South Stream

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This article or section contains information about a proposed, planned or under construction pipeline. It may contain information of a speculative nature and the content may change as the construction and/or completion of the pipeline approaches, and more information becomes available.

South Stream (Russian: Южный Поток, Bulgarian: Южен поток, Serbian: Jужни ток/Južni tok, Hungarian: Déli Áramlat) is a proposed gas pipeline to transport Russian natural gas to the Black Sea to Bulgaria and further to Italy and Austria. The project would partly replace the planned extension of Blue Stream from Turkey through Bulgaria and Serbia to Hungary and Austria, and it seen as rival to the planned Nabucco pipeline.^[1][2] The completion is due by 2015.

[edit] History

Serbian and Russian presidents, Boris Tadić and Dmitry Medvedev, sealed the deal regarding the South Stream construction in December 2008

The South Stream pipeline project was announced on 23 June 2007, when the Chief Executive Officer of Italian energy company Eni Paolo Scaroni and the Vice-Chairman of Russian Gazprom Alexander Medvedev signed in Rome a memorandum of understanding of construction South Stream.^[3] On 22 November 2007, Gazprom and Eni signed in Moscow an agreement about establishing a joint project company for the commissioning of the marketing and technical feasibility studies of the project.^[4] The joint venture South Stream AG, equally owned by Gazprom and Eni, was registered on 18 January 2008 in Switzerland.^[5]

The preliminary agreement between Russia and Bulgaria on the Bulgaria's participation in the project was signed on 18 January 2008. It was agreed to set up an equally owned company to build and operate the Bulgarian section of the pipeline.^[6] The agreement was ratified by Bulgarian Parliament on 25 July 2008.^[7] The first agreement between Russia and Serbia was signed even before announcement of the South Stream project. On 20 December 2006, Gazprom and Serbian state-owned gas company Srbijagas agreed to study building a gas pipeline running from Bulgaria through Serbia.^[8] On 25 January 2008, Russia and Serbia signed an agreement to route a northern pipe of South Stream through Serbia and to create a joint company to build the Serbian section of the pipeline and large gas storage facility near Banatski Dvor in Serbia.^[9][10] At the same day, Russia and Hungary agreed to set up an equally owned joint company to build and operate the Hungarian section of the pipeline.^[11][12] On 29 April 2008, Russia and Greece signed an intergovernmental agreement on cooperation in the construction and operation of the Greek section of the South Stream.^[13]

On 15 May 2009 in Sochi, in presence of the Prime Minister of Russia Vladimir Putin and the Prime Minister of Italy Silvio Berlusconi, the gas companies of Russia, Italy, Bulgaria, Serbia and Greece signed an agreement on construction of the South Stream pipeline.^[14][15]

[edit] Route

The 900 kilometres (560 mi) long offshore section of South Stream would start from the Beregovaya compressor station at Dzhubga on the Russia's Black Sea coast, and would run to Bulgaria's Varna.^[16] The shortest initial route would run along the continental shelfs of Russia, Ukraine, Romania and Bulgaria.^[17] Another possible route would passes Romania by.^[18] However, because of the gas disputes with Ukraine, Russia is considering a longer route through the Turkey's exclusive economic zone.^[19][20] The offshore section would be built and operated by South Stream AG, a joint company of Gazprom and Eni.^[21] According to the United Nations Convention on the Law of the Sea, the delineation of the course for the laying of such pipelines on the continental shelf is subject to the consent of the coastal state.^[17]

In Bulgaria, Gazprom wanted to include this country's current pipeline network in the South Stream pipeline project, although initial plans envisaged the construction of a separate pipeline.^[22] However, in April 2009, Vladimir Putin conceded Bulgaria's request for a separate pipeline.^[23] From Varna, the south-western route would continue through Greece and the Ionian Sea to southern Italy.^[24] Greece has proposed that the southern pipe may also supply the Turkey-Greece-Italy pipeline.^[25] The north-western pipeline will run through Bulgaria, Serbia and Hungary to Austria ending at the Baumgarten gas hub.^[26][27] Another option is that the north-western route would run through Slovenia to northern Italy.^[28][27][29] It is possible that two smaller parts will go through Bosnia and Herzegovina to the Port of Ploče and another through Croatia to Port of Rijeka and pipeline end in Italy's Port of Trieste.^[30][31][32] There are also talks that the South Stream pipeline will be connected to the Wingas-owned Haidach gas storage, the second largest gas storage in Central Europe.^{[citation needed]}

