Brussels, 13/12/2012 (Agence Europe) - The South Stream gas pipeline project is being piloted by the Russian gas supplier Gazprom and enjoys the support of certain European groups. This project is the rival of the European Nabucco project and is managing to pull ahead of the pack. Nonetheless, certain uncertainties remain regarding the final investment decision and regulatory aspects in European territory.
The president of Russia, Vladimir Putin, officially launched the construction work for the South Stream gas pipeline on 7 December on the banks of the Black Sea. This project will be directed by the Russian gas supplier, Gazprom and supported by several major European groups. It is expected to enable Russia to deliver its gas to the EU by bypassing the Ukraine. The seaside resort of Anapa will be the starting point of a 2,380 km long pipeline. Completion of the construction is expected at the end of 2015. South Stream is expected to begin sending an annual 16 billion m3 by the end of 2015. It is expected to reach full capacity by 2018 and from then on, provide an annual gas supply of 63 billion m3, half of all current Russian gas supplies to Europe.
President Putin emphasised that this is an important event not only for the Russian energy market but also for the whole of Europe. With its Nordic counterpart in the Baltic Sea, the North Stream pipeline, South Stream will create the conditions for reliable and unconditional Russian gas supplies to European consumers in the south of Europe, in this case, he added. The pipeline route will go through the Black Sea, then through Bulgaria, Serbia, Hungary, Slovenia and up to Italy and will carefully avoid Ukrainian territory, the country through which 80% of Russian gas currently transits on its way to the EU. Recurring problems between Moscow and Kiev regarding gas prices, which upset Russian gas supplies several times in the middle of winter, have prompted Gazprom to look for other supply routes.
The South Stream project is expected to cost a total amount of more than €16.5 billion. It is headed by a consortium that is 50% controlled by Gazprom and the rest by the Italian oil company ENI (20%), the French energy giant EDF (15%) and the German company Wintershall (15%). The presence of these major European groups alongside Gazprom reflects the Russian gas company's ambivalent policy towards Europe. On the one hand, Gazprom is attempting to cultivate individual ties with EU consumer countries as part of its strategy for conquering new markets and on the other it is in permanent conflict with the EU. This problem involves the question of rules on internal market access for its pipelines. This dispute got particularly heated when the Commission launched an investigation against Gazprom for abusing its dominant market position and manipulating prices in several Central and Eastern European countries.
President Putin may therefore use the occasion of the EU/Russian summit on 21 December in Brussels to present his country as a good guarantee for reliable supplies and undermine the criticism levelled against Russia about it using its dominant gas market position as an instrument to wield political influence. Although it is ahead of its EU supported rival, Nabucco, the South Stream project still faces a number of regulatory uncertainties in European countries and the EU it has to go through, such as in Bulgaria, the first stage of the route or in environmental matters and its Turkish neighbour in the Black Sea will also have to give its permission. Moreover, analysts are sceptical about the real cost of a pipeline that will have more than 900 km of undersea pipeline joints in the North Sea. A cost of €25 billion has been mentioned. (EH/transl.fl)