Russia's minister of industry and energy, Viktor Khristenko, is convinced that oil production will total 450 million tonnes by the end 2004, a 7% year-on-year increase. Exports will reach 260 million tonnes, which means that the increment in oil extraction will be exported.
Russia's transport infrastructure for export oil deliveries operates with difficulty but without delays. If problems arise, Russian oil workers and transport providers are generally not to blame. One problem is the critical situation caused by congestion in the Turkish straits. This is particularly true for tankers transporting Russian and Kazakh oil. In 2003, 135 million tonnes of oil and oil products were exported from Russia via the Black Sea. The situation is less critical for Azerbaijan's oil, as it is transported in smaller amounts.
"Traffic jams" are increasing on both sides of the straits along with the freight prices. Today, one third of the price for transporting a tonne of oil from Novorossiisk to Italian ports ($19.3) is spent on covering the demurrage of tankers waiting to pass through the Bosphorus and the Dardanelles. Russian exporters thus lose $400 million every year. Transit through Turkey has become a bottleneck for Russia's export both figuratively and literally.
However, the problem of passing through the straits is not only due to intensive traffic, but also measures adopted by the local authorities. For example, they have imposed a ban on tankers sailing at night and on the simultaneous passage of more than one tanker in daytime.
Ankara's tougher position on navigation security in the straits is clear. The Turkish representatives who recently told Russia's leadership that their country's straits are not pipelines know only too well the danger tankers in the endless line of barges pose for Istanbul, as they pass a few hundred metres away from heavily populated districts. By reducing the straits' traffic capacity and thereby averting the possibility of an environmental disaster, the local authorities cause congestion.
Obviously, this "clot" will not be unblocked in the long term either, even after the Baku-Tbilisi-Ceyhan (BTC) international pipeline is commissioned. It is expected to export tens of millions of tonnes of Azerbaijani oil from new Caspian fields. These millions remain to be extracted, though. Perhaps this uncertainty over the Caspian oil prompted the pipeline's builders to start actively wooing Russia and Kazakhstan with oil, simultaneously restricting the passage of tankers through the Bosphorus.
Where might a solution be found? Is there any alternative to the Turkish straits? Transneft, a state-run oil company and the leading operator of Russia's main pipelines, has long been thinking about this issue. Out of several bypass routes for Russian oil, experts at the Main Pipeline Design Institute, Giprotruboprovod, have pointed to two: the Turkish route, Kiyikoy (the Black Sea) - Ibrihaba (the Aegean Sea), and the Bulgarian-Greek route Burgas - Alexandroupolis.
In May 2004, the Transneft board of directors approved the company's participation in developing the project on Turkish territory. It includes a pipeline with a diameter of 1,220mm and the length of 193km, the main and relay pumping stations, the tank field, end terminals and loading berths. The project will take two years, and then the pipeline will start transporting 60 million tonnes of oil a year, assuming 50% of the Bosphorus' load.
The project's designers are counting on the opportunity to service ocean super-tankers with a deadweight of up to 300,000 tonnes and organise massive exports of Russian oil to America's Eastern Coast. According to their calculations, oil shipment from the Black Sea ports to Houston will become 10-11 days faster, and the freight price per tonne will fall by $7. Ocean tankers are currently prohibited from entering the straits.
Transneft will operate and lay the future pipeline. According to sources in the company, this will be their first experience on this field. A group of Turkish companies, Anadolu, will act Transneft's partner on the project and its main investor. So far, the sides have drastic differences over how much the project will cost with the Russians believing that at least $900 million will be needed.
According to Sergei Grigoryev, a Transneft vice president, the Russian side is fully prepared to implement the project and now the ball is in the Turks' court. Moreover, the participation of Russia's BP-TNK and Tatneft in the Kiyikoy-Ibrihaba project's working group guarantees that the pipeline will be filled.
At present, the EU's position is unclear, though Brussels can hardly be very happy that all the three southern oil transit routes will come from the former USSR (a sea and two land oil pipelines), leaving Ankara holding the "nuts and bolts." This is one of the reasons why the EU is lobbying alternative oil shipment projects in the Balkans. They could involve Bulgaria, Romania, Albania, Macedonia, Greece, and Croatia. The completed Ukrainian pipeline, Odessa - Brody, is considered to be another alternative route.
The Burgas-Alexandroupolis pipeline, developed ten years ago, is the most feasible of these projects. Russia's LUKoil, which has considerable interests in Bulgaria and Greece, is actively lobbying it, and the Russian and Bulgarian presidents discussed the project's future at a recent meeting. The Bulgarian government has adopted a decision to launch the project.
The third party is Greece, which participates in the project on a parity basis. Although the text of a trilateral government memo on the pipeline has been co-ordinated, the shares of each of its participants have not been officially registered. LUKoil also believes Greece's transit tariffs to be too high.
If the project is implemented, the 285km pipeline will transfer up to 40 million tonnes of Russian oil every year. The cost of the project is $700 million, while the recoupment period is seven to ten years, given current oil prices and tariffs.
Evidently, Russian oil has realistic projects for bypassing the Bosphorus, but it remains to start their implementation as soon as possible. Moscow will certainly make every effort to replace the narrow lane of the Turkish straits with a wide avenue to increase its oil exports.
