Gazprom Prepares Romania's South Stream Accession in 2011

Business » ENERGY | October 13, 2010, Wednesday // 20:08
Bulgaria: Gazprom Prepares Romania's South Stream Accession in 2011 Gazprom CEO Alexei Miller (left) pictured with Russian PM Vladimir Putin. Photo by EPA/BGNES

Russian energy company Gazprom and Romania's Transgas have made a deal considered the last step before Romania formally joins the South Stream pipeline.

Gazprom said in a statement that it had signed a memorandum of mutual understanding with Romania's Transgas SA to establish a joint group of experts, who will conduct a technical and economic assessment of the pipeline construction in Romania.

"If the results of the assessment are positive, Gazprom and Transgas will suggest signing a Russian-Romanian intergovernmental agreement on cooperation in the South Stream project in the first quarter of 2011. The agreement will be the political, international and legal basis for further development of the project in Romania," the statement said as cited by RIA Novosti.

After meeting Romanian officials in Bucharest on Wednesday, Gazprom CEO Alexei Miller said he had no doubts the South Stream pipeline will be finished in 2015.

He made it clear the deal made in Bucharest brought Romania a step closer to becoming part of South Stream.

"We have signed a document to make a technical, economic analysis of a pipeline transiting Romania and after this analysis we can sign an intergovernmental agreement," Miller said as quoted by Romanian media.

Thus, the agreement for Romania's accession to South Stream will most likely be signed in the first quarter of 2011.

Russia and Romania first started talks for that in June fueling fears in Bulgaria that Romania's inclusion into the project – combined with Macedonia's accession for which talks are under way - might allow the Russians to go around Bulgaria as a result of the Borisov Cabinet balking at two other large-scale Russian-sponsored energy deals – the Belene NPP and the Burgas-Alexandroupolis oil pipeline.

While Russia sought to refute such fears by saying that Romania will only be supplied with gas through South Stream, and most likely will not be a transit country, recent publications in the Russian media interpreting a statement by Italian PM Berlusconi that Bulgaria was creating difficulties for the project continue to fuel suspicions that Moscow might swap Bulgaria for Romania.

The South Stream gas transit pipeline is supposed to be ready by 2015. Its construction is expected to cost between EUR 19 B and EUR 24 B. It will be transporting 63 billion cubic meters of natural gas annually, or 35% of Russia's total annual natural gas export to Europe.

The South Stream pipe will start near Novorosiysk on the Russian Black Sea coast, and will go to Bulgaria's Varna; the underwater section will be long 900 km.

In Bulgaria, the pipe is supposed to split in two – one pipeline going to Greece and Southern Italy, and another one going to Austria and Northern Italy through Serbia, Croatia and Slovenia.

The project was initiated by Gazprom and the Italian company Eni, and the French company EdF is also planned to join as a shareholder. It is seen as a competitor to the EU-sponsored project Nabucco seeking to bring non-Russian gas to Europe.

As early as April 2010, Russian Prime Minister Vladimir Putin announced that the French company EDF will also become a partner in the South Stream project. Back then he said that EDF asked for a 20% share, which, if granted, will probably leave Gazprom and Eni with 40% each.

At their meeting on Saturday in St. Petersburg, Berlusconi and Putin welcomed the idea of having German companies join in as shareholders. There is no indication as to how the joining of RWE or some other German company would re-apportion the stakes.

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Tags: Russia, South stream, gas transit pipeline, natural gas, pipeline, Gazprom, Alexei Miller, Romania, Transgas

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