Five countries are expected to sign in January an agreement to build an oil pipeline from Romania to Italy.

Five countries are expected to sign in January an agreement to build an oil pipeline from Romania to Italy.

It is the latest move in the intensely competitive and politically fraught battle over who controls, and who benefits from, the Caspian’s growing oil production.

Cabinet ministers from Romania, Serbia, Croatia, Slovenia and Italy are expected to meet in Rome to agree on the formation of a development company for the 1,500km pipeline.

The project, which includes rehabilitating Romania’s Black Sea port Constanta, would cost at least $ 2.4bn (€ 2bn, £1.4bn), a feasibility study has found. People close to the project said two key oil companies, one international energy group and one state-owned energy company, had expressed interest.

Henry Owen, a financial adviser to the project, said the pipeline would feed refineries in south-eastern Europe, Italy, Austria and Bavaria and would send oil to tankers via an existing pipeline from Trieste to the deepwater port at Genoa.

It would reduce European dependence on Middle Eastern oil, would be outside Russian control and would help to alleviate some of the congestion in the Bosphorus and Dardanelles straits, analysts said.

But they warned that the pipeline faced several competitors and that an agreement could still be scuttled by one of the five states. If the signing ceremony proceeds, the next big hurdle will be reaching agreement on the pipeline tariffs.

Ian Woollen, senior analyst at Wood Mackenzie, the UK-based consultants, said: ‘It is a step forward, but there is still a long way to go. There are a lot of competing options that make more sense logistically and commercially.’

Two pipelines that would originate in Burgas, Bulgaria, compete with the so-called Pan-European Pipeline from Constanta to Trieste. One would send oil to Alexandroupolis in Greece, the other to Vlore on Albania’s Adriatic coast.

Politics plays as much of a role as money. Russia’s interest in controlling the region’s oil flow, and the US opposing objective in diversifying the power away from Moscow, mix with the broader tug between Asia and Europe, both large markets keen to receive the oil.

Meanwhile, Turkey wants to reduce the strain of shipping almost all the region’s oil through the dangerously busy Bosphorus and Dardanelles straits, but does not want to lose control of the power and the income that comes with being such an important trading gateway.

Altogether a dozen pipelines are proposed for the region. The most significant new pipeline is the BP-led Baku to Ceyhan line, expected to open this spring.

Source : news.ft.com