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Serb gas agreements add to South Stream momentum

Gas ties between Russia and Serbia have been at the forefront of the visit by President Dmitry Medvedev to Belgrade.

In a series of agreements signed off during the visit, Gazprom has committed to building a € 25 million underground gas storage facility, at Banatski Dvor, which will complement the south stream gas project to bring Russian gas across the Black sea into the Balkans and Central Europe.

Gazprom CEO, Alexey Miller, added that a joint venture to operate the South Stream pipeline in Serbia will be formally set up within in a month, and that the project to pump Russian gas to Europe was on track after .

“South Stream is a strategically-important project for energy security in Europe, and it will be realized by the end of 2015. Currently, work is underway on economic and technical feasibility studies for the pipeline's segments going through the Black Sea as well as the territory of transit countries. We, along with our Serbian colleagues, plan to finalise feasibility work on the Serbian sector by 2010.”

Gazprom says the new facility will allow for increased flexibility in managing seasonal changes in gas demand in Serbia and neighbouring countries, and enable better reserve supply.

The Serbian deals come just a day after Turkey gave the go-ahead for the project in the Turkish Black Sea.

VTB Capital Analyst Lev Snykov says the project will go some way to easing the risks of stoppages to Russia’s gas supplies to Europe along existing pipeline networks.

“For Europe, for Russia it's an attempt to diversify the infrastructure, and diversify political risks. Therefore I think even if some people might not be that bullish about the European gas demand the project still makes sense. Because now with the existing situation in Europe and in Russia basically both customers and suppliers can afford some excess infrastructure just for the sake of political safety.”