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Europe: Russia, Bulgaria create JV to build South Stream gas pipeline

Europe: Russia, Bulgaria create JV to build South Stream gas pipeline

Write: Galya [2011-05-20]
p>Russia and Bulgaria signed a deal Saturday to set up a joint venture to build and operate the Bulgarian stretch of the planned South Stream gas pipeline in a ceremony attended by both countries' prime ministers.


"South Stream is important across Europe. Italy and France have already joined the project and we have received offers to join from some of our other Western European partners," Russian Prime Minister Vladimir Putin said, according to remarks posted on a Russian government website.


The 50:50 joint venture is between Russian gas giant Gazprom and state-owned Bulgarian Energy Holding, a Gazprom statement said.


Bulgarian Prime Minister Boyko Borisov said he spoke with the EU energy commissioner Gunther Oettinger before agreeing to the deal to ensure that it complied with EU legislation, according to the Russian website.


Oettinger's press spokeswoman Marlene Holzner confirmed Monday that the agreement setting up the joint venture had been changed to make it clear that the shareholders will have to ask for an exemption from EU third party access rules to any capacity they want to keep entirely for themselves in the Bulgarian stretch.


EU law requires all pipeline operators to offer non-discriminatory third party access to capacity, but exemptions are possible for new investments such as South Stream.


"The shareholders have to request the exemption from the national regulator and it has to be approved by the European Commission," Holzner told reporters in Brussels.


But Holzner added that a January 2008 intergovernmental agreement between Russia and Bulgaria which referred in general terms to allowing "full and unrestricted transit" needed to be changed to comply with EU law.


"We would like to see [the third party access rules] stated very clearly in the intergovernmental agreement," she said.


Holzner said the Bulgarian government had assured the EC that it will change the intergovernmental agreement in order to comply.


PUTIN SLAMS EU'S ENERGY RULES


During a press conference after the signing Saturday, Putin said the EC's attempts to liberalize the gas market might be a drag on developing Europe's energy infrastructure, limit gas supplies and lead to energy higher prices.


"If big players like Gazprom and other European upstream companies don't have the right to build new infrastructure facilities...I am convinced that infrastructure development will be delayed," Putin said, according to the government website.


Putin said the price Bulgaria pays for Russian gas was not part of the South Stream negotiations and suggested that a key to controlling costs could be reforming the European distribution system so that large end-users do not receive the preferential pricing they currently enjoy.


"I believe that it would be fair to share costs more equitably between all market participants and all consumers," he said.


Borisov said Bulgaria was continuing to work on Nabucco, a rival pipeline to South Stream meant to reduce dependence on Russian gas, and labeled negotiations with Russia as "pragmatic and mutually beneficial."


Bulgarian Energy Holding Executive Director Maya Hristova said in the Gazprom statement that: "The South Stream project is of great importance both for Bulgaria and for the entire European energy market, in order to diversify gas supply routes and improve European energy security."


South Stream is to carry Russian gas to Europe, bypassing Ukraine, with the first deliveries expected at the end of 2015.


The pipeline plans to carry up to 63 billion cubic meters/year of Russian gas across the Black Sea to Bulgaria, where it is to split into two paths to be built by Gazprom jointly with local partners. One line is planned to run southwest to Greece and into southern Italy, and the other is to travel via Serbia, Hungary and Slovenia to northern Italy, with an offshoot to Austria.