Business News
European firms sign Black Sea pipeline deal with Russia
Sep 16, 2011, 12:39 GMT
Sochi, Russia - Russia agreed with three major European energy firms on Friday to build a natural gas pipeline across the Black Sea as part of an ongoing Kremlin strategy to diversify export routes westward and bypass Ukraine.
Russian Prime Minister Vladimir Putin was at the signing ceremony in the Black Sea resort city of Sochi, along with the heads of French energy company EDF, Italy's Eni, and Germany's Wintershall.
Russia's natural gas monopoly Gazprom will take a 50-per-cent stake in the offshore section of the so-called South Stream pipeline project, with Eni receiving 20 per cent and EDF and Wintershall each receiving 15 per cent.
'The gas supply is available, the European markets need it,' said South Stream director Marcel Kramer in a statement.
South Stream plans a 900-kilometre pipeline connecting Russia's Black Sea port terminal Dzhubga with the Bulgarian city of Varna. Its maximum capacity is rated at 63 billion cubic metres a year, or roughly 10 per cent of current EU consumption.
The undersea portion of South Stream will cost around 10 billion dollars, of which between 3 and 4 billion dollars will go towards the steel pipes, said Eni's Paolo Scaroni.
A planning study was in progress and project partners should be able to present to shareholders a detailed cost breakdown by the end of 2012, he said.
The undersea section of the line should be operational in 2015, according to a statement from South Stream.
Balkan branches of the pipeline will carry Russian gas onward to Italy and Central Europe.
Onshore sections will be built by local joint ventures between Gazprom and energy companies in Austria, Bulgaria, Croatia, Greece, Hungary, Serbia and Slovenia, the statement said.
Gazprom officials have long supported a gas delivery route under the Black Sea, as a way of preventing possible Ukrainian interference with Russian natural gas deliveries to Europe.
European deliveries experienced stoppages in 2006 and 2009 because of disputes between Gazprom and Ukraine over natural gas pricing. Currently, some 80 per cent of all Russian gas exported to Europe reaches the market via pipelines crossing Ukraine.
Ukrainian President Viktor Yanukovych criticized the planned pipeline, saying that increasing capacity of existing overland pipelines through Ukraine would be 'five times less expensive.'
In early September, Russia began pumping gas into a trans-Baltic Sea pipeline called Nord Stream which, once fully operational in October, will deliver natural gas directly to Germany.
Russian energy industry analysts have said the South Stream pipeline would also reduce the importance of a competing trans-Turkey pipeline called Nabucco which, if built, would allow Azerbaijan and Central Asian nations to export their own natural gas westward without using Russian-controlled pipelines.
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