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04/12/2016

Italy: South Stream pipeline is no longer a priority

Energy

Italy: South Stream pipeline is no longer a priority

Gazprom yacht race endosement. Trieste, 2010. [William Tennent Bersing/Flickr]

Italian Industry Minister Federica Guidi said on Wednesday (19 November) that the South Stream gas pipeline project, which was put in doubt after Russia’s annexation of Ukraine’s Crimea peninsula, is no longer a priority.

Plans to build the $40 billion (€32bn) pipeline carrying enough Russian gas to meet almost 15% of European demand while bypassing Ukraine have divided European Union member states and run into opposition from the European Commission.

Italy, whose state-owned oil producer Eni is involved in the project, would be one of the countries supplied by the pipeline.

“It’s a useful infrastructure, but maybe it’s no longer in the list of priorities,” Guidi told reporters in Rome. “Even if on the one hand it helps diversify transit (of gas), on the other hand from the supply point of view it has some critical points.”

EU sources said the South Stream project, designed to bring Russian gas directly to Europe, bypassing Ukraine, was “dead” following Crimea’s annexation by Russia.

>> Read: South Stream victim of Crimea annexation

Moreover, the European Commission contends that bilateral agreements signed between Russia and other EU countries over South Stream are in breach of EU laws which prevent energy suppliers from owning transmission grids. 

This means that Gazprom, which is both a producer and a supplier of gas, cannot simultaneously own production capacity and its transmission network in Europe.

Gazprom, which controls 50% of the entire planned South Stream project, has refused to comply with the demand.

>> Read: South Stream bilateral deals breach EU law, Commission says

Background

South Stream is a Russian 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.