French power company Electricite de France SA will join the South Stream gas pipeline project, designed to bring Russian gas across the Black Sea to Europe without passing through Ukraine, by the end of November, according to a person familiar with the matter.
EDF will join OAO Gazprom, Russia's Kremlin-controlled gas giant, and Italy's ENI SpA, which each have 50% in the South Stream consortium. The state-controlled French company will probably take a 10% stake, the person said, while the other two will have 45% each.
Falling natural gas prices and a recession that has damped demand for gas in Europe have put pressure on Gazprom's finances. Teaming up with a giant like EDF on South Stream will help it defray the project's costs -- expected to exceed 20 billion euros ($29 billion).
Currently, about 80% of Russian gas exports to the European Union flow through Ukraine, but a series of disputes between Moscow and Kiev that have led to cut-offs of Russian gas to European customers have thrown doubt on the viability of the route.
Russia has said the spats with Ukraine prove it has to diversify its export routes, and has pushed South Stream and another project, Nord Stream, which would bring Russian gas under the Baltic Sea to northern Germany -- also avoiding Ukraine.
Meanwhile, the EU has backed a rival project, called Nabucco, designed to reduce Europe's dependence on Russian energy imports. Nabucco would bring gas from the Caspian, Central Asia and the Middle East to the heart of Europe.
Another French company, GDF Suez SA, is also planning to take a small stake in Nord Stream. Currently Gazprom holds a 51% stake in Nord Stream AG, the project operator. Germany's Wintershall, a subsidiary of BASF AG, and E.ON AG have 20% each with the remaining 9% belonging to the Dutch energy company Nederlandse Gasunie NV.
A spokesman for Gazprom said talk of a deal with EDF by the end of November was "premature," though he confirmed that Gazprom will hold talks with EDF next month. He also declined to say how big EDF's stake would be.
"ENI and Gazprom can do this on our own, but clearly having a third partner of EDF's stature will make things easier," said the spokesman, Sergei Kuprianov.
In a press release, ENI said its chief executive, Paolo Scaroni, had met the head of Gazprom, Alexei Miller, in Moscow Tuesday and they had discussed bringing a "possible third partner" into the South Stream project.
A spokesperson for EDF confirmed the company had held talks with Gazprom and ENI about coming into South Stream as a minority partner but declined to comment further. /photos/edf_logo.gif