Pumping oil could payoff in Romania as benefits from the Constanta-Trieste pipeline could amount to more than four billion dollars.
The benefits could range from 2.27 to 4.39 billion dollars over 20 years, depending on the capacity of the new oleo duct, according to Hill International's feasibility study.
The five states partnered in the project, Romania, Serbia, Croatia, Italy and Slovenia, should sign an agreement for the construction of the pipeline by the end of March. "We are still waiting for a positive answer from Slovenia," said Iuliana Dumitru, the spokeswoman for the Ministry of Economy and Trade.
The full length of the pipeline will be 1,360 kilometers and should originate at the Constanta harbor, passing through Serbia, Montenegro and Croatia, before ending in Trieste, Italy, where it will connect with the Trans Alpine Pipeline - TAP, which supplies oil to Austria and Germany. The pipeline will supply oil to refineries in Southeastern Europe, Italy, Austria and Bavaria (Southern Germany), stated Henry Owen one of the financial advisors of the project. The oleo duct will also fill oil tankers through the existing Trieste-Genoa pipeline, he added.
Among the companies who have expressed interest in the project are General Electric Energy Oil & Gas and China National Oil Corporation. Chevron, Texaco, British Petroleum and Austrian oil group, the majority shareholder of Petrom, also have shown an interest in the project.
The costs for the pipeline are estimated between 2.2 billion and 4.6 billion dollars, depending on the transport capacity chosen for the oleo duct, the construction of which should begin next year.
For Romania, the projected costs for three designs, which would transport between 40 and 90 million tons of oil per year, could range from 1.1 billion dollars to 2.1 billion dollars.
Advantages of the project also include a direct route for transportation of Caspian crude oil to Europe and significant transit financial benefits. In Romania alone, the project could lead to the creation of 5,000 jobs during the construction phase and 1,000 jobs during its operational life, estimated at 25 years.
Of the pipe's total length, 649 kilometers would be on Romanian soil, fitted with three of the six pumping facilities required for the project. Moreover, Romania has a well-developed infrastructure in the transportation, storage and processing of crude oil. It has its own refineries with a total processing capacity of 34 million tons per year crude oil, or about half of the production forecast to be achieved from the Caspian Sea area. Romania also has petrochemical plants for secondary processing, which will give them, after the upgrading process, competitive conditions compared with those existing in well-developed countries, delivering high-quality products at international standards, while observing ecological provisions. Transportation of oil products to existing refineries in Romania (a great part of this oil is processed locally-near Constanta - in the Midia - Navodari Refinery) is carried out by pipelines (the network comprises 2,454 km of main pipelines and connection between refineries and storehouses), railways, or by car.
Due to existing infrastructure and its geographical position, Romania can offer a competitive price for the transportation of crude oil from the Black Sea's east coast harbors to an open sea. For instance, the price of transportation of crude oil from Novorossiysk, Russia to the Adriatic Sea, through Romania, is about 12.5 dollars per ton.
Market is also an important advantage. Romania has a crude oil deficit for its internal needs of seven million tons per year. Furthermore, the total crude oil necessary in neighborhood countries is about 70 million tons per year. After processing, the light products can also be exported back to some Central Asian countries.
Estimated at 60-75 billion barrels, the oil reserves in the Caspian Sea region align Romania and the Black Sea on a strategic axis, with numerous economic advantages. Thus, with investments of approximately two billion dollars, Romania could earn, from transit tariffs alone, 600 million dollars yearly. A feasibility study carried out by Italian company ENI shows that Romania's input for the project would actually amount to 1.2 billion dollars, for a transportation capacity of 30 million tons of oil per year. Moreover, Romania's refining capacity amounts to 34 million tons per year, but it only processes 13 million tons yearly. Thus, the new pipeline would allow the refineries to function on full throttle, boosting growth potential of local refining companies such as Austrian controlled OMV/Petrom and RomPetrol.
New pipelines could satisfy Europe's needs
Presently, most of the oil extracted in the Caspian Sea area is transported by sea or through pipelines owned by the former Soviet Union. The crude oil available for export in the region will boost to 344 million tons per year by 2020, compared with the 50 million tons per year transported out of the region at this time.
The European market for the pipeline requires 298 million tons per year, with a significant growth potential if it is connected to the Italian pipeline systems, which reach as far as Genoa.
Economic experts believe that the future oleo duct could efficiently carry approximately 60 to 90 million tons of crude per year, which would ensure Europe's strategic needs.
Moreover, the pipeline will contribute to reducing traffic through the Bosporus - Dardanelles straits, according to Financial Times. However, although Turkey intends to reduce traffic, its government has every intention of holding on to energy and tax control. Turkey does not allow the transit of more than 25-30 million tons of oil per year, considerably under Europe's needs.