THE PLOCK BARRIER FOR CASPIAN OIL

Azerbaijan has already established itself as a reliable partner in ensuring the energy security of the region. The next step will be the supply of Azerbaijani gas to Europe, which will contribute to EU objectives to diversify sources of "blue fuel". Earlier, Azerbaijan began to supply its oil to world markets via the Baku-Tbilisi-Ceyhan pipeline. The next step in ensuring the energy security of Europe is the launch of the Euro-Asian Oil Transport Corridor designed to provide a number of Eastern European countries with "black gold" from the Caspian region. To this end, in the first phase it is planned to start supplying oil via the Odessa-Brody pipeline to Ukraine, Slovakia and the Czech Republic. The next stage envisages the construction of a pipeline to the Polish cities of Plock and Gdansk, which will deliver Caspian energy resources to the Baltic Sea.

This project is being implemented by the International Pipeline Company (ICC) Sarmatia. Apart from the Georgian Oil and Gas Corporation Ltd. (GOGC), Ukrainian Ukrtransnafta, Polish Przedsiebiorstwo Eksploatacji Rurociagow Naftowych Przyjazn SA and Lithuanian AB Klaipedos Nafta, its shareholder is also SOCAR (State Oil Company of Azerbaijan) with equity participation of 24.75%.

In an interview with R+, the general director of ICC Sarmatia, Sergey Skripka, spoke about how soon it will be possible to realize the project and how important the pipeline is today.

- How do you think we can assess the prospects of the Euro-Asian Oil Transportation Corridor (EAOTC) for member countries?

- The clear advantage of the EAOTC is that, if implemented, it will benefit all participants. For example, the countries of the Caspian region will receive an additional reliable route for supplying their oil to the European market, a range of new customers and expanded opportunities to work on related markets, while European countries will gain access to high-quality sources of hydrocarbons. For a number of them, this route will create real conditions for the diversification of energy supplies. We should not forget about the benefits that the transit countries, including Georgia, Ukraine and Poland will get.

The value of the project will especially increase in today's environment when we are witnessing instability in the Middle East and Africa, changes in the energy strategies of traditional oil suppliers, new routes for the transportation of hydrocarbons and refusal to use old routes. Competition is growing for Europe from oil consumers in China and other Asian countries. It the EAOTC that can answer many of these challenges and become the element of the global infrastructure that will keep the balance on the European oil market and prevent a shortage of this raw material in the future.

But the importance of the EAOTC project is not confined to this. Signing the agreement on cooperation in the energy sector in November 2007 in Vilnius, representatives of the five countries thought about the prospects of economic partnership between Azerbaijan, Georgia, Ukraine, Poland and Lithuania. They thought that the project would be a reliable link between our countries, which will make it possible to develop further joint projects, provide a synergy of efforts to establish cooperation with the European Union and make our states an important element of the energy security of the European continent. We must not forget about it.

- What kind of work has been done within the framework of the project? At what stage is the implementation of the project at the moment?

- In 2013, ICC Sarmatia made serious progress in the preparation of the project for the construction of the Brody-Adamova Zastava oil pipeline, which is the only missing part of the EAOTC at the moment. For example, in January of this year, the process of making changes, related to the project, to provincial and local land use and development plans in Poland was completed, which is a complicated and lengthy process in this country. The fact that we managed to complete it within a year is undoubtedly a great success, which was achieved not only through the efficient work of our consultants (ARCADIS and ILF), but also with the support of the local authorities and the public.

In March, the process of notifying state aid to the project was completed with a positive result. As you know, to support our project within the framework of the EU Operational Programme "Infrastructure and Environment", funds in the amount of about 120 million euros were reserved. Until the allocation of these funds, the European Commission should ensure that the planned funding does not disrupt the balance on the market and is not contrary to the principles of free competition. These issues are considered as part of the state aid notification procedure. The decision of the EC on our project says that the planned aid "serves the achievement of important social purposes and meets the requirements of the EU internal market".

The procedure for the preparation of an assessment of the impact of the project on the environment is at the final stage, and it can be expected that the environmental permit for the project will be issued before the end of August this year.

Obtaining the environmental permit is the last condition that must be met before the filing of a formal application to the European Commission on the financing of the project from the funds of the Operational Programme "Infrastructure and Environment". The other conditions have already been met.

- It is known that in order to finance the project in the current year, the authorized capital of ICC Sarmatia needs to be increased. How does this process work and what work is planned for the period after its completion?

- In accordance with the plan to prepare the project, this year it is necessary to carry out the procedure of allocating land for construction. As part of the procedure, it is planned to sign contracts with the owners of more than 8,000 land plots along the pipeline route in Poland. Unfortunately, the government of the Republic of Poland, despite earlier promises, failed to ensure the adoption of the law "On energy corridors", which aims to simplify issues of allocating land plots.

In Ukraine, the law guards public interests and supports investors who implement strategic and socially important infrastructure projects. Therefore, in Ukraine, we do not foresee special difficulties with land acquisition. This year we also need to start preparing a detailed working draft for the construction of the pipeline. These steps are quite costly and require our co-founders to increase the authorized capital of the ICC Sarmatia from the current 4.65 million euros to 15 million euros.

However, this issue has stalled a bit - the thing is that the Polish co-founder of ICC Sarmatia - the oil transport company PERN Przyja?? makes its position on increasing the authorized capital dependent on the decision to implement the project at the state level and on relevant intergovernmental agreements. This position is logical, because PERN Przyja?? is under full government control. Meanwhile, the position of the Polish government on the project is not completely clear. There is a significant change in its approach to the preparation of a multilateral intergovernmental agreement to support the EAOTC. The agreement, according to experts of such well-known companies such as PricewaterhouseCoopers, Granherne and ILF, should be the legal basis for the functioning of the future oil transportation corridor and give guarantees to the project participants, investors and users of the infrastructure that is being created. It is this agreement that paves the way for the signing of commercial contracts between suppliers and consumers of oil, as well as for its transportation contracts. An example of the importance of such an agreement for the implementation of the international infrastructure project is the project for the construction of the Baku-Tbilisi-Ceyhan pipeline, which is a model for us in many respects.

Azerbaijani Minister of Industry and Energy Natiq Aliyev had drawn the attention of Poland's Deputy Prime Minister and Minister of Economy Janusz Piechocinski to the need to sign an intergovernmental agreement, and this opinion is shared by the remaining participants in the project.

For some reason, the Polish side believes that the signing of an intergovernmental agreement is not a mandatory condition for the implementation of the EAOTC project. In their opinion, it is first of all necessary to conclude commercial agreements for the supply of oil. No one denies the importance of such contracts, but this approach is like trying to harness a horse behind the cart. It is hard to expect that commercial entities will agree to assume all the risks of the project without having interstate guarantees.

We hope that the situation will be clarified after multilateral consultations between representatives of the countries involved in the project, as well as a bilateral meeting between the Ukrainian minister of energy and coal industry and the Polish minister of economy. In May, the Ukrainian side offered to host both events. They were supposed to take place before the end of June, but as far as I know, the Polish side has not yet replied to the proposals.

- What is the position of the European Commission on this project?

- The position of the European Commission on the project remains unchanged. They see it as an important tool to improve energy security in Europe, which ensures the creation of conditions for the diversification of sources and routes of oil supply. Evidence of this is the positive decision of the European Commission on the notification of state aid to the project, which I mentioned above.

It is expected that the EAOTC project will be approved on the list of "projects of European importance" (Project of Common Interest), which is to be prepared by the European Commission before the end of this year.