While the first one still has to make significant headway, particularly with regards to reliable and sufficient long-term gas supplies, the second one has suffered from a lack of transit country agreements.The first step towards initiating South Stream was taken on June 23, 2007, by the announcement that Russia's Gazprom and Italian Eni had reached an agreement to build the new line from Russia to Italy.
South Stream would start from Russia's Black Sea coast at Beregovaya, the same starting point as that of the Blue Stream pipeline to Turkey. It would run about 900 kilometers on the seabed of the Black Sea, reaching a maximum water depth of more than 2.000 meters, to Bulgaria. Once the pipeline reaches Bulgaria from the Black Sea, there are two probable routes to consider for the Italian route: the southwestern route and the northwestern route.
The southwestern route would continue through Greece and the Adriatic seabed in the Strait of Otranto to southern Italy. The northwestern route would run from Bulgaria through Romania, Hungary and Slovenia to northern Italy. If the second route is chosen, a lateral spin from Hungarian territory into Austria is also possible. Gazprom is considering all the options, including both the southwestern and the northwestern routes.
South Stream is envisaged to carry 31 billion cubic meters of gas annually. Eni's SAIPEM unit, which is well experienced in building underwater pipelines, such as Blue Stream to Turkey, will undertake the laying of the underwater pipe. The investment costs will be borne by Gazprom and Eni on an equal basis. According to Eni, the costs would be similar to those of constructing an LNG supply line along the South Stream route. That, of course, means high costs from the start. In fact, according to Gazprom chief Alexei Miller, the cost would be 8.6 billion euros ($11.6 billion), and the project would be commissioned by Dec. 31, 2015.
The particulars of South Stream I have just mentioned have become all the more relevant and important because last week the main problem the Russian project faced was solved by the participating countries at a summit held in the Russian resort town of Sochi. In the presence of Prime Ministers Vladimir Putin and Silvio Berlusconi, inter-corporate documents with transit countries Bulgaria, Greece and Serbia were signed. According to Russian government spokesman Dmitry Peskov, these documents are “an important stage in finalizing inter-corporate relations, a major component in the construction of the project.”
The agreements with Bulgarian Energy Holding, Greek DESFA and Serbiagaz stipulate the terms for the creation of joint ventures that will provide feasibility studies, design, construction and operation of South Stream sections in the respective territories. Joint ventures with Bulgaria and Greece will be created on a parity basis, while in Serbiagaz Gazprom will hold 51 percent and the Serbian side 49 percent. The agreement with the Bulgarian side envisages the creation of a separate pipeline, while the national gas transportation system will be used for domestic needs.
In addition to these important agreements, Eni and Gazprom also agreed to increase South Stream's annual capacity to 63 billion cubic meters. “Most of this gas will substitute gas currently crossing Ukraine, and some new gas,” said Eni chief Paolo Scaroni in this regard.
With the agreements signed last week South Stream has appeared to outflank Nabucco, which still has to overcome many problems, the primary one being finding and securing sufficient and reliable gas sources. In this regard only Azerbaijan is reasonably secure, capable of supplying 10 billion cubic meters annually, which, of course, is not enough. As for South Stream, the gas supply problem is almost solved, and this makes the project more viable.
