Final decision on South Stream pipeline in sight


A consortium backing the Gazprom-led South Stream pipeline expects to make a final investment decision within months, says the head of one of its second largest shareholder, Italy’s Eni energy.

Eni chief executive Paolo Scaroni was quoted on Sunday (15 July) as saying that all four partners were interested in the natural gas pipeline project, but that they still needed to see all the details before making the investment decision. A decision, he said, is expected by early 2013.

South Stream’s partners are Russia’s Gazprom, Eni, Wintershall Holding of Germany and Electricité de France (EDF). The pipeline would carry up to 63 billion cubic metres (bcm) of Russian gas a year across the Black Sea to Europe (see background and next steps).

Eni is Gazprom's partner in the construction of South Stream's offshore section. Last year, Turkey approved the route through its Black Sea economic zone, allowing the corridor to bypass Ukraine, which opposes South Stream project because it would lose important transit income.

Gazprom owns 50% of the €15-billion South Stream project, while Eni has 20% and EDF and Wintershall each own 15%. As planned, 30% of the financing will be paid by the shareholders and the bulk would come from credit financing.

South Stream officials have often provided contradictory target dates for the start of construction.

The Gazprom-favoured pipeline has been in competition with the other southern gas corridor projects. The Nabucco pipeline was initially designed to carry gas from Azerbaijan to Baumgarten, Austria, the same gas hub near Vienna that the South Stream partners plan to use.

But recent developments indicate that the backbone of the southern corridor will be the Trans-Anatolia Gas Pipeline (TANAP) across Turkey, while Nabucco may be downsized and run only through EU territory.

TANAP could eventually carry as much as 31 bcm, equal to the planned capacity of the Nabucco pipeline. Gas from Azerbaijan is expected to come upstream in 2017, the same year that South Stream is to be working at full capacity.

Commission has received no notification

Russia says it wants to include South Stream as a part of the trans-European energy network, or TEN-E, considered as “project of European interest” and eligible for EU assistance. However, the European Commission confirmed yesterday (16 July) that it had not received any notification about South Stream.

The Commission does not see South Stream as a means to improve the Union's energy security, mainly because the gas comes from Russia, already its major supplier. However, Brussels says that EU members are free to choose their infrastructure projects priorities, as long as EU energy legislation is respected.

But if a new infrastructure project seeks exemption from EU energy regulation, it needs to be approved by the Commission. EU legislation requires the new infrastructure to reserve half of its capacity for other possible operators – so-called third-party access. Gazprom sees this as a waste of resources, as it would cut its potential supply.

National authorities may request exemptions from the third-party access rules. According to the EU gas and electricity legislation, the national regulatory authority must assess the request for exemption submitted by an operator, and the national regulator’s decision then needs Commission approval.

The Commission’s opinion is binding. For infrastructure projects that affect several EU countries, the Agency for the Cooperation of Energy Regulators, or ACER, may coordinate the different requests, Commission officials told EURACTIV.

South Stream is a planned natural gas pipeline running across the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another one to Romania, Serbia, Hungary, Slovenia and Austria.

Russia recently announced that it would more than double its planned capacity from 31 billion cubic metres per year (bcm/y) to 63 bcm/y.

South Stream's website says the pipeline is "aimed at strengthening European energy security" by eliminating transit through Ukraine, as "another real step toward executing the Gazprom strategy to diversify the Russian natural gas supply routes."

  • Third quarter of 2012: Feasibility studies to be revealed.
  • Before the end of 2012: Completion of the project and design work on the Black Sea shelf.
  • End of 2012: South Stream consortium makes final investment decision.
  • Early 2013: Beginning of work on offshore section.
  • December 2015: Completion of offshore section.
  • 2015: First gas to arrive through South Stream on EU territory.
  • 2017: Completion of the project.

·        The Wall Street Journal: Eni CEO sees South Stream investment decision by start 2013

Subscribe to our newsletters