STUTTGART - Russia is prepared to build the South Stream gas pipeline to Europe to remove transit risks, but if Europe abandons the project, then it risks unguaranteed gas shipments, Economic Development Minister Alexei Ulyukayev said at a business breakfast in Stuttgart.
“If European consumers have a need for lowering risks, then we will build South Stream. If this demand doesn’t exist, then we aren’t going to build it. But in any case, whoever abandons these possibilities must take upon themselves the risk of violating shipment guarantees. And we have enough gas for the East and the West,” he said.
He stressed that “the construction of both the eastern and western gas pipelines to China has no relation to the fulfillment of our obligations to European consumers.”
“In this case, we’re talking about natural diversification, a natural energy balance of supplies for different consumers. South Stream is a means of guarantee, eliminating transit risks for European consumers,” Ulyukayev said.
Recently the European Union has increasingly expressed opposition to the construction of the South Stream pipeline. Former EU Energy Commissioner Gunther Oettinger, who left this post in November, had stressed that this project was not a priority for the EU, since it does not see a new source of gas in it.
South Stream will supply Gazprom’s gas anyway. “South Stream is a new gas pipeline, bigger than others. But this will not be a new gas. South Stream will still supply the gas of Gazprom. In place of Ukraine, it will run along the Black Sea in order to reach the European Union. This isn’t bad, but it’s not a miracle,” Oettinger said on Oct. 16.
Oettinger said the supporting opinion on the South Stream project was the idea that gas transit must avoid the territory of Ukraine since it will become a bankrupt, unmanageable government. The EU, however, does not take a position against Ukraine, which is creating an association with the EU and shares the EU policy, he said.
“Of course transit [through Ukraine] could be questioned, but this hasn’t happened yet. South Stream is acceptable, but it is currently not a European priority,” Oettinger said.
He also noted that investors in all EU countries through which South Stream is expected to run must agree to the conditions of the European market, which is extremely important for the EC.
Bulgaria has already come under pressure from the EU regarding the project. The EC said in June that the agreement between the Russian and Bulgarian governments to build South Stream did not comply with EU law. For example the EU requires that gas supply, transport and distribution must be unbundled, that third party access must be granted to gas transport infrastructure and that contracts must be awarded on a competitive basis. As a result, CJSC StroyTransGaz, which is 31.5 percent-owned by a fund controlled by Gennady Timchenko, had to drop plans to build the pipeline section across Bulgaria.
Russian President Vladimir Putin has said Russia is unable to build the South Stream pipeline on a unilateral basis and that the EC must also desire this.
Recently it was announced that the cost of building South Stream, capacity 63 bcm of gas, had gone up 47% from the original estimates to 23.5 billion euro. The pipeline’s offshore section will now cost an estimated 14 billion euro and its European section – 9.5 billion euro instead of 10 billion and 6 billion euro, respectively.
South Stream Transport will build the undersea segment of the gas pipeline. South Stream Transport’s shareholders are a consortium of international companies: Gazprom (50 percent), Italy’s Eni (20 percent), Germany’s Wintershall Holding (15 percent) and France’s EDF (15 peercent).
The onshore sections on European territory will be built by a joint venture between Gazprom and companies from the relevant countries.
