South Stream

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South Stream (Russian: Южный Поток, Bulgarian: Южен поток, Serbian: Jужни поток/Južni Potok, Hungarian: Déli Áramlat) is a proposed gas pipeline to transport Russian natural gas to Italy. The project would partly replace the planned extension of Blue Stream from Turkey through Bulgaria and Serbia to Hungary and Austria. South Stream is also likely to dash hopes of Gazprom joining the Nabucco Pipeline project.[1]

Contents

[edit] History

The South Stream pipeline project was announced on 23 June 2007, when CEO of Italian energy company Eni Paolo Scaroni and Vice-Chairman of Russian Gazprom Alexander Medvedev signed in Rome a memorandum of understanding of construction South Stream.[2] On 22 November 2007, Gazprom and Eni signed in Moscow an agreement about establishing a joint project company for the commissioning of the marketing and technical feasibility studies of the project.[3] On 18 January 2008, Gazprom and Eni registered in Switzerland the joint venture South Stream AG equally owned by the two companies.[4]

The agreement between Russia and Bulgaria on the Bulgaria's participation in the project was signed on 18 January 2008. It was agreed to set up an equally owned company to build and operate the Bulgarian section of the pipeline.[5]

The first agreement between Russia and Serbia was signed even before announcement of the South Stream project. On 20 December 2006, Gazprom and Serbian state-owned gas company Srbijagas agreed to study building a gas pipeline running from Bulgaria through Serbia.[6] On 25 January 2008, Russia and Serbia signed an agreement to route a northern pipe of South Stream through Serbia and on 25 February 2008, an agreement to create a joint company to build the Serbian section of the pipeline and large gas storage facility near Banatski Dvor in Serbia, was signed.[7][8] At the same day, Russia and Hungary agreed to set up an equally owned joint company to build and operate the Hungarian section of the pipeline.[9][10] On 29 April 2008, Russia and Greece signed an intergovernmental agreement on cooperation in the construction and operation of the Greek section of the South Stream.[11]

[edit] Route

The 900 kilometres (560 mi) long offshore section of South Stream would start from the Beregovaya compressor station at the Russia’s Black Sea coast, and would run to Bulgaria's Varna.[12] The pipeline route will cross the continental shelf of Ukraine and Romania. According to the UN Convention on the Law of the Sea, the delineation of the course for the laying of such pipelines on the continental shelf is subject to the consent of the coastal State.[13] This section would be built and operated by South Stream AG, a joint company of Gazprom and Eni.[14]

From Varna, the south-western route would continue through Greece and the Ionian Sea to southern Italy.[12][15] Greece has proposed that the southern pipe may also supply the Turkey-Greece-Italy pipeline.[16] The north-western pipeline will run through Serbia, Hungary and Slovenia to Austria ending at the Baumgarten gas storage.[17][18][19][20] Another option is that the north-western route would run through Slovenia to northern Italy.[12][21] It is possible that two smaller parts will go through Bosnia and Herzegovina to the Port of Ploče and another through Croatia to Port of Rijeka and pipeline end in Italy's Port of Trieste.[22][23][24] There are also talks that the South Stream pipeline will be connected to the Wingas-owned Haidach underground gas storage, the second largest gas storage in Central Europe.[citation needed]

[edit] Technical description

The offshore pipeline is planned to carry 31  billion cubic meters (bcm) of gas annually.[1] Pipeline sections in Serbia and Hungary will have capacity at least 10 bcm per annum both. There would be constructed two gas storage facilities, of which one underground storage facility with capacity at least 1 bcm will be in Hungary and another one in Banatski Dvor, Serbia with capacity of 3.2 bcm.[25][26] Hungarian oil and gas company MOL has offered its empty natural gas field at Pusztaföldvár as a 9 bcm storage facility. MOL is also ready to offer its unused gas pipelines in West Hungary for links between Serbia and Austria. If Austria does not become part of the South Stream but Slovenia does, MOL will offer to replace the Baumgartner switch point in Austria with a MOL facility in Városföld.[27]

The feasibility study will be prepared by Saipem, a subsidiary of Eni, and it is expected to be completed by 2008.[28] The construction is planned to be completed in less than three years after approval from European Union competition and regulatory authorities. Construction of the Serbian stretch is scheduled to start by 2010. The deliveries through the South Stream pipeline are scheduled to start by 2013.[9][29] The pipeline is expected to cost at least €7-10 billion, [24][30] the U.S. Deputy Assistant Secretary of State Matthew Bryza estimated that costs will be high as US$20-30 billion.[31] The Hungarian section will cost US$2 billion.[25]

