Europe gas and South Stream

With Gazprom executives lobbying the European Parliament over the South Stream pipeline project, and new rules forcing a split between pipeline ownership and the gas sales, Business RT spoke with Vladimir Rojarnovsky from Nord Capital.

RT:  What are these legal obstacles holding back the project?

VR:  “Well basically there are several projects, including competing Nabucco, which tangibly held back the project of South Stream.And also there was several complications like negotiations with alternatives like Nord Stream.There were a lot of uncertainties, including from purely environmental side.They waited for final approvals for laying the pipelines underneath the Black Sea, so I think the main complication is caused not so much by the financial or negotiating side, but from the environmental or circumstantial side.”

RT:  Why is it so important for South Stream to get the status of trans-European gas route?

VR:  “I think yes, this is with 53 billion cubic metre capacity, this is considered to be a rather large project, and it’s been long awaited.So it is going to be ramified into two streams – one is going to go to Southern Europe, other bit to Central Europe to Austria, and definitely it will add substantially to the capacity of the West European countries.And until recently there was no pure understanding who owns the project.Although there were explicit shares of each party, until the visit of Russian Prime Minister Putin to Brussels and spoke to Mr Barroso, in terms of who is going to own the pipelines and who is going to own the generating capacity.Well they are obviously belonging to Russia, to Russian government, Russian companies, and Western Europe insisted that the pipeline distribution network has to be somehow be owned by the western countries.Right now, I think this is no longer a major issue.Both parties, they have an acute feeling that it needs to go ahead, and therefore I think this is the main issue right now.Everybody needs to go ahead.”

RT:  What is the likelihood of South Stream being exempted from the rules of the third energy package given that Nabucco already has an exemption?

VR:  “Yeah.In terms of exemptions I think there is a pretty much related to the former visit, mentioned by my, visit of Prime Minister to Brussels.And I think as soon as both parties will feel comfortable about this project the exemption issue will go very smoothly.”

RT:  Gazprom's Aleksey Miller says South Stream won't bring any new capacity to the market, it's just a new way of pumping gas already destined for the European market – so what's the point of it?

VR:  “You mean the European gas which is already present in the market.Yeah, OK, yes, definitely.Alternative projects like Nord stream, South Stream, as I mentioned, Nabucco also competing.Right now the main issue is just to avoid any disruptions which we experienced in the past.Due to the Belarus and Ukrainian occasional clashes it was rather political.But west European consumer, they didn’t actually pay much attention to who was the party to blame.They need reliability, therefore the alternative routes, they are really essential to ensure the stability of deliveries and this is the main issue.But in certain time I think there will be a bit of overcapacity with the South Stream due to the competing Nabucco.”