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EK insists South Stream be exempted from Third Energy Package

September 05, 2014, 7:09 UTC+3 BRUSSELS
The issue of third party access to the pipeline is being considered, and tariffs will be set by local operators
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© TAR-TASS/Ruslan Shamukov

BRUSSELS, September 05 /ITAR-TASS/. The European Commission is insisting that the South Stream gas pipeline project be subject to exemption from the Third Energy Package requirements, a source familiar with the situation said on Thursday.


The European Commission regards an exemption as the only possible solution, the source said, adding that Russia was not yet ready to request such exemption as it would require it to change the key parameters of the business model approved earlier for the project.

The Russian Energy Ministry confirmed to ITAR-TASS that no such request had been made so far.

Gazprom says its business model for the project may as well fit into the Third Energy Package requirements. According to the proposed model, the onshore sections of the pipeline will be controlled not by Gazprom but by national consortiums of countries, most of which are EU members.

The issue of third party access to the pipeline is being considered, and tariffs will be set by local operators.

However, the European Commission is insisting that South Stream should go the same way the Trans Adriatic Pipeline did. The latter will transport Azerbaijani gas to Europe. It has been exempted from the ownership unbundling principle and has received all the required permits from the European Commission.

South Stream will be built across the Black Sea to South and Central European countries to diversify gas supplies to Europe and reduce the dependence on transit countries.

To build the onshore sections of the pipeline, Gazprom has signed agreements with Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia, and Austria.

Infographics Russian gas in Europe Russian gas in Europe
One-third of gas consumed in EU comes from Russia. Infographics ITAR-TASS

The South Stream Offshore Pipeline will run through the Black Sea from Russia to Bulgaria and have a total length of 930 kilometres. An environment impact assessment (EIA) in accordance with national environmental legislation is being conducted in Russia, Turkey and Bulgaria. In addition, South Stream Transport is undertaking an Environmental and Social Impact Assessment (ESIA) in alignment with the standards and guidelines of international finance institutions. This will involve an ESIA Report for each Sector of the Project and a consolidated document for the entire South Stream Offshore Pipeline to ensure a consistent approach.

South Stream, initially conceived ENI and Gazprom, later joined by Electricite de France and German Wintershall AG, will eventually take 30 billion cubic metres of Russian natural gas a year to southern Europe.

The offshore section of the pipeline, which will run in part along the seabed and reach the maximum depth of 2,200 m, will be 931 km long. Each of the four parallel strings of the pipeline will consist of 75,000 pipes, each 12 m long, 81 cm in diameter, 39 mm thick and weighing 9 tonnes.

The construction of South Stream started on December 7, 2012 is scheduled to be completed by 2015. The overall capacity of the marine section of the pipeline will be 63 billion cubic metres a year. Its cost is about 16 billion euro. The pipeline will go on onshore in the area of the Bulgarian city of Varna.

According to the European Commission, the Third Energy Package should promote competition in the EU energy market and push energy prices down in Europe.

One of its most controversial provisions demands that all energy transit infrastructure be handed over to autonomous operators independent from energy generating and mineral producing companies.

Russian Permanent Representative to the European Union Vladimir Chizhov said that the enforcement of this provision has “basically led to nationalisation of pipelines in some East European countries.”

The European Union’s Third Energy Package is a legislative package for an internal gas and electricity market in the European Union. Its purpose is to further open up the gas and electricity markets in the European Union. The package was proposed by the European Commission in September 2007, and adopted by the European Parliament and the Council of the European Union in July 2009. It entered into force on September 3, 2009.

Core elements of the third package include ownership unbundling, which stipulates the separation of companies’ generation and sale operations from their transmission networks, and the establishment of a National Regulatory Authority (NRA) for each member state, and the Agency for the Cooperation of Energy Regulators which provides a forum for NRAs to work together.

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