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31/08/2016

Gazprom: Serbia will start building South Stream in October

Energy

Gazprom: Serbia will start building South Stream in October

South Stream map [Gazprom]

The construction of the Serbian stretch of the South Stream gas pipeline will start in October, the head of the Gazprom international projects department Alexander Siromyatin was quoted as saying by Serbian media.

The construction work in Serbia will be begin regardless of the situation in Bulgaria, where the work on South Stream has been suspended until the project is fully harmonised with EU regulations, Siromyatin said yesterday (16 September).

Speaking at a conference on the natural gas market and the prospects and opportunities for the Danube region, held in Budapest, Siromyatin said that the building permit for the South Stream section through Serbia will be issued by the end of this month.

Several days ago, Siromyatin made another surprising statement, saying that the Russian gas monopoly expects Bulgaria to grant permit for the construction of South Stream just after the early 5 October elections.

At the G7 summit held in Brussels on 4 June, Commission President José Manuel Barroso made it plain that the EU’s executive had launched an infringement procedure against Bulgaria for non-compliance with European rules on energy competition public procurements. Other infringements procedures related to other countries participating in the project (see background) would follow if other irregularities were not removed, he said.

Bulgaria suspended construction work of the Gazprom-backed pipeline, but a video published by Dnevnik, the EurActiv partner in Bulgaria, shows workers at the Varna harbour amid pipes delivered for the South Stream pipeline and making room for further deliveries.

>> Read: Bulgaria says it has ‘frozen’ South Stream, but pipes continue to arrive

According to experts, South Stream is in competition with the TANAP-TAP project to bring Azeri gas to Italy through a different route.

The Trans-Anatolian gas pipeline (TANAP) is a proposed natural gas pipeline from Azerbaijan running through Turkey. The approximately 870 km long TAP pipeline connects with TANAP, and will cross Greece and Albania before reaching Italy through an offshore section. It is to be built by a consortium led by BP, Norway’s Statoil and Azerbaijan’s SOCAR.

TAP is in an advanced stage of preparation and the start of its construction is planned in 2016.

Experts believe that whichever projects delivers gas the first would be economically viable, but are less certain about the chances of the loser.

http://www.euractiv.com/video/commission-warns-serbia-over-south-stream-construction-eu-law-must-be-respected-308526

Positions

Asked today (17 September) to comment, Marlene Holzner, spokesperson to energy commissioner Günther Oettinger, basically said that Serbia, a candidate country, wasn’t bound by the same rules as EU member Bulgaria, who is already subject to an infringement procedure.

“However, if the idea is to bring gas from Russia to Europe, you have to go through European territory and as we have said for all big infrastructure […] if you do business on European territory, you have to respect our legislation”, she said. 

Background

South Stream is a Russia-sponsored natural gas pipeline. As planned, the pipeline would run under the Black Sea to Bulgaria, and continue through Serbia with two branches to Bosnia and Herzegovina and to Croatia. From Serbia the pipelines crosses Hungary and Slovenia before reaching Italy [see map]. Its planned capacity is 63 billion cubic metres per year (bcm/y).

The key partner for Russia's Gazprom in the South Stream project is Italy's largest energy company, ENI.

Russia signed intergovernmental agreements with:

  • Bulgaria – January 18, 2008;
  • Serbia – January 25, 2008;
  • Hungary – February 28, 2008;
  • Greece – April 29, 2008;
  • Slovenia – November 14, 2009;
  • Croatia – March 2, 2010;
  • Austria – April 24, 2010.

Bulgaria committed to provide the most favourable tax regime to Gazprom, which according to the EU Commission is in breach of the EU's state aid rules;

At one point, the inter-governmental agreement (IGA) stipulates that Bulgarian and Greek companies would be subcontracted, and at another, that preference would be given to companies from the states of the Parties (Bulgaria and Russia), which is against EU competition rules;

The IGA stipulates that tariffs for using the pipeline would be established "by the Company", which is in contradiction with the powers of the national regulator to approve transmission tariffs in accordance with EU law.

Further Reading