[edit] Project companies

The pipeline would be built and operated by several project companies. The main project company is South Stream AG, which is equally owned by Gazprom and Eni.[4] South Stream AG was incorporated on 18 January 2008 in Zug in Switzerland with the share capital of 100,000 CHF.[32] Also Gaz de France has expressed the intention to join South Stream, which has welcomed by Gazprom.[33]

The Bulgarian section of the pipeline would be built and operated by the joint venture of Gazprom and Bulgargaz, while the Serbian section by the joint venture of Gazprom and Srbijagas.[8][29][34] The Hungarian section would be built and operated by the equally owned joint venture between Gazprom and the state-owned Hungarian Development Bank MFB, which will buy the elaborated feasibility study of Hungarian section from SEP Co., a joint venture of Gazprom and MOL.[25].[35]

[edit] Controversy

[edit] Nabucco pipeline project

The South Stream project is seen as a rival to the planned Nabucco pipeline.[36] There are doubts about the feasibility of South Stream project, since it may cost twice as much as Nabucco. Some experts claim that the South Stream pipeline is a political project to counter Nabucco and to expand Russian presence in the region.[37]

Russian First Deputy Prime Minister Dmitry Medvedev and Hungarian Prime Minister Ferenc Gyurcsány have confirmed that there is no contradiction between South Stream and the Nabucco pipeline project, designated to bring Caspian (Azerbaijani) gas to South and Central Europe via Turkey. "South Stream will have no negative impact on Nabucco, just as Nabucco will have no negative effect on South Stream," Dmitry Medvedev said during his visit to Hungary on 25 February 2008.[9]

[edit] Conflict with Ukraine

South Stream has been seen as diverting some gas exported through Ukraine, instead of providing a new source of gas for Europe.[37] At the same time most of off-shore route of South Stream to be laid through the continental shelf of Ukraine.[25] Although Ukraine has limited opportunities to ban the project, the laying pipeline on the continental shelf of Ukraine would require a large-scale environmental impact assessment study and environmental permits from Ukrainian authorities. There is speculations that Ukraine will permit the construction of South Stream in exchange of Russian permit to build the White Stream offshore gas pipeline from Georgia to Ukraine.[13]

[edit] Offer to Romano Prodi

Before stepping down from the premiership, Italian Prime Minister Romano Prodi got an offer from Gazprom to become chairman of South Stream AG. This move was compared with the appointment of the former Chancellor of Germany Gerhard Schröder to lead Nord Stream AG, a consortium constructing Nord Stream pipeline. Romano Prodi has declined this offer.[38] According to the Prodi's spokeman "Prodi was extremely flattered, but reiterated that he wants to take some time off to ponder after leaving Italian politics."[39]

