Russia ready to break ground on pipeline to rival Azeri plan

MOSCOW

Russian Prime Minister Dmitry Medvedev (R) and his Slovenian counterpart Janez Jansa (L) shake hands during a news conference following their meeting at the Gorki residence outside Moscow.

Russia’s Gazprom, the largest gas extractor in the world, announced yesterday that it would begin construction of its slow-going South Stream pipeline to Europe on Dec. 7. The pipeline will rival other European alternatives that lean on an Azerbaijani-Turkish initiative to carry Caspian gas through western Turkey.

Gazprom has long placed its bets on South Stream while also expanding the capacity of a sister project under the Baltic Sea called Nord Stream. Its officials sounded confident yesterday, Agence France-Presse reported.

After signing an investment decision on the project with Slovenia, company boss Alexei Miller said a similar deal with Bulgaria – the only transit country yet to approve South Stream – would be sealed on Nov. 15. “We intend to sign the final investment decision on the sea section Nov. 14 and a deal with Bulgaria on Nov. 15,” news agencies quoted Miller as saying, following talks with Slovenian energy officials.

“Construction will begin on Dec. 7,” Miller said.

Diversification efforts

The project runs in direct competition to the Nabucco project, which EU states have been discussing for much of the past decade in order to reduce their dependence on Russian gas.

The EU has sought ways to diversify its natural gas supply base to reduce the approximately 30 percent stake that Russia holds today. Nabucco intends to channel gas from the Caspian Sea and Middle East to Europe via Turkey. But EU states have struggled to secure delivery deals and are debating the merits of making the massive investment amid their financial malaise.

Gazprom’s link intends to pump some of its current volume of Siberian gas under the Black Sea across southern Europe to Italy’s Adriatic Sea coast.

Russian President Vladimir Putin personally pushed Gazprom to launch construction this year while he was still serving as prime minister in December 2011.

Miller, at the time, estimated the total cost at 16.5 billion euros (about $21 billion), around two-thirds of that figure attributed to the cost of building the pipeline across the Black Sea.

Gazprom then secured swift approval for the deal from southern European transit countries that already rely heavily on Russian gas and were suddenly in a position to negotiate lower prices for their long-term contracts.

Bulgaria became the last holdout after finding itself in the enviable position of being courted by both Moscow and Brussels.

The EU’s Nabucco pipeline is to shoot up to Bulgaria from Turkey before extending through Romania and Hungary to Austria.

Yet Miller said price discounts were not a part of Gazprom’s negotiations with the Balkan country. “These issues are not related,” Miller said.

Gazprom’s project manager, Leonid Chugunov, said in a statement yesterday that the company does not plan further investments in Greece and southern Italy.

Albania praises TAP

Meanwhile, another Nabucco rival to feed Europe via Turkey, the Trans Adriatic Pipeline (TAP), received Albanian support yesterday, with Prime Minister Sali Berisha saying TAP was crucial for not only his country but for all of Europe. TAP is competing with Nabucco to carry Azeri gas that will reach Turkey via the as-of-yet undeveloped Trans Anatolia Pipeline (TANAP). TAP starts in Greece before reaching Italy via Albania. Nabucco’s route passes through Turkey, Bulgaria, Romania and Hungary.