Changing pipelines, diversifying investment?
Last week, ONGC Mittal of India claimed that Oman had offered its stake in the Caspian Sea pipeline to the company for 'about $200 million.'
Oman and Kazakhstan signed a memorandum of understanding regarding the Caspian Sea pipeline in June 1992. Work was delayed, and the deal was re-jigged in April 1996 to include Russia with a 15 percent stake. Restructuring concluded late in 1997.
The lead partner in the consortium of governments and private oil companies is Chevron Oil, which is managing the refinery at the Caspian Sea port of Tengiz, at the eastern end of the pipeline. The western end of the pipeline terminates at the Russian port of Novorossiysk on the Black Sea.
Chevron holds 15 percent. Russia currently holds 24 percent, Kazakhstan 19 percent and Oman has continued to hold seven percent. Royal Dutch Shell holds 7.5 percent.
The pipeline is currently handling 650,000 barrels of oil per day but is scheduled to expand to 1.4 million barrels and even 1.6 million barrels by 2015.
The Russians are expected to benefit by using 25% of the capacity of the pipeline. The Russians have also been holding up plans for expansion. They want more revenue from the pipeline and are claiming back taxes as well as checking the books. RosTekhNadzor, the Russian technical standards agency, cleared the Chevron pipeline of any technical breaches in January. But Russian objections to the expansion are eroding the value of the investment by up to $50 million a month.
A contact of mine in Kazakhstan suggested dryly that perhaps the prospect of supplying lots of steel for the pipeline might also have entered into the equation for Mittal.
Meanwhile, US Assistant Secretary of State for Economic, Energy and Business Affairs Daniel Sullivan visited Kazakhstan in early February to discuss alternative routes for exporting Kazakh oil and gas almost all of which are transported through Russia. He is reported to have said that 'it is high time that Kazakhstan joins the Baku- Tbilisi-Ceyhan oil pipeline project.' a mere 1,768 km of pipeline crossing Azerbaijan, Georgia and Turkey, emerging at the Ceyhan Marine Terminal, because 'the Russian transportation system will not be able handle the ever-increasing volumes of Kazakh oil and gas exports to Europe.'
Also early this month Oman signed an MoU expressing interest in investing, via Oman Oil, in a 'trans-Balkan oil pipeline that would carry Urals and Caspian crude from Bulgaria's Bourgas to the Greek port of Alexandroupolis'.
Well, a Russian agency announced on 2nd February that 'Russia’s national oil pipeline operator Transneft, state-owned oil company Rosneft and Gazprom Neft, an oil division of Russian gas giant Gazprom, have set up the Burgas-Alexandroupolis Pipeline Consortium,' which I guess is one and the same.
Russia's Deputy Minister for Industry and Energy, Andrei Dementyev, has said that shareholders in the Caspian Pipeline Consortium would be welcome to invest in this new 280 km pipeline which will bypass holdups in the Bosphorus and the Dardanelles.
It rather looks as if Oman is spoilt for choice when it comes to choosing pipelines.
Oman and Kazakhstan signed a memorandum of understanding regarding the Caspian Sea pipeline in June 1992. Work was delayed, and the deal was re-jigged in April 1996 to include Russia with a 15 percent stake. Restructuring concluded late in 1997.
The lead partner in the consortium of governments and private oil companies is Chevron Oil, which is managing the refinery at the Caspian Sea port of Tengiz, at the eastern end of the pipeline. The western end of the pipeline terminates at the Russian port of Novorossiysk on the Black Sea.
Chevron holds 15 percent. Russia currently holds 24 percent, Kazakhstan 19 percent and Oman has continued to hold seven percent. Royal Dutch Shell holds 7.5 percent.
The pipeline is currently handling 650,000 barrels of oil per day but is scheduled to expand to 1.4 million barrels and even 1.6 million barrels by 2015.
The Russians are expected to benefit by using 25% of the capacity of the pipeline. The Russians have also been holding up plans for expansion. They want more revenue from the pipeline and are claiming back taxes as well as checking the books. RosTekhNadzor, the Russian technical standards agency, cleared the Chevron pipeline of any technical breaches in January. But Russian objections to the expansion are eroding the value of the investment by up to $50 million a month.
