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28 Dec, 2011 13:33

There's no stopping South Stream

Turkey has given the green light to South Stream –a set of pipelines carrying Russian gas to Southern Europe - to cross its territory. Yet there’s still uncertainty if Russia- Ukraine gas talks would affect the project.

The pipeline is intended to carry 63 billion cubic meters of gas annually from Southern Russia to Europe, bypassing the transit countries of Ukraine and Belarus. Its cost is estimated at around $20 billion dollars

Gazprom's chief executive Alexei Miller says Turkey’s decision was “the most serious proof” that the project will go ahead as planned and be completed by 2015.  However, only two days ago the head of Gazprom linked the destiny of the pipeline to negotiations with Ukraine over the Russian company’s participation in the country’s gas transit system. The negotiations over the issue are expected to continue after the New Year Holidays. There has been speculation the South Stream project could be dropped if Kiev allows Gazprom into its gas transportation system. When asked about this possibility, Miller replied that the final outcome of the negotiations with Ukraine over the joint ownership or management of the country's gas-transportation system won’t affect the South Stream schedule and that “South Stream is already in the construction stage” and “in December 2015, the first pipeline will be launched.”  "The European Union needs to import an additional 250 billion cubic meters of gas, even if Nord  Stream and South Stream are built. The rival Nabucco pipeline and Liquefied Natural Gas deliveries will provide  around  15-20 billion cubic meters of  additional gas deliveries  which will not be  enough," explained Alexander Medvedev, Deputy Chief of Gazprom.

Analysts say the volume of gas delivered through South stream and North Stream, the pipeline that carries Russian gas through the Baltic sea to Germany, depends on the financial situation in Europe and on how much of nuclear energy the western countries decide to use.“Both Nord stream and South Stream have to be functions, even though they can be under-utilized, because both routes through Belarus and through Ukraine, their total capacity is not enough for western Europe to be consumed,” said Vladimir Rozhankovsky, gas analysts from Nord Capital.  Alexei Miller also explained that the price of the company’s gas won’t be affected by the construction of South Stream pipeline because the price formula depends on oil. Gazprom owns 50% of the project while 20% belongs to Italy's Eni, the rest is evenly distributed between France's EDF and Germany's Wintershall.