Ukraine surfaced in South Stream project

12:16, 29 February 2008
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South Stream will run from Russia to Bulgaria

The meeting of Russia`s President Vladimir Putin and Hungary`s Prime Minister Ferenc Gyurcsany in Kremlin has completed the preparation stage of the South Stream project running from Russia to Europe through the Black Sea, according to Kommersant.

Hungary will create a venture with Gazprom to construct its portion of the facility. But new difficulties may emerge en route of the pipeline. The offshore section of South Stream will go via the economic zone of Ukraine, and the recurring gas clashes of Moscow and Kiev are particularly acute now.

Russia’s Industry and Energy Minister Viktor Khristenko and Hungarian Finance Minister Janos Veres sealed yesterday an intergovernmental cooperation agreement for constructing a pipeline for the gas transit via Hungary. The matter at stake is the last portion of South Stream that hadn’t been agreed on until recently. Russia’s President Vladimir Putin, who attended the ceremony, said the plans were to lay in Hungary a pipeline with capacity of at least 10 billion cu meters of gas and build an underground storage facility for at least 1 billion cu meters. A source with the RF government specified that two gas storage facilities would be constructed actually.

In line with the agreement, Hungarian MFB and Russia’s Gazprom will create parri passu a venture that will buy the elaborated feasibility study from SEP Co. (a venture of Gazprom and Hungarian MOL). According to Hungary`s Prime Minister Ferenc Gyurcsany, who didn’t ignore the ceremony either, the project would cost roughly $2 billion and pay back in 15 years.

South Stream will run from Russia to Bulgaria via the bottom of the Black Sea, dividing into two after it. One of the branches will head to Serbia and Hungary and then to Austria, another will go via Greece to southern Italy. The capacity is 30 billion cu meters of gas a year. Italian Eni is Gazprom’s partner in the project and the construction is to be completed in 2012.

The tricky point is that nearly all off-shore route of South Stream has been laid through the continental shelf of Ukraine, and the gas conflict of that country with Moscow is particularly acute now. Gazprom promised to cut gas supplies to Ukraine March 3. The parties were negotiating all Thursday in the Moscow headquarters of Gazprom but the results of the talks are yet unclear.

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