'In fact, expansion is integral to CPC realizing its full economic potential for the host governments and shareholder companies.' Caspian Pipeline Consortium website.Such is the power of
RosTekhNadzor, along with state environment watchdog RosPrirodNadzor, that it has become one of the most feared institutions among foreign investors after months of pressure on the Royal Dutch Shell-led Sakhalin-2 oil and gas project.Given the equivocation and the lack of return on investment, it can hardly be surprising that Oman Oil, the Oman government's investment company, decided that it wanted to pull out, although agreement is required from the other members of the consortium.
Shell and its partners ultimately decided to sell half of Sakhalin-2 to state gas monopoly Gazprom late last year. After the sale the pressure quickly subsided.
A contact of mine in Kazakhstan suggested dryly that perhaps the prospect of supplying lots of steel for the pipeline might also have entered into the equation for Mittal.
Meanwhile, US Assistant Secretary of State for Economic, Energy and Business Affairs Daniel Sullivan visited Kazakhstan in early February to discuss alternative routes for exporting Kazakh oil and gas almost all of which are transported through Russia. He is reported to have said that 'it is high time that Kazakhstan joins the Baku- Tbilisi-Ceyhan oil pipeline project.' a mere 1,768 km of pipeline crossing Azerbaijan, Georgia and Turkey, emerging at the Ceyhan Marine Terminal, because 'the Russian transportation system will not be able handle the ever-increasing volumes of Kazakh oil and gas exports to Europe.'
Also early this month Oman signed an MoU expressing interest in investing, via Oman Oil, in a 'trans-Balkan oil pipeline that would carry Urals and Caspian crude from Bulgaria's Bourgas to the Greek port of Alexandroupolis'.
Well, a Russian agency announced on 2nd February that 'Russia’s national oil pipeline operator Transneft, state-owned oil company Rosneft and Gazprom Neft, an oil division of Russian gas giant Gazprom, have set up the Burgas-Alexandroupolis Pipeline Consortium,' which I guess is one and the same.
Russia's Deputy Minister for Industry and Energy, Andrei Dementyev, has said that shareholders in the Caspian Pipeline Consortium would be welcome to invest in this new 280 km pipeline which will bypass holdups in the Bosphorus and the Dardanelles.
It rather looks as if Oman is spoilt for choice when it comes to choosing pipelines.
Investing in Bulgaria
Catching up with news headlines after I've been away can be a chore, so it's possible to miss events. The big story seemed to be the symposium held at the Royal Camp at Seeh al Rasiyat, Samail, to discuss the need to improve agricultural productivity. Sigh. We've been there before, improvements in agricultural productivity that is. But maybe more of that in another posting.
I also noted that senior ministerial and trade delegations from both Bulgaria and Turkey had visited Muscat last week.
Write-ups in both the Omani and regional English-speaking press really said very little beyond the usual bland statements that the countries would invest in each other and promote tourism. In the case of Turkey, the Oman Observer of 5th February said that Oman was hoping to learn from Turkey's experience in managing free trade zones, food processing and fishing. Turkey was reported to be keen to initiate projects that could benefit from the industry being created at Sohar.
As for the visit of Roumen Ocharov, Bulgarian Minister of Economy and Energy, we learnt little more than that Oman and Bulgaria had signed an agreement for encouraging and protecting joint investment. Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council, who signed on behalf of the Oman government told the Oman News Agency (ONA) that 'the agreement would provide a legal framework that would achieve mutual benefits for both sides, and encourage the growth of joint investments in public and private sectors.' Oman Observer, 4th February.
The Bulgarian media has been more explicit without giving precise details - which of course may not have been decided yet. The Sofia News Agency reported on 4th February that "Oman Oil has said it was ready to invest in a EUR 700 M trans-Balkan oil pipeline that would carry Urals and Caspian crude from Bulgaria's Bourgas to the Greek port of Alexandroupolis [and is] has expressed interest in investing in a EUR 4 B nuclear power plant in Bulgaria."
That's right. A nuclear power plant.
Another Bulgarian website said that 'Oman wants to participate in the construction of NPP Belene.'
Bulgaria gets 40% of its power supply from nuclear power units at Kozloduy, near the Romanian border. Almost 12% of the electricity has been exported to Greece, Turkey, Serbia and Macedonia. Bulgaria was vital in supplying power for the Athens Olympic games.
