South Stream

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Significance

The South Stream project is aimed at strengthening the European energy security. It is another real step in pursuing the Gazprom strategy to diversify the Russian natural gas supply routes. The new gas pipeline system meeting the most recent environmental and engineering requirements will significantly raise the energy security throughout mainland Europe.

South Stream project

South Stream project

Route

South Stream’s offshore section with the total length of 930 kilometers will run under the Black Sea through the exclusive economic zones of Russia, Bulgaria and Turkey. The maximum depth will be more than two kilometers and the design capacity will amount to 63 billion cubic meters.

The onshore section will cross Bulgaria, Serbia, Hungary and Slovenia. The gas pipeline will end at the Tarvisio gas metering station in Italy. Gas branches from the main pipeline route will be built to Croatia and to Republika Srpska (the state formation within Bosnia and Herzegovina).

In order to feed the required amount of gas into the South Stream gas pipeline, Russia’s gas transmission system will be expanded by means of constructing the additional 2,506.2 kilometers of linepipe and 10 compressor stations with the total capacity of 1,516 MW. This project has been named Southern Corridor and will be implemented in two phases before 2018.

Environmental compliance

State-of-the-art technologies meeting the most stringent environmental requirements will be employed while executing the project. The Environmental Impact Assessment (EIA) will be carried out in full compliance with the Espoo Convention.

Cooperation

The project history started in 2006, when Gazprom and Eni entered into the Strategic Partnership Agreement entitling Gazprom to supply Russian gas directly to the Italian market starting from 2007. Under the Agreement, the existing contracts for Russian gas supplies to Italy were extended to 2035.

Successful Blue Stream project exemplifies efficient cooperation between Gazprom and Eni

Successful Blue Stream project exemplifies efficient cooperation between Gazprom and Eni

In June 2007 Gazprom and Eni inked the Memorandum of Understanding for the South Stream project implementation.

In January 2008 a special purpose company, South Stream AG, was incorporated in Switzerland by Gazprom and Eni on a parity basis to build the offshore section.

Between 2008 and 2011 the intergovernmental agreements on the project implementation were signed with Austria, Bulgaria, Croatia, Greece, Hungary, Serbia and Slovenia. Gazprom signed bilateral agreements on cooperation within the project with the authorized national companies: Serbian Srbijagas, Hungarian Development Bank MFB, Bulgarian Energy Holding, Greek gas transmission system operator DESFA, Austrian OMV and Slovenian Geoplin Plinovodi.

The following joint project companies were incorporated:

  • in Bulgaria – South Stream Bulgaria (Gazprom and Bulgarian Energy Holding – 50 per cent each );
  • in Serbia – South Stream Serbia (51 per cent owned by Gazprom, 49 per cent – by Srbijagas );
  • in Hungary – South Stream Hungary (Gazprom and Hungarian Development Bank MFB – 50 per cent each (in 2012 MVM became a partner));
  • in Slovenia – South Stream Slovenia (Gazprom and Plinovodi – 50 per cent each);
  • in Austria – South Stream Austria (Gazpron and OMV – 50 per cent each);
  • in Greece – South Stream Greece (Gazprom and DESFA – 50 per cent each).

In September 2011 the Shareholders Agreement for the offshore section of the South Stream project was signed. Pursuant to the Agreement, German Wintershall Holding (subsidiary of BASF) and French EDF each acquired a 15 per cent stake in the offshore section of the South Stream project through a 30 per cent reduction of Eni's stake. As a result, the shareholding structure in the South Stream offshore section is as follows: Gazprom – 50 per cent, Eni – 20 per cent, Wintershall Holding and EDF – 15 per cent each.

In April 2012 the first meeting of South Stream Transport Board of Directors took place. Alexey Miller, Chairman of the Gazprom Management CommitteeAlexander Medvedev, Deputy Chairman of the Gazprom Management Committee, Paolo Scaroni, Chief Executive Officer of Eni, Henri Proglio, Chairman and CEO of EDF, Harald Schwager, Member of the Board of Executive Directors of BASF and Henning Voscherau entered the Board. Henning Voscherau was unanimously elected as Chairman of the South Stream Transport Board of Directors.

Henri Proglio (EDF), Harald Schwager (BASF), Vladimir Putin, Alexey Miller and Paolo Scaroni (Eni)

Henri Proglio (EDF), Harald Schwager (BASF), Vladimir Putin, Alexey Miller and Paolo Scaroni (Eni)

From October 29 to November 15, 2012 final investment decisions were made on the project in Serbia, Hungary, Slovenia and Bulgaria.

On November 14, 2012 the meeting of the South Stream Transport Board of Directors adopted the final investment decision for the offshore section. The meeting also approved the incorporation of South Stream Transport B.V. in Amsterdam (the Netherlands).

Project implementation

In December 2012 the South Stream gas pipeline construction started near Anapa in the Krasnodar Territory.

On October 31, 2013 the first joint was welded at South Stream's Bulgarian section near the Rasovo CS site. On November 24, 2013 the construction of South Stream's Serbian section started in the vicinity of Sajkas village, South Backa District.

First gas supplies via the South Stream gas pipeline are scheduled for late 2015.

At ceremony to mark start of South Stream construction in Bulgaria

At ceremony to mark start of South Stream construction in Bulgaria