Russian state gas firm OAO Gazprom (GAZP.RS) Friday secured backing for its South Stream gas pipeline from European energy giants Electricite de France SA (EDF.FR), Eni SpA (E) and Wintershall AG, heating up the battle between Russia and the European Union over competing pipelines.
Russian state gas firm OAO Gazprom (GAZP.RS) Friday secured backing for
its South Stream gas pipeline from European energy giants Electricite de France
SA (EDF.FR), Eni SpA (E) and Wintershall AG, heating up the battle between
Russia
and
the European Union over competing pipelines.
Friday's agreement deepens the commitment of the three European giants to the
long-discussed pipeline and sets the stage for a final investment decision on
South Stream, according to a statement by the consortium. Equally important, in
lining up the top executives from three energy heavyweights from
France
,
Germany
and
Italy
at a
signing ceremony on the Russian Black Sea, Gazprom Chief Executive Alexei
Miller sent a powerful message of support to
Brussels
as the
European Commission continues to press the controversial Nabucco pipeline.
"The signing demonstrates that the partner companies agree that South
Stream is not only strategically important in the medium and long term, but
that it is also a commercial opportunity not to be missed," said Marcel
Kramer, CEO of South Stream. South Stream is "an obvious priority in many
EU capitals," he added.
The South Stream shareholder agreement will give
Italy
's Eni
a 20% stake in the offshore section of the pipeline, EDF and Wintershall a 15%
stake each, for a total of 50% shared among the European heavyweights. Gazprom
will hold a 50% stake, the consortium said in a press release.
The South Stream pipeline is envisioned to ship up to 63 billion cubic meters
of Russian natural gas a year under the
Black Sea
to
European customers from 2015. Construction would cost 15 billion euros,
according to a preliminary estimate.
The EU has endorsed the rival Nabucco pipeline to diversify
Europe
's gas
supply sources away from
Russia
by
tapping into Caspian gas.
Experts have been skeptical about the feasibility of Nabucco, because in its
first phase it would rely on gas from
Azerbaijan
able
to fill only one third of its capacity, while it remains unclear where the
project will source the rest of the gas from to fill its annual 31 bcm of
expected capacity.
The EU - and especially its eastern European countries - heavily depend on gas
imports from
Russia
,
mainly through
Ukraine
. Price
disputes between
Moscow
and
Kiev
are
giving new value to pipelines that would bypass
Ukraine
, like
Nord Stream, which will soon carry gas to
Germany
under
the
Baltic Sea
-- and South Stream.
At the same time,
Brussels
'
effort to increase competition in the EU domestic energy market has raised some
tensions with
Moscow
.
According to EU rules, the owners of a pipeline must allow access to
competitors, unless an exemption is granted by the EU. The pipelines also have
to be managed independently from energy production, so that there is no risk
that the owner abuses its powers. Gazprom has publicly opposed the EU rules.
These provisions --which have complicated recent gas negotiations between
Russia
and
Poland--
would
also be applicable to South Stream once it reaches the European border.
The South Stream spokesman said new EU regulation has raised "certain
questions about how it will apply to the South Stream project."
A feasibility study of will be finished soon, which will determine the route of
both the offshore and onshore section of the pipeline, South Stream said.
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