South Stream project finance postponed until 2015

MOSCOW – Reuters

Fundraising to begin building the subsea stretch of the South Stream gas pipeline from Russia across the Black Sea has been postponed until the first quarter of 2015, Russian news agency Interfax has said.

A source at gas exporter Gazprom, which owns half the project, said the schedule had been pushed back from December, Interfax said.

“To raise the project finance by the end of 2014, this is not the case now,” the source said. “The shareholders have now agreed on arranging the funding in the first quarter of next year.”

South Stream Transport B.V., operator of the subsea part of the pipeline, and Gazprom both declined comment.

The $45 billion pipeline is designed to circumvent Ukraine, with which Gazprom is locked in a dispute over gas pricing which promoted the company to halt deliveries in mid-June.

Relations between Ukraine and Russia have deteriorated sharply since the ouster of pro-Moscow Ukrainian President Viktor Yanukovich in February.

Russia annexed Ukraine’s Crimea region in March and has been accused of backing pro-Russian separatists in the east of the country, sparking sanctions against Moscow from the European Union and United States.

Wintershall, part of German chemicals group , Italy’s Eni and France’s EDF also have stakes in the pipeline project.

The project also passes through Turkey’s territorial waters before reaching Bulgaria.

Gazprom said Oct. 1 it has agreed with Turkey to increase the capacity of the Blue Stream underwater gas pipeline to 19 billion cubic meters (bcm), from 16 bcm.

The increase came as Turkey, the second-largest consumer of Russian gas after Germany, sided with Gazprom on the South Stream undersea gas pipeline project to Europe.

The future of the Project has been cast into doubt due to Russia’s role in Ukrainian conflict.

Meanwhile, European Energy Commissioner Guenther Oettinger has asked Ukraine and Russia to take part in another round of talks to try to solve a gas pricing row on Oct. 14 in Berlin, a Commission official said.

“This date and place is of course subject to agreement by all three sides,” the official, who asked not to be named, told Reuters Oct. 9.