Russia, Bulgaria sign final investment decision on South Stream gas pipeline
Moscow (Platts)--15Nov2012/1045 am EST/1545 GMT
Russia's Gazprom and Bulgaria's Energy Holding EAD Thursday took the
final investment decision on the construction of the South Stream gas
pipeline via Bulgaria, finalizing the process of taking FIDs for all sections
of the route.
The document was signed by Gazprom CEO Alexei Miller and EAD's executive
director Mihail Andonov in the presence of Bulgarian Prime Minister Boyko
Borisov, Gazprom said in a statement.
Earlier Thursday, the partners in the subsea section of the pipeline --
Gazprom (50%), Italy's Eni (20%), France's EDF (15%) and the energy unit of
Germany's BASF, Wintershall (15%) -- inked the FID to build the underwater
Serbia, Hungary and Slovenia have already taken the FIDs on their
sections of the pipeline.
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The South Stream pipeline is to carry up to 63 billion cubic meters/year
of Russian gas across the Black Sea to Bulgaria, from where it will go to
Serbia-Hungary-Slovenia and on to northern Italy.
Two offshoots could be built to Bosnia-Herzegovina and Croatia.
The project will include four parallel lines of 15.75 Bcm/year capacity
each, with the first commercial deliveries scheduled for late 2015. Gazprom
expects to build the second and third lines by the end of 2016.
A fourth line is scheduled to follow by the end of 2017.
Gazprom estimates the 925 km (573.5 mile) subsea section will cost Eur10
billion ($12.81 billion) at 2010 prices, Alexei Serebryakov, first deputy
head of Gazprom's project management department said Friday.
The investment needed for the 1,455 km onshore section in Europe,
including eight compressor stations, is estimated at Eur6 billion,
Serebryakov specified that Gazprom expects to finalize the investment
estimates in current prices after all the tender procedures are completed,
expected in 2013. "So far, the estimates do not seriously differ from those
[announced]," he said.
The land sections will be built by Gazprom in cooperation with local
Construction of onshore infrastructure on the Russian Black Sea coast is
scheduled to start on December 7.
Supply contract with Bulgaria
Separately, Gazprom and the Bulgarian government signed a new gas-supply
contract, "which stipulates the supply of 2.9 Bcm of gas per annum until 2022
along the traditional transportation corridor and via the South Stream
pipeline, once it is commissioned," Gazprom Export said in a statement
The deal retains "the principle of long-term contracts with oil
indexation and the take-or-pay obligation. This mechanism has set the
conditions for gas consumption increase in Bulgaria," the Gazprom Export
statement said, citing CEO Alexander Medvedev.
Borisov said the deal involves a 20% price discount starting from
January 1, Bulgarian news agency Novinite reported.
Under the new contract in the sixth year Bulgaria will have the
opportunity to renegotiate the price and the quantity of gas supplied,
The current contract, under which Gazprom supplied up to 3.1 Bcm of gas
to Bulgaria, expires at the end of this year.
In 2011, Gazprom delivered a total of 2.81 Bcm to Bulgaria, which
represented a 6% increase from 2010.
--Nadia Rodova, email@example.com
--Edited by Jonathan Dart, firstname.lastname@example.org