Russia takes on board Slovenia in South Stream venture

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Russia signed a deal with EU member Slovenia yesterday (22 March), paving the way for the construction of the South Stream gas pipeline through the Adriatic country. 

Speaking at a press conference in Slovenia after Russian gas giant Gazprom had signed a $1 billion (0.7 billion euro) South Stream joint venture agreement, Russian Prime Minister Vladimir Putin said he saw no threat to the project from Turkey.

Turkey has objected on ecological grounds to plans to build a crucial offshore section of South Stream through its territorial waters, leading Russia to claim last week that it may be forced to give up on the project altogether

"But we are ready for any scenario," Putin conceded, explaining that Russia would in the next few months present Turkey with additional documentation on the ecological impact of the pipeline and other issues.

Russia plans to launch the $21.5 billion (15.1 billion euro) pipeline, which will transport up to 63 billion cubic metres (bcm) of gas to Central and Southern Europe, in 2015. The planned underwater portion of the pipeline will go through Turkey's territorial waters.

Turkey, which is also a major player in the rival, European Union-sponsored 7.6 billion euro Nabucco project to pipe gas from Turkmenistan to Europe, has been in discussions with Russia over the price of gas it buys for domestic consumption.

Putin said Russia may liquefy gas at a new plant on the Black Sea coast and send it to Bulgaria. He said Russia could also liquefy gas at the planned plant on the Yamal Peninsula in the Arctic, which is controlled by Gazprom rival Novatek.

Right way to go

The proposed alternatives will significantly change the South Stream project, in which Germany's Wintershall (a unit of BASF), Italy's ENI and France's EDF recently became involved.

"We are hoping that the project will be implemented in its initial form," Gazprom CEO Alexei Miller told reporters, adding that the deal with Wintershall signed on 21 March may influence Turkey's decision.

"I am sure that the goals we are pursuing with regard to the underwater section will be achieved quicker now that BASF has entered the project," Miller said, citing joint experience of obtaining permission for the Baltic Sea gas pipeline.

The move appears to have increased support for Moscow's stance that Russian pipelines should be exempted from new EU energy liberalisation rules.

Russia earlier said another threat to the project was posed by new EU energy legislation, which imposes limits on the ownership of pipeline infrastructure by gas suppliers and calls for the "unbundling" of over-concentrated ownership.

Yesterday Energy Minister Sergei Shmatko said Russia had proposed to the European Union to exempt transnational pipelines from the new rules, under which Russia could be forced to sell off parts of its pipeline network in the EU.

Putin said Russia and the EU were "in the process of constructive talks," while Slovenian Economy Minister Darja Radi? said Russia should seek an exemption from the new rules, known as 'the Third Energy Package'.

"The Third Energy Package enables exemptions for certain projects and I think that the right way to go would be to try to gain an exemption for the new gas pipelines in Europe," Radi? told reporters.

South Stream is a planned natural gas pipeline bypassing Ukraine, running under 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.

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

Consequently, Gazprom sees South Stream not as a competitor, but as the best project in the EU's Southern Gas Corridor.

The planned route of South Stream starts from the Pochinki compressor station on Russia's Black Sea coast. The pipeline's offshore section, which is around 900km long and has a maximum depth in excess of 2,000m, will connect the Russian and Bulgarian coasts under the Black Sea. Italy's petroleum company ENI acts as Gazprom's partner in the construction of South Stream's offshore section.

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