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15 May, 2009 17:22

New partners sign up for South Stream gas pipe

Russia has signed deals that could see the South Stream project pumping gas to Europe in six years' time. State controlled energy giant Gazprom has closed initial transit deals with Greece, Bulgaria, Serbia and Italy.

Gazprom and Italy’s ENI completed the signing ceremony in Russia’s Black Sea resort of Sochi. Technically, the signed agreement was the second attachment to the first memorandum on the implementation of the pipeline.

It means Russia will be able to pump far more gas to Europe. The new pipe will expand the country’s export capacity to the continent from 47 billion cubic meters of gas per year to 63 billion cubic meters of gas per year. That is a tremendous increase by any standard.

Another major event at Sochi saw three new transit partners coming on board – Bulgaria, Serbia and Greece. This was important for Russia as it gives it alternative routes for its gas – something the gas industry has been chasing for years. These countries are seen as far more reliable transit partners than Ukraine.

Transit problems with Ukraine were certainly a trigger for both Russia and the European Union to search for alternative routes like the Nord Stream pipeline which will run through the Baltic Sea and the South Stream that will run through the Black Sea. Earlier this year a major gas crisis struck when Ukraine refused to pay off its own gas debts and was also accused by Russia of siphoning off gas meant for the EU. The crisis left many parts of the European Union without heat during the winter.

For years it was clear to both sides that they needed another way to get Russian gas to the EU. It’s believed the three new transit partners will be reliable and that the new deal will bring stability to Europe, Russia’s Prime Minister Vladimir Putin said.

“First and foremost, it's interdependence. Today the producer in the energy markets can ship to anywhere in the world. But if we build a pipeline worth billions of dollars – we are linked to our consumers. This provides stability to European markets and the economy,” Putin said.

Gas and politics don’t mix well but on the other hand they can’t be separated. Russia and the EU need each other, a point underlined by Italian Prime Minister Silvio Berlusconi.

“I have always been working on this because I’m absolutely convinced that the European Union needs the Russian Federation just as much as the Russian Federation need the European Union. I’m working for the benefit of this tie,” Berlusconi said.

The ambitious nine billion Euro South Stream gas project is expected to be built by 2015.

The EU is also keen on alternate routes and is not looking to the Stream projects alone.

The Nabucco pipeline is backed by the EU and would bypass Russia – but some say the project simply couldn't compete with the South Stream.

“There is much doubt if Nabucco is going to be built. And the reason behind it is that not enough supplier states have committed to Nabucco, whereas some of those supplier states have a long and stable relationship working with Gazprom. And agreement with Gazprom for them is something much more concrete than a political agreement with the European commission,” energy analyst Roman Kazmin says.