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South Stream project to be complete in due time, 2015 – Gazprom

September 16, 2011, 21:53 UTC+3

The South Stream project will be complete in due time – the year 2015

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MOSCOW, September 16 (Itar-Tass) —— The South Stream project will be complete in due time – the year 2015, Gazpromexport CEO, Gazprom Deputy CEO Medvedev told reporters in comment on the Friday signing of the South Stream shareholders agreement.

“We have a plan, and nothing can prevent us from implementing it on time. The pipeline will bring its first gas to Europe across the Black Sea in 2015,” he told Russia Today. Medvedev said that the project had been launched and the company was drafting a final investment decision.

Medvedev also hopes that Europe will grant an equal status to South Stream and Nabucco. “European Energy Commissioner Gunther Oettinger said at the project presentation in Brussels that he saw no reason why the South Stream should be described differently. However, strange statements were made yesterday and the day before yesterday. We hope that South Stream will not be discriminated by the regulators. We have only goal only, that is to bring gas to our clients, and nothing else,” Medvedev said.

As for the proposal of Ukrainian President Viktor Yanukovich to lay the South Stream pipe across the Ukrainian territory, Medvedev said, “Our contract with Ukraine is valid for a certain period; it clearly states the amounts of gas we have the right to transport across the Ukrainian territory. South Stream will go by the Black Sea bottom,” he said.

The South Stream integrated development project will be ready by the end of the first half of 2012, Medvedev said earlier in the day.

“A final investment decision based on the project, which will be ready by the end of the first half of 2012, will be next step,” he said.

Medvedev called unfounded and illogical the statement by European Energy Commissioner Gunther Oettinger, who had described South Stream and Nabucco as rivals. “South Stream and Nabucco are not rivals; they have different goals,” he said.

“We are diversifying the routes of the delivery of Russian gas under earlier contracts. We have the gas, the market, the contracts and the partners, while Nabucco’s goal is to diversify the sources of the supplies,” he said.

Russia does not take joy in the fact that the Nabucco project has not acquired gas resources, he said. “We take no joy in the hitherto unknown sources of Nabucco gas because Europe will have a gas deficit in the future,” he said.

Medvedev confirmed the estimated value of the South Stream sea segment at about $10 billion and said that the land segment would cost $5.5 billion. “The cost won’t grow much, it will be 15% more or less,” he said.

Russia’s Gazprom, Germany’s BASF, France’s EdF and Italy’s ENI signed a shareholder agreement in the South Stream project in the attendance of Prime Minister Vladimir Putin and on the sidelines of the Sochi 2011 Investment Forum.

Gazprom is the largest shareholder in South Stream with 50%. BASF and EdF hold 15% each, and ENI’s share is 20%.

The final investment agreement will be presented to the banks pool in the second half of 2012, ENI CEO Paolo Scaroni told reporters on Friday.

The rates of the construction of the South Stream gas pipeline depend on the European Union, he said.

“The ball is in the EU court. The rates of the pipeline construction depend on two or three elements, mostly on the EU issue of permits because most of the pipeline infrastructure will be laid through the European territory and it must meet European norms,” he said. Scaroni hopes that the coordination would be quick. “From the technical point of view, we need about three years,” he added.

Scaroni stressed the importance of the South Stream pipeline as the infrastructure to guarantee European energy security and noted that the role of the project involving Italy, France and Germany continued to grow.

He thinks that Nabucco is not a rival to South Stream. “The new pipeline will carry Russian gas, which Europe currently receives across Ukraine. Nabucco will have different sources, and it is not a rival to the Russian deliveries,” he said.

The Nabucco pipeline is a planned natural gas pipeline that will transport natural gas from Turkey to Austria, via Bulgaria, Romania, and Hungary. It will run from Erzurum in Turkey to Baumgarten an der March, a major natural gas hub in Austria. The project is backed by the European Union and the United States. It may cost $10.7 billion.

The preparations of this project started in February 2002 when first talks took place between OMV and BOTAS. In June 2002, five companies signed a protocol of intention to construct the Nabucco pipeline, followed by the Cooperation Agreement in October 2002. In December 2003, the European Commission awarded a grant in the amount of 50% of the estimated total eligible costs of the feasibility study including market analysis, technical, economic and financial studies. On June 28, 2005, the Joint Venture Agreement was signed by five Nabucco Partners. In February 2008, RWE became a shareholder of the consortium. On June 11, 2008, the first contract to supply gas from Azerbaijan through the Nabucco pipeline to Bulgaria was signed.

The Nabucco project is included in the EU Trans-European Energy Network program and a feasibility study for the Nabucco pipeline has been performed under an EU project grant.

South Stream aims to diversify the routes of natural gas deliveries to Europe. A gas pipeline will be built across the Black Sea to Bulgaria, Serbia, Hungary, Slovenia, Austria and Northern Italy. There will be extensions to Croatia, Macedonia, Greece and Turkey.

The construction works are due to start in 2013, and the first line with the rated capacity of 15.75 billion cubic meters of gas per year is due to become operational on December 30, 2015. After that additional facilities will be commissioned annually for bringing the total capacity of the pipeline to 63 billion cubic meters in 2018.

The project value is estimated at 15.5 billion euros, including about 10 billion euros to be invested in the undersea segment.

The South Stream company was registered in Switzerland in January 2008. Gazprom and Italian Eni were the cofounders of the company on parity terms.

Gazprom and French EdF signed a memorandum of mutual understanding on November 27, 2009, to enable EdF to join the construction of the South Stream sea segment.

On March 21, 2011, Gazprom and BASF signed a memorandum involving BASF subsidiary Wintershall in the project.

The laying of the South Stream gas pipeline on the Black Sea bottom is totally safe, South Stream Project Director Marcel Kramer told Russia Today this June.

He said they were very careful about the environmental impact of the whole project and its elements. The transportation of gas through a pipeline laid on the bottom of a sea does not create any danger, he said, nothing that the effect on the sea bottom and the environment must be minimized on the particular route.

As for the opinion of experts that modernization of Ukrainian gas pipelines would cost much less than the laying of the new gas pipeline across the Black Sea, Kremer said that the South Stream project participants decided that it would be unwise to rely on gas transit across Ukraine in the current amounts. Actually, some gas will still be delivered across Ukraine, in addition to the South Stream pipeline – a modern and efficient gas transit route to enhance the reliability of gas deliveries to Europe.

Transit routes need modernization, Kramer said. In his words, the Nord Stream pipeline is a good example, as it will also help ensure uninterrupted gas supplies to Europe through a modern pipeline and under supervision of modern managers.

He said that the South Stream capacity would amount to 63 billion cubic meters upon the end of the construction in 2019, but the capacity of the pipeline would be growing step by step and it would start from modest amounts in 2015.

The market will determine how much gas will be supplied, he said. According to the basic plan, two-thirds of South Stream deliveries will be gas that is currently transited across Ukraine.

Russia presented the South Stream project at the European Commission in Brussels on May 25.

Russian Energy Minister Sergei Shmatko said that Europe was increasingly interested in the project, and the number of skeptics had gone down.

“The fact that we will present the project at the European Commission headquarters shows that Europe no longer avoids contacts related to this cooperation project. It has been said a lot over recent months about Russian gas’ being a substantial energy resource for Europe, and many skeptics have drastically changed their point of view,” Shmatko said.


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