Russian gas export monopoly Gazprom has bought the shares of its European partner companies in the South Stream gas pipeline company, namely Eni, EDF and Wintershall, for approximately $1 billion, thus becoming sole owner of the defunct pipeline.
Gazprom has reportedly paid Italy’s Eni, who owned 20% of the South Stream company, approximately $390 million, and France’s EDF and Germany’s Wintershall, who had a 15% share, approximately $290 million.
At first sight, it is unclear why Gazprom buys those shares, as the shareholders’ agreements foresee joint risk taking for the project. However, Russia decided to abandon it unilaterally (see background).
Although the financial situation of Gazprom is not good, it is believed that by making these payments, Russia preserves good relations with Eni’s subsidiary Saipem, who has a licence to lay pipes under the Black Sea for South Stream (see background). Russia now plans to use the company’s services for Turkish Stream, a project replacing South Stream, which will bring Russian gas to the European territory of Turkey.
The Russian press quotes Konstanin Simonov, head of the Russian Foundation for National Energy Security, who sees it as a positive development that Russia becomes the sole owner of all the projects’ assets.
Secondly, as Simonov explained, by making the payment, Russia has improved its relations with Italian company Eni, who is the main shareholder of the construction company Saipem, whose services Gazprom intends to use for laying down the pipes on the Black Sea seabed.
Fear of sanctions
Russian agency Interfax quotes an anonymous source disclosing that Gazprom relations with the Dutch-registered company “South Stream Transport B.V.” are extremely important in the context of the EU sanctions, which have hurt Russia’s and oil business.
EU sanctions restrict the exports of certain energy-related equipment and technology to Russia by requiring prior authorisation by member states. Export licenses are denied if products are destined for deep water oil exploration and production, arctic oil exploration or production, and shale oil projects in Russia.
“South Stream Transport B.V.” is reported to have a Dutch license for producing the pipes, and a contract with Saipem for laying the pipes under the Black Sea, and Saipem has authorisation from the Italian authorities for doing that in relation to the South Stream project. However, it is unclear if the license applies for Turkish Stream.
Interfax writes that Gazprom has already set up a company for Turkish Stream, named “Gazprom Russkaya”, adding that “South Stream Transport B.V.” could be part of the project.
The report adds that Gazprom is still unable to come to an agreement with Turkey to start exploration for the Turkish Stream project. According to a source quoted by Intefax, Ankara wants a package deal including gas price discounts and an increase of the capacity of the existing offshore gas pipeline Blue Stream, linking Russia to the Asian territory of Turkey.
The pipes for Turkish Stream would be stored in the Bulgarian port of Varna. Pipes intended for the South Stream pipeline are already in Bulgarian ports.