Oettinger declines invitation to South Stream opening

Putin and friends. Sochi, 2011. [Gazprom]

Putin and friends. Sochi, 2011. [Gazprom]

The construction of the offshore section of the South Stream pipeline is due to officially start today (7 December) with a ceremony near the Russian Black Sea town of Anapa in the presence of Russian President Vladimir Putin. But Energy Commissioner Günther Oettinger has reportedly declined the invitation to attend.

Observers note that Gazprom may have put the cart before the horse, as a final investment decision is not even in sight.

According to media, Putin will launch the construction of the offshore section and Bulgaria, where the pipe is expected to emerge on the other side of the Black Sea, has sent its public works minister to attend the ceremony.

The launch is to be marked by a symbolic welding of the pipeline.

Radio Free Europe cited experts as saying that a final route has yet to be submitted to Brussels and likely won’t be approved for at least another year.

Jonathan Stern, head of the Natural Gas Research Programme at the Oxford Institute for Energy Studies, is quoted as saying that Gazprom hasn’t yet ordered pipes or organised the lay barge for the pipeline and “cannot start laying the offshore section until 2014 [at the] earliest.”

The European Commission has repeatedly said there was no final investment decision on South Stream, and that the EU executive has seen no blueprint of the project.

A final investment decision presumes that a number of elements are defined, notably the establishment of a final route, the financing envelope and the necessary contracts. Environmental and social impact assessments also have to be completed, which is not the case yet.

The construction of South Stream in Bulgaria will begin “around July 2013”, Sofia announced. Bulgaria say the total length of South Stream across the country is 535.7 km, the diameter of the pipe is 140 cm, and the price tag of the construction on Bulgarian territory is of €3.3 billion.

As the Bulgarian side has no funds available, its share will be funded by Gazprom, which in return will get all the transit taxes for the next 15 years. The entry point at the Black Sea is indicated at Galata, a cape South of Varna.

Data from the website show that 17.8 billion cubic metres per year (bcm/y) of the pipeline's total capacity of 63 bcm/y output will not be new deliveries. Instead, they will be a re-route of the normal supplies to Turkey (14 bcm/y), Greece (3 bcm/y) and Macedonia (0.3 bcm/y). Gazprom’s aim of building South Stream is to bypass Ukraine, the main gas pipeline hub to the EU.

The South Steam is skimpy on financial details, saying the project “has an investment budget of several billion euros, financed by private investors”.

“This long-term investment project will provide a significant stimulus for many sectors of the European economy – at zero cost to the region's tax payers,” the company's website says.

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."

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