Five nations sign southeast Europe oil pipeline deal

Five southeastern European countries signed a declaration yesterday to construct a pipeline connecting the Black Sea with Italy and carrying oil from the energy-rich Caspian to the European Union.

The project fits with Europe's aim of reducing its reliance on Russia and the Middle East for its energy needs. The Caspian, the region holding the world's third largest oil and natural gas reserves according to US estimates, has a key role to play.

Top officials in charge of energy policies from Romania, Serbia, Croatia, Slovenia and Italy signed the declaration to start work on the 1,400-kilometre long Pan-European Oil Pipeline (PEOP) from Constanta to Trieste, worth between $2 billion and $3.5 billion.

"It is in line with the policy of securing and diversifying energy supplies for the European Union by upgrading and constructing new energy infrastructure," said the declaration, also signed by EU Energy Commissioner Andris Piebalgs.

The pipeline, due for completion by 2012, will supply refineries in northern Italy and central Europe with crude from the Caspian - notably the former Soviet states Kazakhstan and Azerbaijan. The Caspian has become a focal point for untapped oil and gas since the collapse of the Soviet Union. The declaration said the route may also be used to transport natural gas.

The new pipeline will connect the Romanian port of Constanta with Trieste in Italy and have an annual capacity of 60-90 million tonnes (1.2-1.8 million barrels per day).

In 2005, oil from the southern sections of the Caspian Sea began pumping through a pipeline built by a BP-led consortium to the Turkish seaport of Ceyhan. That aims to pump one million bpd in the course of 2008.

"The Caspian Sea is the region that will more and more supply world markets. That is why we need infrastructure like the Pan-European Oil Pipeline which will bypass congestion (in the traditional Black Sea route)," Mr Piebalgs said.

Croatian Prime Minister Ivo Sanader said the pipeline should reduce the number of oil tankers in the Mediterranean and help the region's tourist industry.

"The project is important for all these countries, the EU, and also the United States if the pipeline from Trieste is connected to Genoa, from where it can be exported outside Europe," he added.

Most parts of the future Pan-European Oil Pipeline are already in place. It is necessary to build a part connecting the Romanian city of Pitesti with Pancevo in Serbia, and a stretch between Croatia's northern Adriatic through Slovenia to Trieste.