South Stream to boost Europe's energy security



MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - On February 6, Russian President Dmitry Medvedev met in the Kremlin with a European Commission delegation headed by chairman Jose Manuel Barroso.

The European Commission representatives also met with Prime Minister Vladimir Putin. Both meetings focused, among other things on the planned pan-European energy security system.

On the same day, Russian gas monopoly Gazprom disclosed the tentative cost of its most expensive endeavor, the South Stream gas pipeline project, estimated at 24 million euros.

Do we need a new agreement?

The two-week gap in Russian gas supplies to Europe across Ukraine in early January has brought Europe's energy security problem back into the limelight.

"The energy security issue is very important. The latest gas crisis has shown that things aren't so good here. The situation is very vulnerable," Medvedev said at the meeting with EU officials.

Despite the common talk that such issues should be handled bilaterally by the conflicting parties - in this case, Russia and Ukraine - in reality such conflicts often hit other countries - European gas consumers this time.

The Russian president proposed building a full-fledged international legal system protecting consumers against such incidents, since the existing system - the Energy Charter - does not seem to be effective enough.

Therefore, Russia has proposed revising the Energy Charter or inventing a totally different scheme which would provide the EU with some guarantees of stable supplies.

Barroso supported the Russian leader, saying it was important to make efforts now to avoid such problems in the future. He also said the EU was considering signing an international energy security agreement.

Barroso agreed with Russia's policy of lobbying and laying additional routes for gas exports to Europe, an effort essential to lessen transit risks and uphold Europe's energy security. He also confirmed Europe's interest in building two planned alternative pipelines from Russia to Europe, Nord Stream and South Stream.

Admittedly, he pointed out that both Streams were commercial projects and that their masterminds had never asked the European Union for money. As for Nabucco, another gas pipeline bypassing Russia and its gas fields, Barroso said the EU was considering providing financial support for that project.

To diversify gas supplies

On February 6, Gazprom for the first time announced to investors that the total worth of South Stream was estimated at 19 to 24 billion euros, making it the most expensive project ever implemented by the Russian gas monopoly.

Of the amount cited, 4 billion euros will go into laying the underwater stretch, from Russia to Bulgaria across the Black Sea (900 km), to be built by 2015 jointly by Gazprom and Italian Eni.

Another 15 to 20 billion euros will be needed for the two surface links, from Bulgaria to Austria and from Bulgaria to the west coast of Greece.

Intergovernmental agreements on building the surface sections have already been signed with Bulgaria, Serbia, Hungary and Greece. Agreements with Slovenia and Austria still need to be finalized. Gazprom plans to build each of the South Stream links in 50-50 partnerships with national companies in each country covered by the pipeline. Therefore, Gazprom will shoulder roughly half of the costs.

Gazprom earlier estimated the planned pipeline's throughput capacity at 31 billion cubic meters of gas a year; now the Russian giant says it is ready to boost the initial plan to 47 billion.

Of all of Gazprom's operational pipelines, South Stream could be remotely likened to the 390-km Blue Stream link to Turkey, with annual capacity of 16 billion cubic meters. The project costs totaled $3.3 billion.

If South Stream is eventually built, and so is Nord Stream, a planned gas pipeline from Russia's Vyborg to Germany's Greifswald across the Baltic Sea bottom, worth over 7.4 billion euros, the total capacity of Russian gas export pipelines, including the Ukrainian and Belarusian gas transport systems, will reach 304 billion cubic meters of natural gas a year by 2015.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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