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Gazprom board to mull buying stake in South Stream Austria

October 21, 2014, 17:32 UTC+3 MOSCOW

The Austrian part of the pipeline measures around 50 kilometers and its capacity is projected at up to 32 billion cubic meters of gas per year

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© ITAR-TASS/Sergei Karpov

MOSCOW, October 21. /TASS/. The board of directors of Russian gas giant Gazprom will consider acquiring a stake in South Stream Austria, the operator of the South Stream pipeline’s onshore part, on October 29, the giant said in a statement Tuesday.

Gazprom will own the company on a parity basis with Austria’s OMV.

The Austrian part of the pipeline measures around 50 kilometers and its capacity is projected at up to 32 billion cubic meters of gas per year.

The South Stream pipeline will carry Russian gas to the EU bypassing Ukraine. Gas will be pumped to the Bulgaria’s Black Sea port of Varna before extending overland through Serbia, Hungary, and Slovenia to supply gas to the Western Europe via Italy and Austria. The pipeline’s capacity amounts to 63 billion cubic meters.

The construction of the South Stream pipeline started in late 2012. Under the project, the first deliveries are due in 2016 and the pipeline is expected to become fully operational in 2018.

Last year, the European Commission urged to review bilateral intergovernmental agreements between Russia and EU countries to ensure that they comply with the Third Energy Package, which requires the separation of gas production, transportation and sale to prevent gas suppliers from dominating the infrastructure.

Russia insists the South Stream project should be exempt from the effect of the Third Energy Package because it signed bilateral inter-governmental agreements with the EU countries participating in the construction of the gas pipeline on their territory before the EU’s new energy legislation came into force.

Therefore, Russia says that the European Commission’s requirement to adapt these documents to the Third Energy Package contradicts the basic law principle that legislation cannot have retroactive force.

Third Energy Package

The Third Energy Package requires, in particular, that a half of the capacities of the pipeline built with Russian money must be reserved for independent suppliers, i.e. for cheap and free transit of Caspian gas to Europe independently from Russia.

Therefore, Russia does not recognize the legitimacy of applying the Third Energy Package to the South Stream gas pipeline project. If Moscow agrees to the EU’s proposal to consider exemptions for the South Stream gas pipeline as part of the Third Energy Package, this will mean that Russia will de facto recognize the legitimacy of using this ultra-liberal regulation.

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