[edit] See also

[edit] References

  1. ^ a b "Gazprom, Eni plan big gas pipeline bypassing Turkey", Reuters, 2007-06-23. Retrieved on 2007-06-26. 
  2. ^ "Eni and Gazprom sign gas pipeline accord for EU", Energy Publisher, 2007-06-23. Retrieved on 2007-06-26. 
  3. ^ "Eni and Gazprom sign the agreement for the South Stream Project", Scandinavian Oil-Gas Magazine, 2007-11-23. Retrieved on 2008-02-24. 
  4. ^ a b "Eni, Gazprom set up company for South Stream gas pipeline", Forbes, 2008-01-18. Retrieved on 2008-02-24. 
  5. ^ "Eni: Agreement Russia and Bulgaria on South Stream", AGI News, 2008-01-18. Retrieved on 2008-01-18. 
  6. ^ "Serbia signs up for gas pipe study", Upstream Online, 2006-12-20. Retrieved on 2008-02-26. 
  7. ^ "Serbia signs strategic energy deal with Russia", Reuters, 2008-01-25. Retrieved on 2008-01-25. 
  8. ^ a b "Russia, Serbia Sign Gas Pipeline Deal", Downstream Today, 2008-02-25. Retrieved on 2008-02-25. 
  9. ^ a b c Oleg Shchedrov, Dmitry Solovyov. "Russia wins Hungary for South Stream gas project", Reuters, 2008-02-25. Retrieved on 2008-02-25. 
  10. ^ "Hungary officially joins South Stream project", RIA, 2008-02-18. Retrieved on 2008-02-28. 
  11. ^ "Russia, Greece Sign South Stream Deal", Downstream Today, 2008-04-29. Retrieved on 2008-05-10. 
  12. ^ a b c "Eni and Gazprom sign the agreement for the South Stream Project", Eni, 2007-06-23. Retrieved on 2007-06-26. 
  13. ^ a b "Gazprom's, ENI's South Stream pipeline could be in trouble - report", Forbes, 2008-02-29. Retrieved on 2008-03-02. 
  14. ^ "Eni, Gazprom set up company for South Stream gas pipeline", CNBC, 2008-01-18. Retrieved on 2008-01-21. 
  15. ^ "Greece steps up for South Stream", Upstream Online, 2008-04-15. Retrieved on 2008-04-19. 
  16. ^ Kostis Geropoulos. "After Bourgas-Alexandroupolis Greece eyes South Stream", New Europe, 2008-02-25. Retrieved on 2008-02-25. 
  17. ^ "Hungary to join Russia's South Stream gas project", RIA Novosti, 2008-02-26. Retrieved on 2008-02-26. 
  18. ^ "OMV calls for South Stream through Austria", Upstream Online, 2008-04-17. Retrieved on 2008-04-19. 
  19. ^ "Gazprom: South Stream To Cross Slovenia", Downstream Today, 2008-06-11. Retrieved on 2008-06-12. 
  20. ^ "Gazprom Discussing South Stream Role for OMV", Downstream Today, 2008-04-17. Retrieved on 2008-04-19. 
  21. ^ "Slovenia eyes South Stream berth", Upstream Online, 2008-04-11. Retrieved on 2008-04-19. 
  22. ^ "Minister slams Russian grab for Serb oil monopoly", Reuters, 2007-12-28. Retrieved on 2007-12-31. 
  23. ^ "Serbs await Russian decision on South Stream route", Reuters, 2007-07-20. Retrieved on 2007-12-31. 
  24. ^ a b "Russia offers Serbia inclusion in South Stream gas pipeline", Southeast European Times, 2007-12-12. Retrieved on 2007-12-31. 
  25. ^ a b c d "Ukraine Surfaced in South Stream Project", Kommersant, 2008-02-29. Retrieved on 2008-03-02. 
  26. ^ Vladimir Socor. "Gazprom set to pounce on Serbia as Putin moves into the Balkans", Eurasia Daily Monitor, 2008-01-09. Retrieved on 2008-06-01. 
  27. ^ "MOL offers reserve for South Stream", Hungary Around the Clock, 2008-05-05. Retrieved on 2008-05-18. 
  28. ^ "Bulgaria signs up for Russian natural gas project", Reuters, 2008-01-18. Retrieved on 2008-01-19. 
  29. ^ a b Oleg Shchedrov, Ellie Tzortzi. "Russia and Serbia firm up gas pipeline deal", Reuters, 2008-02-25. Retrieved on 2008-02-25. 
  30. ^ "Gazprom, Eni move ahead with 10 bln euro pipeline", Reuters, 2007-11-22. Retrieved on 2008-01-19. 
  31. ^ "U.S. throws weight behind EU's Nabucco pipeline", Reuters, 2008-02-22. Retrieved on 2008-02-23. 
  32. ^ "South Stream AG, Zug", itonex ag. Retrieved on 2008-02-27. (German) 
  33. ^ "Gaz de France Prefers South Stream to Nabucco", Kommersant, 2008-02-08. Retrieved on 2008-02-27. 
  34. ^ Neil MacDonald. "Medvedev shows support for Serbia", Financial Times, 2008-02-25. Retrieved on 2008-02-26. 
  35. ^ "Budapest does South Stream sums", Upstream Online, 2008-02-28. Retrieved on 2008-03-01. 
  36. ^ Neil MacDonald. "Balkan boost for Russian gas plan", BBC, 2008-02-25. Retrieved on 2008-02-26. 
  37. ^ a b "Energy security: South Stream vs. Nabucco gas pipelines", Southeast European Times, 2008-02-14. Retrieved on 2008-02-27. 
  38. ^ Judy Dempsey. "Gazprom courts Prodi as pipeline chief", International Herald Tribune, 2008-04-28. Retrieved on 2008-05-10. 
  39. ^ Luca Di Leo; Liam Moloney. "Outgoing Italian Premier Turns Down Top Job for South Stream", Downstream Today, 2008-04-28. Retrieved on 2008-05-10.