EurasiaNet Business & Economics - Russia: Gazprom Having Second Thoughts About the South Stream Pipeline?

BUSINESS & ECONOMICS

RUSSIA: GAZPROM HAVING SECOND THOUGHTS ABOUT THE SOUTH STREAM PIPELINE?
10/03/08

The Kremlin-controlled energy conglomerate Gazprom is pushing back the start date of the South Stream pipeline by at least two years, according to a report published by the Russian business paper Vedomosti.

According to a company strategy paper, titled A General Plan for the Development of the Gas Sector by 2030, Gazprom envisions South Stream starting to pump gas in 2015, Vedomosti reported. Earlier this year, Gazprom chief Alexei Miller indicated that the pipeline would be ready by 2013.

The South Stream Project is a joint venture involving Gazprom and the Italian energy concern ENI. The route would connect Russia and Italy via a pipeline under the Black Sea and passing through Central European states, including Bulgaria, Greece Hungary and Serbia. It will have a planned peak capacity of 31 billion cubic meters annually.

Cost estimates for South Stream are now approaching $20 billion and are continuing to climb. Some experts believe that the rising cost should cause Gazprom to think twice about going through with construction.

A September 10 commentary published by Novaya Gazeta said the South Stream project was driven by a Kremlin desire to have Russian energy exports circumvent Ukraine and Turkey. In 2007, a pricing dispute Russia and Ukraine prompted Kyiv to disrupt the flow European-bound gas deliveries via the Druzhba route, which has an annual capacity of 130 bcm - more than four times the projected volume of South Stream. [For background see the Eurasia Insight archive].

"In our opinion, it’s much easier to reach an accommodation with the Ukrainians than to build a multibillion-dollar pipeline that reduces our dependence [on Ukraine] by just 25 percent. What needs to be done is maintain a dialogue from the position of compromise, rather than only strength," the Novaya Gazeta commentary stated.

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