to enter the global fuel transit market by year 2011

It is only a matter of time before Greece becomes a player in the international fuel transport market, following last week’s agreement with Russia and Bulgaria on the final text of the agreement for the construction of the Burgas-Alexandroupolis pipeline. The tripartite agreement will be signed in Athens in early March following 14 years of intense business and diplomatic negotiations. With the implementation of the pipeline, Greece and Bulgaria will become transit corridors for the transport of oil from its production sites to the world market. This role is expected to boost both countries’ strategic importance, even though neither possesses proven significant oil reserves. Between 35 and 50 tons of crude oil will pass annually through the Black Sea port of Burgas and the Aegean Sea port of Alexandroupolis, having been transported by ship from the Russian port of Novorossiysk across the Black Sea. Greece stands to benefit from the transit fees and the jobs that will be created during the construction of the pipeline at the port of Alexandroupolis and, indirectly, in the city itself. The construction of the pipeline has been the result of persistent efforts by consecutive Greek governments and, especially recently, the haste shown by the Russians for implementation of the project. This haste manifested itself in recent pressure on Greece and Bulgaria to act quickly and the threat by Russian President Vladimir Putin that «there are alternative ways» should the project fail. This haste from Russia had been predicted 14 years ago by the man who conceived the project, the late Nikos Grigoriadis, a close adviser to the late shipping tycoon Yiannis Latsis. Grigoriadis had foreseen the rise in global demand for oil and the need for new ways to transport oil to major consumers, ways that would be more secure and reliable and, at the same time, not threatening the existing strategic balance of forces. With these things in mind, Grigoriadis had designed a pipeline, not big by international standards in either length or capacity, but one which would allow Russia, Europe’s biggest supplier of oil, to bypass the Bosporus strait and thus lessen its dependence on Turkey. Traffic through the Bosporus has reached near-saturation levels and there are long delays, imposing additional costs on tankers and increasing the chance for accidents that may cause environmental disasters. The Bosporus strait’s capacity for oil transit stands at 110 million tons annually, but there have been years when up to 130 million tons have transited through the area. However, the available amounts from Russian and Kazakh oil fields through Novorossiysk stand now at 180 million tons. The Burgas-Alexandroupolis pipeline is expected to take up most of this extra capacity. The Tengiz oil field in Kazakhstan is 50 percent-owned by US oil giant Chevron, which, along with Russia’s Transneft and Kazakhstan’s KazMunaigaz, owns the pipeline that transports the oil to Novorossiysk. Chevron has asked the Russian government for permission to increase that pipeline’s capacity. Russia appears to have committed Transneft and KazMunaigaz to agree that the extra capacity will transit through the Burgas-Alexandroupolis pipeline, thus ensuring the pipeline’s long-term survival. At the same time, Russia precludes the transit of Kazakh oil through the Baku-Ceyhan pipeline which passes through Azerbaijan, Georgia and Turkey. The two companies will also take part in the consortium building the Burgas-Alexandroupolis pipeline. Russia used the argument that the consortium that will build the pipeline must be controlled by the oil producers, ensuring in the process the control of 51 percent in the project. The recent pressure by Russia to hurry up also put an end to Bulgaria’s objections. With the signing of the tripartite agreement in Athens, the way opens for the consortium of Russian, Kazakh, Bulgarian and Greek companies to start work on the pipeline, most likely in 2008. Oil is expected to flow sometime in 2011. Nikos Stefanou, general secretary for energy at the Ministry of Development, says that the agreement was the result of a five-month «sprint» of bilateral and trilateral negotiations. «There was a shared desire by the three countries to resolve, in the shortest time possible, all outstanding issues,» Stefanou told Kathimerini. «Despite the successful conclusion (of negotiations), there are many things still to be done. The international (construction) consortium must be set up and transit agreements signed with Bulgaria and Greece,» he added.