More countries join South Stream pipeline project

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MOSCOW. (Igor Tomberg for RIA Novosti) - During his visit to Slovenia, Gazprom CEO Alexei Miller discussed with President Danilo Turk and Prime Minister Janez Jansa the prospects of the two countries' cooperation in the natural gas sphere.

In addition to the Russian gas supplies which Slovenia has been receiving since 1978, the officials discussed Slovenia's possible participation in the South Stream pipeline project, which is extremely important for Russia at a time when politically loaded pipeline competition is gaining momentum in the Balkans and the Black Sea region.

The planned South Stream pipeline, which will run from Russia to Europe along the bottom of the Black Sea, is viewed by many as a rival plan to Nabucco, a 4,000-km (2486-mile) EU-backed pipeline project to supply Central Asian and Caspian gas to Europe via Azerbaijan, Georgia, Turkey, Bulgaria, Hungary, Romania and Austria, bypassing Russia.

South Stream, a joint project of Russia's Gazprom monopoly and Italian oil and gas giant ENI, will carry Russian and possibly Central Asian gas to Bulgaria across the Black Sea, then split into two legs, one running to Austria and Slovenia via Serbia and Hungary, the other to southern Italy via Greece. The pipeline's throughput capacity will be 30 billion cu m (1.06 trillion cu f) a year; it is expected to come on stream in 2012.

Moscow seems to be taking calmly the prospect of having Nabucco as a rival project to South Stream. The official position is very explicit and transparent: both pipelines have a right to exist, and Europeans have the right to choose their source of gas supplies. A sound competition of pipeline projects is good and healthy for the industry, while Russia is confident of its resource sustainability.

Incidentally, resource problems which will face the various bypass projects should not be underestimated. Iran has been making huge political and diplomatic efforts lately, trying to position itself as a major gas exporter to Europe. However, its current political status hinders a broader cooperation with European nations. But in a different political situation, Iranian gas could be the heaven-sent resource to actually fill Nabucco.

Slovenia is an important transit link for Russian gas on its way to Europe. Gazprom wouldn't like Iranian gas pumped through Nabucco to become more competitive than Russian one going though the South European gas ring that President Vladimir Putin mentioned in the fall of 2005, including Blue Stream stretched through Greece to Southern Italy, and now also the South Stream.

Miller's current negotiations in Slovenia are a follow-up on last year's discussion of Slovenia's gas transit options, with the end goal of creating a "transit corridor" for Russian gas deliveries to Italy. The Slovenian option would help Gazprom enter the Italian market. It could also become a viable alternative route for delivering Russian gas to Italy via Slovenia and Hungary in the longer run, and strengthen Russia's positions in its potential competition with Iran.

Part of the planned gas links will be used to increase Russian gas deliveries for Slovenia's domestic consumption. The country is planning to expand domestic power generation with an option to export energy to Italy, which has been experiencing a power shortage. Slovenia is considering Gazprom as a possible important partner for its power generation projects. In 2006, Gazexport, the Russian gas giant's export arm, extended its long-term gas supply contract with Slovenia's Geoplin until 2015, also envisaging a boost in supplies from the current 620 million cu m (21.89 billion cu f) a year.

It is important for Russia to complete the lineup of participants in the South Stream project and launch the construction as soon as possible. Russia's strained relations with its close neighbors are one reason to hurry, as they are jeopardizing stable fuel supplies to Western Europe. The threat of Iranian gas supplies becoming more competitive is still tentative, but can soon become quite real if political sentiments change. This also suggests that Russia should lose no time if it wants to retain its influence on the European gas market. Fortunately, Europeans still trust Gazprom as a reliable supplier, and new participants eagerly join its mega-projects, including South Stream.

Dr. Igor Tomberg is a senior research fellow with the Centre for Energy Studies at the Institute of World Economy and International Relations, the Russian Academy of Sciences.

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

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