But two units have had to close at Kozloduy at the insistence of the EU, as a pre-condition for Bulgaria becoming a EU member. This means that there will no longer be spare capacity of electrical power for export.
Work began on a second site for nuclear reactors at Belene in 1987, but was abandoned in 1991 due to lack of funds. This is the site in which Oman Oil is alleged to be interested in investing. The new units are scheduled to come online in 2013 with input from Russia, France, Germany, with possible partners from Italy and the Czech Republic. Japan is training key Bulgarian personnel.
The new units at Belene will satisfy stringent western European safety standards and therefore be more acceptable to the EU.
There is another question in my mind. Did that agreement signed between Oman and Bulgaria also mention technology transfer? Given recent announcements that the Gulf states intended to hold talks with the International Atomic Energy Agency (IAEA) in order to outline plans for a joint programme for the use of nuclear technology for peaceful purposes, is this particular investment coincidental or part of a move to acquire nuclear technology?
The only Gulf newspaper in which I have read about Oman's interest in developing Bulgaria's nuclear industry is the Gulf Daily News of Bahrain.
Bulgaria is a party to the Nuclear Non-Proliferation Treaty (NPT) as a non-nuclear weapons state.
I also noted that senior ministerial and trade delegations from both Bulgaria and Turkey had visited Muscat last week.
Write-ups in both the Omani and regional English-speaking press really said very little beyond the usual bland statements that the countries would invest in each other and promote tourism. In the case of Turkey, the Oman Observer of 5th February said that Oman was hoping to learn from Turkey's experience in managing free trade zones, food processing and fishing. Turkey was reported to be keen to initiate projects that could benefit from the industry being created at Sohar.
As for the visit of Roumen Ocharov, Bulgarian Minister of Economy and Energy, we learnt little more than that Oman and Bulgaria had signed an agreement for encouraging and protecting joint investment. Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council, who signed on behalf of the Oman government told the Oman News Agency (ONA) that 'the agreement would provide a legal framework that would achieve mutual benefits for both sides, and encourage the growth of joint investments in public and private sectors.' Oman Observer, 4th February.
The Bulgarian media has been more explicit without giving precise details - which of course may not have been decided yet. The Sofia News Agency reported on 4th February that "Oman Oil has said it was ready to invest in a EUR 700 M trans-Balkan oil pipeline that would carry Urals and Caspian crude from Bulgaria's Bourgas to the Greek port of Alexandroupolis [and is] has expressed interest in investing in a EUR 4 B nuclear power plant in Bulgaria."
That's right. A nuclear power plant.
Another Bulgarian website said that 'Oman wants to participate in the construction of NPP Belene.'
Bulgaria gets 40% of its power supply from nuclear power units at Kozloduy, near the Romanian border. Almost 12% of the electricity has been exported to Greece, Turkey, Serbia and Macedonia. Bulgaria was vital in supplying power for the Athens Olympic games.
But two units have had to close at Kozloduy at the insistence of the EU, as a pre-condition for Bulgaria becoming a EU member. This means that there will no longer be spare capacity of electrical power for export.
Work began on a second site for nuclear reactors at Belene in 1987, but was abandoned in 1991 due to lack of funds. This is the site in which Oman Oil is alleged to be interested in investing. The new units are scheduled to come online in 2013 with input from Russia, France, Germany, with possible partners from Italy and the Czech Republic. Japan is training key Bulgarian personnel.
The new units at Belene will satisfy stringent western European safety standards and therefore be more acceptable to the EU.
There is another question in my mind. Did that agreement signed between Oman and Bulgaria also mention technology transfer? Given recent announcements that the Gulf states intended to hold talks with the International Atomic Energy Agency (IAEA) in order to outline plans for a joint programme for the use of nuclear technology for peaceful purposes, is this particular investment coincidental or part of a move to acquire nuclear technology?
The only Gulf newspaper in which I have read about Oman's interest in developing Bulgaria's nuclear industry is the Gulf Daily News of Bahrain.
Bulgaria is a party to the Nuclear Non-Proliferation Treaty (NPT) as a non-nuclear weapons state.