Final details on South Stream gas pipeline

Nov 16, 2009 01:00 AM

by Daniel Raunig

On November 14 Russian Prime Minister Vladimir Putin and his Slovenian counterpart Borut Pahor signed an energy agreement giving the green light to the construction of a section of the South Stream gas pipeline through Slovenia to northern Italy.
This was the last detail to be worked out on the ambitious pan-European project. Russian gas will reach northern Italy not through Austria, as originally planned, but through Slovenia.

In a bold last-minute move, Bratislava agreed to allow part of South Stream to pass through Slovenian territory on its way to northern Italy, thus turning Slovenia into a major gas transit country. In time, other countries, Austria, Croatia, Bosnia and Herzegovina, may also be connected to South Stream, though only through secondary branches of the main pipeline. Now that the agreement with Slovenia has been signed, the route of South Stream has finally been determined.
It was not for nothing that Russian Prime Minister Vladimir Putin said thatthis was the last agreement that remained to be signed with European partners. The prime minister stressed that South Stream has truly become a major, pan-European energy project.

The South Stream project will carry gas from Russia, and possibly Central Asia, under the Black Sea to southern and central Europe. The participants in the project are Russia's Gazprom and Italy's ENI. According to a recently signed agreement between Russia and Turkey, the gas pipeline will pass through the Turkish and Russian exclusive economic zones.
Because Bulgaria has recently been pressing for the Russian-Bulgarian oil and gas agreements to be revised, it is impossible to rule out the possibility that the section of the pipeline in the Black Sea will run from the Russian to the Turkish coast bypassing Bulgaria.

From there South Stream will split: one branch will run through Greece to southern Italy under the Adriatic and the other will also run through Greece but then turn north and pass through Bulgaria, Serbia, Hungary and, as of November 14, Slovenia, to northern Italy. The pipeline is to begin transporting gas in 2015. The design capacity is 63 bn cm of gas a year.
Russia has not abandoned its efforts to bring Austria into the project. Austria is the location of Europe's largest gas transport hub in Baumgarten. The negotiations with Austria on South Stream were the most difficult. And no wonder. Austria was one of the first countries to propose the alternative pipeline, Nabucco, which the European Union hopes would make it less dependent on Russian gas supplies.

The Russian-Austrian energy dialogue was somewhat complicated by the recently strained relations between long-time partners Gazprom and the Austrian gas company OMV. The companies failed to fulfil their cooperation agreement due to differences over dividing up the Austrian gas market. However, talks continue between the two companies on further cooperation.
They may get a boost from the November 10 and 11 talks in Moscow between Austrian Chancellor Werner Faymann, Russian President Dmitry Medvedev and Russian Prime Minister Vladimir Putin. At the talks, the three leaders discussed a potential agreement between the two countries on South Stream.

While its backers still face the problem of finding gas supplies for Nabucco, South Stream is guaranteed to be filled with Russian gas. Thus, Vienna will not miss out on the chance to have two pan-European pipelines on its territory.
According to the recently signed agreement, Slovenia will transport Russian gas directly to the border with Italy, which is the main target market for the pipeline. Now all the elements for the implementation of the South Stream project are in place, according to a source in the Russian government. Access to the Italian border opens up the possibility of Gazprom expanding its operations on the Apennine Peninsula and in Europe as a whole. Slovenia will emerge as the clear winner, because becoming a partner of the world's biggest gas exporter, the Gazprom Group, offers extra security for its energy market.

South Stream, which is intended to diversify energy supply routes to Europe, in the long run will make energy deliveries to Europe more reliable, ensure the unobstructed transit of Russian gas to European consumers, and free Russia and the European Union from their dependence on the Ukrainian transit monopoly.

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