South Stream

South Stream
Map of South Stream
Country/Province	Russia, Bulgaria, Greece, Italy, Serbia, Hungary, Slovenia, Austria
Operator	South Stream AG
Partners	Gazprom, Eni
Maximum discharge	63 billion cubic meters per year
General direction	east–west
From	Beregovaya compressor station, Dzhubga
Passes through	Black Sea
To	Italy, Austria
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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 is seen as rival to the planned Nabucco pipeline.^[1][2] The completion is due by 2015.

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 (MOU) for construction of 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 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 conduct a study on building a gas pipeline running from Bulgaria to 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] On 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 construction and operation of the Greek section of 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] On 6 August 2009, the Prime Minister of Russia Vladimir Putin and the Prime Minister of Turkey Recep Tayyip Erdoğan in attendance of the Prime Minister of Italy Silvio Berlusconi signed a protocol routing the pipeline through the Turkish territorial waters.^[16] On 14 November 2009, followed the talks between Slovenian Prime Minister Borut Pahor and Russian Prime Minister Vladimir Putin, the agreement on the terms of which a part of the pipeline will run through Slovenia to Northern Italy was signedby Russian Energy Minister Sergei Shmatko and Slovenian Economy Minister Matej Lahovnik in Moscow.^[17][18] As per earlier 2008 agreement between two countries, on 17 November 2009, Russian Gasprom and Serbian Srbijagas created South Stream Serbia AG in Bern, Switzerland. The joint engineering company will prepare feasibility study of the Serbian section of project. If agreement on investment is reached, the new joint venture will be also responsible for design, financing, construction and operation of the pipeline in Serbia.^[19]

Route

Major existing and planned natural gas pipelines supplying Russian gas to Europe.

The Russian onshore section will run from the Pochinki compressor station to the Beregovaya compressor station at Dzhubga. The 900-kilometre (560 mi) long offshore section will run from the Beregovaya compressor station on the Black Sea coast to Bulgaria's city of Varna.^[20] Because of the Russia–Ukraine gas disputes, the pipeline is routed through Turkey's waters to avoid the exclusive economic zone of Ukraine.^[16][21][22] According to the United Nations Convention on the Law of the Sea, the delineation of the course for laying of such pipelines on continental shelf is subject to the consent of the coastal state(s).^[23]

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.^[24] However, in April 2009, Vladimir Putin conceded to Bulgaria's request for a separate pipeline.^[25] From Varna, the pipeline will run to Pleven. From there, the southwestern route will continue through Greece and Ionian Sea to southern Italy.^[26] Greece has also proposed that the southern pipe may also supply the Turkey-Greece-Italy pipeline.^[27] The northwestern pipeline will run from Pleven to Serbia. In Serbia, it will run through Zaječar, Beograd and Subotica. From Subotica, one branch continues through Hungary to Austria ending at the Baumgarten gas hub.^[28][29] Another branch will run through Hungary and Slovenia to Arnoldstein in Austria near the Italian border to supply northern Italy.^[30][29][31] It is possible that this branch will be routed through Croatia instead of Hungary.^[32] Srbijagas also plans to construct along Sava river a 480-kilometre (300 mi) long branch pipeline with a capacity of 1.2 bcm from South Stream to Banja Luka and Sarajevo in Bosnia and Herzegovina.^[33]

Technical description

The offshore pipeline is planned to carry 63 billion cubic meters (bcm) of natural gas per year.^[2] Pipeline sections in Serbia, Hungary, and Slovenia will have capacity at least 10 bcm per year.^[18] At least two gas storage facilities would be constructed of which one would be an underground storage facility in Hungary with capacity of minimum 1 bcm and another one in Banatski Dvor, Serbia with capacity of 3.2 bcm.^[34][35] 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 and Slovenia does, MOL will offer to replace the Baumgartner switch point in Austria with an MOL facility in Városföld.^[36] British Melrose Resources is planning to convert the Galata offshore field in Bulgaria to a gas storage facility with initial capacity of 1.7 bcm by 2009.^[37] There are also allegations 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]}

The feasibility study of the offshore section will be conducted by Saipem, a subsidiary of Eni, and is expected to be completed by 2009.^[38][39] The construction is to start in 2010 and the pipeline is planned to be commissioned by 31 December 2015.^[16][40] Construction of the Serbian stretch is scheduled to start by 2012.^[11][41] The pipeline is expected to cost €19—24 billion including the construction of offshore section which will cost of €8.6 billion.^[16][22][42] The cost of onshore sections will depend of the exact route of the pipeline. It was announced that the Hungarian section will cost US$2 billion.^[34]

Project companies

The pipeline will be built and operated by several project companies. The offshore section of the pipeline would be built and operated by South Stream AG, a joint company of Gazprom and Eni.^[43][5] South Stream AG was incorporated on 18 January 2008 in Zug in Switzerland with the share capital of 100,000 CHF.^[44] Also Électricité de France has expressed the intention to acquire a minority stake (10%) in South Stream AG.^[45][46]

The Bulgarian section of the pipeline will 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][41][47] The Hungarian section will 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.^[34].^[48] The Slovenia section will be built and operated by an equally-owned joint venture of Gazprom and Geoplin Plinovodi.^[18]

Controversy

Nabucco pipeline project

Map of the planned Nabucco and South Stream pipelines.

The South Stream project is seen as a rival to the planned Nabucco pipeline.^[49] 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.^[50][51] Some experts claim that the South Stream pipeline is a political project to counter Nabucco and to expand Russian presence in the region.^[50]

Russian President (then First Deputy Prime Minister) Dmitry Medvedev and former 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 Southern 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]

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.^[50] At the same time, a bigger part of the offshore route of South Stream was expected to be laid through the continental shelf of Ukraine.^[34] Although Ukraine had 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 were speculations that Ukraine would permit the construction of South Stream in exchange for Russian permit to build the White Stream offshore gas pipeline from Georgia to Ukraine.^[23]. To avoid Ukrainian exclusive economic zone, the pipeline was re-routed through the Turkish waters.^[16] In early November 2009, while meeting with Austrian Chancellor Werner Faymann, Russian Prime Minister Vladimir Putin, accused Ukraine of repeated diversion of gas bound for Europe without paying for it. "I am very much counting on our main transit partner, Ukraine, to fulfill all its contractual obligations", he said and reiterated his support for South Stream.^[52]

Offer to Romano Prodi

Before stepping down from the premiership, Italian Prime Minister Romano Prodi received an offer from Gazprom to become the 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.^[53] 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."^[54]

See also

• Blue Stream
• Nord Stream
• Trans-Adriatic Pipeline
• Turkey-Greece pipeline
• Greece-Italy pipeline
• Nabucco Pipeline
• 2008 South Ossetia war

References

External links

• South Stream official Web site
• South Stream AG
• Projected Gas Routes to Europe

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