ATHENS (Dow Jones)

A senior Macedonian official said Thursday that a planned trans-Balkan pipeline was well on its way to securing funding and would be funneling oil from the Black Sea across his country to the Adriatic by 2011.

Gligor Tashkovich, Macedonian minister for foreign investment, said in an interview with Dow Jones Newswires that construction on the so-called AMBO pipeline would begin by the middle of 2008.

"I expect the physical groundbreaking to begin in either June or September of next year," he said, "with completion expected by 2011."

The $1.5 billion, 895 kilometer (556 mile) pipeline crosses three countries - Bulgaria, Macedonia and Albania - and is designed to carry 35 million to 45 million tons of oil a year bypassing the crowded Bosporus Strait in Turkey.

In the past 10 years, oil exports from Russia and Kazakhstan through the Black Sea have grown dramatically and some 110 tons of oil pass through the Bosporus each year.

But at the same time, Turkey has become increasingly concerned about an environmental catastrophe in the 19-mile-long Bosporus and has imposed restrictions on oil tankers.

The result: transit times have risen dramatically.

In some cases tanker delays have stretched to as long as three weeks leading to estimated direct and indirect costs to the global oil industry of $1 billion a year.

The AMBO pipeline, under discussion for more than a decade, is one of several pipelines designed to bypass the Bosporus.

In March, the heads of government from Russia, Greece and Bulgaria presided over a deal to build a shorter, $1 billion, 280-kilometer bypass between the Bulgarian Black Sea port of Burgas and the Greek Aegean Sea port of Alexandroupolis.

A third pipeline, crossing from the north coast of Turkey to the south, is also under construction.

But Tashkovich stressed that the AMBO Pipeline - from Burgas to the Albanian Adriatic Sea port of Vlore - offered several advantages over its higher-profile competitor between Burgas and Alexandroupolis, which is scheduled to begin operating in 2010.

He said the AMBO link would not have to rely on government funding, and that the terminus at Vlore would offer better deep-water port facilities than Greece's Alexandroupolis.

"The water depth in Alexandroupolis is too shallow, dangerously shallow," he said.

But at the same time, the cost of using the AMBO pipeline would be higher - at $9.10 per ton of oil shipped, compared with $5.42 a ton for the Burgas-Alexandroupolis route.

That's partly because the AMBO pipeline would be nearly three times as long as Burgas-Alexandroupolis, and will cross hillier terrain, including four mountain passes in Albania and the western edge of Macedonia.

On Jan. 31, ministers from Bulgaria, Macedonia and Albania signed an agreement working out the legal framework for the project.

That framework is expected to be ratified by the three parliaments within the next few weeks, Tashkovich said.

The project will be financed by 71% debt and 29% equity. It has received a commitment from a major producer to supply one-quarter of its throughput, which Tashkovich admits "is not enough, we need more."

But he stressed that with oil output in Kazakhstan and the Caucuses expected to grow over the next few years, there would be enough oil for the AMBO pipeline.

"There's enough oil for two or three pipelines."

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