The planned AMBO trans-Balkan pipeline project to pump crude oil fromthe Bulgarian Black Sea port of Burgas via Macedonia to the Albanian AdriaticSea port of Vlore is still viable, the project's co-founder said in a recentinterview.
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Gligor Tashkovich, the former Macedonian foreign investment minister andboard member of AMBO, said the project has kept a low profile in recent yearswhile seeking major investors and waiting for the timing of the project tomaterialize.
"AMBO is still moving forward," Tashkovich said this month, withcompleting the financing being the immediate stumbling block.
But the announcement in December 2010 of the expansion of theChevron-led Caspian Pipeline Consortium (CPC) pipeline gave the AMBO projecta boost.
"It cements AMBO's long-term development prospects," he said.
The 890 km AMBO pipeline is designed as a 750,000 b/d transit link thatwould divert new volumes of Caspian crude sent to the Black Sea away from thecrowded Bosporus Strait which bisects Turkey.
AMBO was first conceived in the summer of 1993. Along with the other twomain Bosporus bypass pipeline projects--Burgas-Alexandroupolis and Turkey'sSamsun-Ceyhan--AMBO has faced long delays because the crude oil that wassupposed to arrive in the Black Sea in sufficient quantities to fill one ormore of these lines back in the late 1990s has still not arrived.
Tied to the availability of crude oil in the Black Sea is the issue offinancing.
Investors, including oil companies, that are prepared to put up riskmoney are the first requirement in projects such as AMBO.
"Banks are reluctant to fund pipeline projects that don't have acontractually guaranteed oil supply. However, once investors have providedthe required funding and shippers have committed their oil, debt financing bythe banks will follow," Tashkovich said.
"If one of the Middle East sovereign wealth funds wants to finance AMBO,we would certainly welcome their interest," he said.
But AMBO plans to be in a good position to ship the extra oil expectedto begin entering the Black Sea from 2013.
"Currently, most Caspian region production is destined for Westernmarkets hence the need for a western bypass of the Turkish Straits,"Tashkovich said.
Earlier this year, Chevron officially launched its $5.4 billion projectto double the capacity of the CPC oil route to 67 million mt/year (1.34million b/d) by 2015.
The new volumes are to come mainly from Kazakhstan's Tengiz andKarachaganak projects, where crude output has been increasing, perhaps alsofrom new projects, such as Russia's Korchagin field that launched earlierthis year and Kazakhstan's Kashagan, whose start-up is scheduled for 2015.
However, an increase in oil being shipped from Black Sea ports toMediterranean markets through the Bosporus is expected to lead to even longerdelays because of the added congestion.
This is especially visible during the extended winter season which runsfrom mid-November into April.
Naturally, there are also increased fears of an environmental disasterin the Bosporus as the level of oil traffic rises.
Tashkovich stressed that AMBO was not competing with any other Bosporusbypass pipeline projects, but said nonetheless that AMBO's economics weresuperior to the others.
"When people study the economics of our pipeline, we are certain thatAMBO will hold up to the additional scrutiny," he said.
Tashkovich also said that a tripartite convention has enshrined the AMBOproject in Bulgarian, Macedonian and Albanian law.
The convention, which was negotiated and signed in 2007 at ministeriallevel, has been successfully ratified by all three parliaments, he said.
"It now has the status of a legal treaty. We have a turnkey project; weare just waiting until the oil actually arrives," he said.
Despite the positives, AMBO would also have to carry out anEnvironmental and Social Impact Assessment Study (ESIA) on the whole projectbefore any construction permits in the three countries can be awarded.
This has also been an obstacle to Burgas-Alexandroupolis.
AMBO President and CEO Ted Ferguson told Platts that once financing forthe project is secured, it would move to carry out the ESIA.
"While AMBO completed an Environmental Impact Assessment study forfeasibility purposes, this in no way can be construed to be sufficient forthe development phase," Ferguson said.
"A full ESIA requires at least a year studying the 'right of way' andorganizing numerous meetings of the communities potentially impacted by thepipeline," he said.
AMBO, Ferguson said, has been very clear in its planning that the ESIAwould not be undertaken until AMBO has received sufficient financial interestin the project.
"We are confident that financial interest will materialize as soon ascrude oil will predictably flow into the Black Sea in greater volumes," hesaid.
--Stuart Elliott, firstname.lastname@example.org