Construction of the project, due to pump 700,000 brl/yr of Russian crude to the Aegean port of Alexandroupolis from the Bulgarian Black Sea port of Burgas, was previously expected to start in late last year or early this. But Bulgarian regional development and construction minister Asen Gagauzov said that the three countries were yet to pick a bank to help them raise funding, prepare an updated feasibility study, and work out the project details. “We expect to be ready to start construction around September-October 2009,” Mr Gagauzov said. “To finish the project would take about two years, which means launching the pipeline in 2011.”
The Dutch-registered Burgas-Alexandroupolis project company will choose a financial consultant between Societe Generale, Lazard, and Citigroup imminently, the minister said. The global financial crisis and tighter credit conditions should not hinder efforts to raise funding for the project, which was initially estimated at between $600 and $900 million, he said. “The Russian side has said that if other funding is not found, they are ready to provide the money. But our wish is to have an investment project with banks providing the funding,” Mr Gagauzov said. He said it was hard to say how much exactly the pipeline would cost as not all project details were clear yet and the estimated cost remained at around $1.4 billion.
Rising construction and raw material costs have made many energy projects more expensive worldwide, and some analysts say the cost of the Burgas-Alexandroupolis pipeline is likely to jump well above the current estimate. “It (the cost) also depends on when we will launch the project because the longer we procrastinate, the higher the price would become due to rising inflation,” Mr Gagauzov continued. He said Bulgaria was open to discussing selling part of its 24.5% stake in the pipeline to interested parties such as US oil major Chevron and Kazakhstan’s state-owned KazMunaiGaz, but would only do it after the project was launched to maximize its profit.
The idea of selling the whole or parts of the stake was first raised several years ago but was later abandoned. Bulgaria and Greece will each initially own 24.5% of the pipeline. Russian oil pipeline monopoly Transneft, state-controlled oil producer Rosneft, and Gazprom Neft, the oil arm of gas export monopoly Gazprom, will share the 51% Russian stake and provide crude for the project.