South Stream’s Brussels promo tour falls flat

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Russian energy giant Gazprom held an event in Brussels yesterday (25 May) to promote its South Stream gas pipeline but failed to answer questions about the project, which is seen as a competitor to the EU's own Nabucco plan.

The event was attended by EU Energy Commissioner Günther Oettinger, Russian Energy Minister Sergei Shmatko and the entire Gazprom hierarchy, including Chairman Alexei Miller and Alexander Medvedev, director-general for exports.

Paolo Scaroni, CEO of Italian energy giant Eni, one of South Stream's major shareholders, was also present and Bulgaria, one of the key partners in the project, was represented by Energy Minister Traycho Traykov.

But the presentation, which took place in a Brussels hotel, appeared well below the expectations raised by Russia's energy minister at the last EU-Russia summit in February.

Give and take process

Oettinger delivered a political speech, repeating the EU's well-known line that EU-Russia energy relations is a give-and-take process, which was not necessarily understood in the same manner by both sides.

While Russian speakers stressed Europe's growing need for imported gas, Oettinger argued that the demand side was only part of the picture.

"It is equally important to know how the Russian market will develop, what will be the available production and export capacity for oil and gas, and whether the investment climate in Russia will improve to attract European companies," Oettinger said.

The energy commissioner responded to earlier criticism from Russia regarding the EU's latest energy market liberalisation package, which forces integrated gas companies to separate their pipeline businesses from energy supply services – so-called "ownership unbundling".

"Just to illustrate an example: as Gazprom can ship gas round the EU, Novatek can do so in Russia. I would like to see Novatek in Europe, and EU gas companies in Russia. And pluralism between us."

Novatek is Russia's largest independent natural gas producer after Gazprom, but is prevented from selling to Europe because the state-owned Russian giant holds exclusive export rights.

Regarding diversification of supplies, the commissioner drew a comparison between Nord Stream, another Gazprom pipeline that is already under construction, and the proposed South Stream.

"Nord Stream is a good example of diversification of routes, a wholly new route from an established supplier and an established counter-party, Gazprom," he said.

"In the Southern Corridor we are looking at new routes – pipelines such as Nabucco, ITGI, TAP and White Stream – and LNG projects. We have a series of possible supplier countries, with which we will have direct contacts for gas supply such as Azerbaijan, Iraq and Turkmenistan, as well as the Gulf," Oettinger insisted.

'South Stream is not our top priority': Oettinger

Cutting short Russian demands to grant South Stream 'Project of European interest' status, like Nabucco, he said "South Stream is not our top priority".

However, he added that the EU nevertheless recognised its value, in particular for diversifying routes.

In response to Russian demands for a "level playing field for financing, permitting and regulatory processes, he said: "We will support South Stream in its administrative processes in the EU, and we will not impose any unreasonable or unjustified level of administrative or regulatory requirements. We will act as fair partners."

However, various speakers representing South Stream left unanswered many questions asked by journalists. In fact, Oettinger offered a decent summary of the uncertainties surrounding the project.

"What we know is that the gas in South Stream will leave Russia, cross the Black Sea and arrive in Europe. Beyond that, there are a number of questions. Where will the gas actually come from? Where will it arrive? How will it arrive, by ship or by pipeline? Will it divert gas from Ukraine? Once it gets to Europe, what will happen? Most importantly, who can ship gas in the project? Is it only Gazprom, or also other players?" Oettinger asked.

In what was described by guests as "typical Russian style", Medvedev answered that Russia would supply Europe with as much gas as it needed.

Georgi Gotev

Nabucco and South Stream are seen as competing projects and have similar timeframes for beginning and completing construction.

South Stream is a Russia-sponsored planned natural gas pipeline. Once completed, the pipeline will run under the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another to Romania, Serbia, Hungary, Slovenia and Austria. 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.

Another pipeline in the project phase, Nabucco, does not enjoy the favour of Russian state monopoly Gazprom. It widely resembles South Stream, but is intended to diversify the EU's pool of supplier countries, bringing gas to Europe from the Caucasus and the Middle East to a gas hub in Austria, via Turkey, Bulgaria and Romania.

Regarding its priorities, the EU now prefers to refer to the 'Southern Gas Corridor', comprising not only Nabucco, but other smaller projects, such as the Trans-Adriatic Pipeline (TAP), the Turkey-Greece-Italy Interconnector (ITGI) or the Azerbaijan-Georgia-Romania Interconnector (AGRI), all of which have the potential to become important elements of the Southern Gas Corridor and even call into question the future of Nabucco (more).

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