[edit] Technical description

The offshore pipeline is planned to carry annually 63 billion cubic meters (bcm) of gas.^[2] Pipeline sections in Serbia and Hungary will have capacity at least 10 bcm per annum both. There would be constructed at least two gas storage facilities, of which one underground storage facility with capacity at least 1 bcm will be in Hungary and another one in Banatski Dvor, Serbia with capacity of 3.2 bcm.^[33][34] Hungarian oil and gas company MOL has offered its empty natural gas field at Pusztaföldvár as a 9 bcm storage facility. MOL is also ready to offer its unused gas pipelines in West Hungary for links between Serbia and Austria. If Austria does not become part of the South Stream but Slovenia does, MOL will offer to replace the Baumgartner switch point in Austria with a MOL facility in Városföld.^[35] UK's Melrose Resources said it would convert the Galata offshore field in Bulgaria to a gas storage facility with initial capacity of 1.7 bcm by 2009.^[36]

The feasibility study will be prepared by Saipem, a subsidiary of Eni, and it is expected to be completed by 2009.^[37][38] The pipeline is planned to be commissioned by 31 December 2015.^[39] Construction of the Serbian stretch is scheduled to start by 2012.^[11][40] The pipeline is expected to cost €19—24 billion, of which the construction of offshore section will cost €4 billion.^[20][41] The cost of onshore sections will depend of the exact route. It was announced that the Hungarian section will cost US$2 billion.^[33]

[edit] Project companies

The pipeline would be built and operated by several project companies. The main project company is South Stream AG, which is equally owned by Gazprom and Eni.^[5] South Stream AG was incorporated on 18 January 2008 in Zug in Switzerland with the share capital of 100,000 CHF.^[42] Also Gaz de France has expressed the intention to join South Stream, which has welcomed by Gazprom.^[43]

The Bulgarian section of the pipeline would be built and operated by the joint venture of Gazprom and Bulgargaz, while the Serbian section by the joint venture of Gazprom and Srbijagas.^[10][40][44] The Hungarian section would be built and operated by the equally owned joint venture between Gazprom and the state-owned Hungarian Development Bank MFB, which will buy the elaborated feasibility study of Hungarian section from SEP Co., a joint venture of Gazprom and MOL.^[33].^[45]

[edit] Controversy

[edit] Nabucco pipeline project

The South Stream project is seen as a rival to the planned Nabucco pipeline.^[46] There are doubts about the feasibility of South Stream project, since it may cost twice as much as Nabucco, which is expected to cost €7.9 billion.^[47][48] Some experts claim that the South Stream pipeline is a political project to counter Nabucco and to expand Russian presence in the region.^[47]

Russian First Deputy Prime Minister Dmitry Medvedev and Hungarian Prime Minister Ferenc Gyurcsány have confirmed that there is no contradiction between South Stream and the Nabucco pipeline project, designated to bring Caspian (Azerbaijani) gas to South and Central Europe via Turkey. "South Stream will have no negative impact on Nabucco, just as Nabucco will have no negative effect on South Stream," Dmitry Medvedev said during his visit to Hungary on 25 February 2008.^[11]

[edit] Conflict with Ukraine

South Stream has been seen as diverting some gas exported through Ukraine, instead of providing a new source of gas for Europe.^[47] At the same time most of off-shore route of South Stream to be laid through the continental shelf of Ukraine.^[33] Although Ukraine has limited opportunities to ban the project, the laying pipeline on the continental shelf of Ukraine would require a large-scale environmental impact assessment study and environmental permits from Ukrainian authorities. There is speculations that Ukraine will permit the construction of South Stream in exchange of Russian permit to build the White Stream offshore gas pipeline from Georgia to Ukraine.^[17]

[edit] Offer to Romano Prodi

Before stepping down from the premiership, Italian Prime Minister Romano Prodi got an offer from Gazprom to become chairman of South Stream AG. This move was compared with the appointment of the former Chancellor of Germany Gerhard Schröder to lead Nord Stream AG, a consortium constructing Nord Stream pipeline. Romano Prodi has declined this offer.^[49] According to the Prodi's spokeman "Prodi was extremely flattered, but reiterated that he wants to take some time off to ponder after leaving Italian politics."^[50]

[edit] See also

• Blue Stream
• Nord Stream
• Trans-Adriatic Pipeline
• Turkey-Greece pipeline
• Greece-Italy pipeline
• Nabucco Pipeline

[edit] References

[edit] External links

• South Stream AG