21 August 2012, 21:18

Croatian media alter South Stream's route

Croatian media alter South Stream's route

There has been no confirmation from Russia’s Gazprom so far of reports that the South Stream gas pipeline will run though Croatia. Earlier, Croatian mass media alleged that the pipeline’s initial route could be altered. Gazprom’s Croatian partner – Plinacro – claims that talks with the Russian gas giant are well under way.

Zagreb joined the South Stream project in 2010 but its participation in the project has been limited by an agreement on the construction of a branch line toward Croatia from the main pipe. According to a local media outlet, Jutarnji list, Gazprom and Plinacro are negotiating the possibility of gas transit through South Stream via Croatia. The authors of the report note that the pipeline will be shorter and cheaper with Croatia as a transit country. An unnamed Plinacro source confirmed consultations with Gazprom on the issue. But both companies are bound by a mutual confidentiality pledge and there hasn’t been any confirmation on the official level. Sergei Pikin, Director of the Energy Development Foundation, does not see why the pipeline’s current route cannot be altered:

"It all depends on the desire of our partners to enter the project. As yet, the South Stream cannot boast of a full package of accords as far as transit is concerned. Here, some changes could be possible. Gazprom behaves in a very flexible way as it looks for the most advantageous options. Anyway, the above reports have given our partners food for thought, making them aware once more that they are surrounded by potential competitors on which Gazprom may fix its choice."

Jutarnji list says that Gazprom may seek a partner change for other considerations than cost-cutting. Differences between the Russian company and the Hungarian leadership seem a likelier reason. Continuing uncertainty over the distribution of South Stream stakes between Hungarian companies and slow work on the economic feasibility report threaten to disrupt the construction schedule, though Gazprom’s board chairman Alexei Miller lately brushed aside those concerns as “not significant”.

Dmitry Alexandrov, chief researcher at the Univer-Capital investment company, does not rule out that the alleged information leak was initiated by the Croatian side on purpose since gas transit would bring Croatia $25 billion euro in annual profits:

"It may or may not have to do with conflicts with the Hungarian side. Without doubt, major energy holdings are keen to participate in the project. Croatia’s interest in it is plain evident, because it means considerable cash flows for gas transit. What we are witnessing now may be nothing more than Croatia’s proposal."

Construction of South Stream that will connect Russia and Bulgaria through the Black Sea and will then cross Serbia and Hungary to northern Italy is scheduled to begin at the end of this year with 2015 as the completion deadline. Its design capacity is 15 billion cubic meters of natural gas per year. Along with yet another of Gazprom’s pipelines, Nord Stream, it will guarantee stable gas deliveries from Russia to Europe. South Stream’s main investors are Gazprom, Italy’s ENI, France’s EDF and Germany’s Wintershall Holding.

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