Plenty in the Pipeline for Foreign Investment

Economic News

22 Jul 2010
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Foreign interest in the Bulgarian economy became something of a theme this week, as US companies were reported to be taking a strong interest in the projected Bourgas-Alexandroupolis oil pipeline. Meanwhile, a large consortium of US companies and interests was also in talks with Turkey's Koc Holding over a possible bid for the Bulgarian Telecommunications Company (BTC).



Foreign investment in Bulgaria has been growing steadily in recent years, with the first quarter of 2003 seeing a 43.7% jump, according to the latest figures from the Foreign Investment Agency (FIA).



The daily newspaper Trud reported June 25 that the quarter had seen some USD180m of foreign investment, which was mainly through new companies. The leaders were the Netherlands, Britain, Italy and Germany, while the financial, services, transport and telecommunication sectors took the lion's share of the total.



The director of the FIA, Pavel Ezekiev, said Bulgaria should now look to stimulating investments in the tourism, high tech and energy sectors in order to be competitive on the world market. He also claimed that the amount of foreign investment in Bulgaria would reach EUR500m by the end of 2003.



One scheme that could help see that level of investment attained is the projected oil pipeline between the Bulgarian Black Sea port of Bourgas and the Greek Aegean port of Alexandroupolis. The scheme was originally seen as a good solution to the problem of transporting Central Asian and Caspian oil to world markets without using the narrow - and potentially dangerous - Turkish straits.



The line will be some 280km long, with 166km of that inside Bulgaria. Minister of Regional Development and Public Works Valentin Tserovski met with his Greek counterpart, Akis Tsohadzopoulos, at the border checkpoint of Promahom last week, and said that work on construction would begin by the end of this year.



What seemed to have breathed new life into the project was the emergence of reports that US companies operating in Kazakhstan were becoming increasingly interested in the pipeline deal.



Tsohadzopoulos told reporters that talks had already been held with the Russian energy minister of Russia and with Kazak officials. Tserovski then hinted that the pipeline would be supplied with huge quantities of Kazak oil, rather than Russian. This would be piped from Kazakhstan to the Russian Black Sea port of Novorosiisk, loaded onto tankers and then sailed across to Bourgas, to be piped to Alexandroupolis, where it would be reloaded. This, of course, was one of the initial criticisms of the project - that it entailed loading and unloading twice, with all the extra time and cost that would involve.



The switch from Russian to Kazak oil is also significant, as some observers saw it as a move aimed at Moscow, which has so far failed to ratify a trilateral memorandum on the project while Bulgaria and Greece have long signed up.



Russia has proposed an amendment to the memorandum, which would replace the clause giving state control over which companies would be involved in building the pipeline. Moscow instead wants a clause saying that state authorities would simply "cooperate with the selected companies" business daily Pari reported.



Meanwhile, the Bourgas-Alexandoupolis pipeline show is now hitting the road. Tserovski will visit the US to meet with potential participants in the coming days, while potential UK, German and Russian investors are also now receiving presentations on the project.



The Bulgarian tie-in was also established back in April, with seven Bulgarian firms in the joint venture to develop the project. These are: Transstroy Oil Pipeline EOOD-Burgas, MG Energy and Natural Resources AD, Magnum 07 OOD, KZU AD, Monolit-3, Industrial Holding Bulgaria AD and LUKoil Bulgaria AD. The initial capital of the tie-in will be BGL3m.



Tserovski also denied that there would be any "politicking" in deciding who would eventually build the pipeline, adding that currently the parameters of the project were still being decided. Russian, Kazak, British and US companies were all in the running, he added. The Russian company Lukoil, however, is reportedly unlikely to participate in the project.



Plenty of foreign companies may also be in the running for Bulgarian Telecommunications Company (BTC) tender. On June 24, Turkish businessman Ali Koc of Koc Holding announced that the consortium he and Turk Telekom had established to bid for BTC might also contain a 20% block shared between the US Carlisle Group, the International Financial Corporation (IFC), investment bank J.P. Morgan, American billionaire George Soros and the US overseas investment support agency.



This came after the sell off hit controversy after the Supreme Administrative Court revoked a Privatisation Authority (PA) decision to reject a successful bid from Viva Ventures for BTC. If the PA appeals the decision, but is unsuccessful, then Koc will end its attempts to buy up the Bulgarian telecommunications giant, newspaper Dnevnik reported June 25.

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