Financial Times

Russians may upgrade Croatian pipeline for oil exports. By ANTHONY ROBINSON and KERIN HOPE. Zagreb, Athens. 8 Nov 1996

The Russian oil industry is having second thoughts about plans to build a 350km pipeline costing more than Dollars 600m (Pounds 366m) from the Bulgarian port of Burgas to the northern Greek port of Alexandroupolis. Instead, the Russian oil ministry and Transneft, the Russian oil pipeline company, are negotiating with INA, the Croatian oil company, on a proposed Dollars 120m plan to transport up to 14m tonnes of Russian oil a year along the Jadran pipeline.

The Croatian pipeline, which was built in 1979, connects with the former Soviet Druzhba (friendship) pipeline at Gola in northern Croatia. It terminates at the Croatian deep-water oil port of Omisalj near Rijeka in the northern Adriatic.

Omisalj has extensive under-used storage facilities and is capable of accommodating two 400,000dwt tankers at a time. By taking oil along upgraded pipelines to Omisalj the Russian oil industry would save money and gain easier access to markets in Italy and the western Mediterranean.

Russia's search for enhanced access to European oil markets reflects Moscow's determination to establish itself as the main conduit for the estimated 60m-70m tonnes a year of oil from the Caspian region which is expected to come on stream in the next century.

The original plan to ship future Caspian and central Asian oil from the Russian Black sea oil port of Novorossiisk to Burgas and then by a new pipeline to the northern Aegean was designed to circumvent the crowded Bosphorous.

But the plan has several disadvantages. These include environmental objections to the passage of large oil tankers through the crowded, tourist-oriented Aegean sea and the cost of building both a new pipeline and additional storage facilities at both ends.

The Jadran variant would be both much cheaper and more convenient but would require some upgrading of the existing Druzhba pipeline. This was built in the 1960s and runs from Orenburg in southern Russia through to Soviet-built refineries in Hungary, the Czech Republic and Slovakia. Mr Andrija Kojakovic, managing director of INA, which has a 33 per cent stake in the Jadran pipeline, told an investment conference in Zagreb yesterday: 'The Russians are interested in using the pipeline to export crude and see it as an alternative to the Bulgarian project.'

A representative of the Latsis organisation, the Greek shipping and oil group which launched the Burgas project two years ago, said he was surprised. He said the Burgas project seemed to be back on track after months of delay caused by Bulgarian demands for a larger equity stake in Trans-Balkan Pipeline.