Russia’s Global Energy Network Includes $1.2 Billion Balkan Pipeline

Manufacturing News, Source : The Manufacturer US
Published : 19 Mar 2007 22:04

March 19, 2007--Researched by Industrial Info Resources (Sugar Land, Texas). In a week when Russia signed an agreement with Bulgaria and Greece to build the strategic Burgas-Alexandroupolis 279-kilometer crude oil pipeline to link the Balkans with the global markets, it was revealed that the country is aiming for a 20/25% pipeline network reserve capacity by 2015,and the cost estimate for the eastern pipeline to China has almost doubled from the original estimate of $6.6 billion to $11 billion.

Russia will take a 51% share in the new Balkan pipeline with Greece and Bulgaria 24.5% each. Russia’s state-owned oil company Rosneft (RTS:ROSN) (Moscow) and pipeline operator Transneft along with energy major Gazprom (OTC:OGZPY.PK) (Moscow) will hold the Russian stake in the project jointly. When complete, the pipeline will pump 257.25 million barrels (35 million tons) of oil per annum, a volume that could eventually be increased to 367.5 million barrels (50 million tons). The total cost of the project is estimated as $1.2 billion.

The pipeline will develop the roles of the Bulgarian Black Sea port of Burgas and Greece’s Alexandroupolis on the Aegean, avoiding the congested tanker traffic in Turkey’s Bosphorous Straits, and supply Russian oil to Europe, the U.S. and the Asia-Pacific region.

Sergei Mikhailov said that the adequate development of Russia’s oil and gas pipeline system is based on the implementation of such projects as the Eastern Siberia-Pacific Ocean pipeline, the North European gas pipeline and the Burgas –Alexandroupolis line. He said that the projects were aimed at diversifying the export deliveries of Russia’s raw materials to the world market and to making them more reliable. For related news report see February 5, 2007 – Energy Security and Diverse Markets Move the Great Pipeline Game.

Escalating costs and tough physical conditions could raise the total cost of the eastern pipeline to $20 billion with phase I linking Taishet in the eastern Siberian region of Irkutsk to Skovorodino in the far east of Russia’s at a cost of $11 billion. When complete, phase I will pump 588 million barrels to China per annum, boosted by the 367.5 million barrel phase II.

The $10.5 billion North European gas pipeline will supply gas to Western Europe with a pipe across the floor of the Baltic Sea to Germany. Mikhailov said that when all the projects are complete, Russian crude oil will account for 20% of consumption in Europe, 5% in the Asia-Pacific region and 1% in the U.S.

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