Bulgaria produces around 40,000 tonnes of oil a year but its annual needs are more than six million tonnes and the indebted country is seeking options to save on expensive imports.

Experts forecast that existing oil and gas deposits will dry up by 2007, adding urgency to new exploration.

Deputy environment minister Neno Dimov told Reuters earlier this month that preparations for an oil tender, onshore and on the Black Sea shelf, had started.

"We hope that parliament will pass the law on underground resources in the second and final reading soon and after that we can finalise all documents and launch a tender," he said.

Apart from new blocks in the North of the country, Bulgaria is likely to offer offshore blocks as well as some blocks tendered eight years ago but subsequently deserted.

In 1991 Bulgaria granted eight western oilcompanies the right to explore four blocks offshore at an average depth of 2,000 metres, two blocks in the Kamchia and Ropotamo rivers which flow into the Black Sea and two blocks onshore.

The companies were Texaco Inc, Maxus Energy Corp, Union Pacific Corp and Balkan Explorers (Bulgaria) Ltd, Britain's Enterprise Oil and British Gas, Austria's OMV AG and Edison Gas from Italy.

In 1993 Texaco, as an operator, and Enterprise made a marginal gas discovery in the sea near the Port of Varna but abandoned the field's commercial development last year because its gas volumes total only 1.5 bcm, Bulgarian officials said.

The two firms, unhappy also with the concession's legal conditions, sold their stakes to Luxembourg-registered Petreko Petroleum Co.

Since 1991 all foreign companies have given up further drilling after investing tens of millions of dollars in exploration.

Only Bulgaria-registered Balkan Explorers Ltd, affiliated to the Irish Marine and Mercantile Securities (MMS), is expected to drill itsblock of Shabla near Romania.

"A new drill is forthcoming and if successful another will follow," Dimov said.

Dimov said operators willing to drill in Bulgaria would be offered more favourable conditions than in 1991.

"This year some big foreign oil firms showed interest again in deep sea drilling in Bulgaria's Black Sea economic zone but only under the condition that the blocks' frontiers and contract conditions be changed," he said.

A second tender in 1993, which offered five blocks from 1,500 to 2,400 square kilometres each off the sea coast, has failed. Dimov said a new tender would be prepared.

Bulgaria is also keen to participate in two projects which would give it a role in transiting Russian oil to the Balkans.

One is to carry crude from Russia's Port of Novorossiisk to the Bulgarian Black Sea Port of Bourgas by tankers from where an underground pipeline would take it to the northeastern Greek Port of Alexandroupolis.

The 280 kilometre pipeline, expected to cost $700 million, would bring30 to 35 million tonnes of Russian crude to the Balkans. The project includes the construction of a number of port terminals, storage and pumping facilities.

Tsveta Kamenova, a senior Bulgarian government expert, said the Greek side, which had launched a feasibility study tender, was expected to announce the winner shortly.

Experts say the main problem would be to guarantee constant crude supplies for the pipeline.

President Petar Stoyanov held talks in Moscow this month in a bid to attract Russia's major oil producers after Russia's Gazprom said it was not interested in the project.

Under another project, of the US-owned Albanian, Macedonian and Bulgarian Oil Corporation (AMBO), a 910 km pipeline will carry crude from Bourgas to the Albanian Port of Vlore.

The pipeline, with an estimated cost of $850 million, would supply the refinery in Skopje and the Macedonian market, and has the potential to supply Yugoslavia and Italy, AMBO officials say.

It will get crude from Russia, Kazakhstan andAzerbaijan and the oil will be transported by tankers to Bourgas.

Bulgaria's biggest oil refinery, Neftochim, is expected to benefit from the planned network of pipelines by diversifying its oil supplies.

Bourgas-based Neftochim relies on Russia for most of its oil and the crisis there has delayed some of its September oil cargoes, posing a risk of fuel shortages.

The plant covers almost 90 per cent of domestic fuel consumption. It processes 7.5 million tonnes of crude a year while its capacity is 12 million tonnes, or 85 per cent of the country's refining industry.

Bulgaria plans to sell up to 75 per cent of the refinery to private investors by February next year and Russia's Rosneft and LUKoil have shown interest.

Another processing facility in Bulgaria is its second biggest refinery, Plama, heavily indebted and looking for a buyer to bring it back to life.

Plama, with an annual refining capacity of 1.2 billion tonnes of crude, used to have 80 per cent of the local lubricants market but has beenidle for the last two years.