[RUSSIA] Gazprom likely to save money on South Stream offshore leg

Romania may replace Bulgaria on the Gazprom-led South Stream gas pipeline project from Russia to Italy. Gazprom CEO Alexei Miller met with heads of two Romanian companies, Transgaz and Romgaz, late last week. Some sources said the talks focused on Romania's plan to sign up to the project, replacing Bulgaria.

Gazprom's desire to alter the planned pipeline's route is evidence of serous problems arising in the implementation of the project.

Shortly after the Russian-Georgian conflict over South Ossetia, the EU decided to focus efforts on the Nabucco project, an alternative route to ship Caspian oil and gas to Europe bypassing Russia.
Under an earlier intergovernmental agreement, the pipeline was to cross the Black Sea on the way from Russia to Bulgaria. The 560 mile offshore section would have cost $10 billion.

Gazprom was planning to build two legs of the planned pipeline, with one leg going to southern Italy through the Adriatic Sea, while the other one would go to Austria via Serbia and Hungary.

Basic agreements were reached with Sofia, Budapest and Belgrade last year. But in each case there were some hitches that prevented the implementation of the agreements. Bulgaria insisted on ownership rights for its part of the pipeline, while Gazprom wanted it to be Russian property.

Gazprom had similar hitches with Serbia and Hungary. It is clear, however, that lack of compliance of the East European governments was not the key predicament. The problem is the EU's general weariness of dealing with Russia, Gazprom in particular.

European leaders unanimously agreed to diversify energy sources at the latest EU summit on September 1 which discussed the consequences of the South Ossetian-Georgian conflict. One of their first decisions was to focus on Nabucco, South Stream's rival project.

Both Romanian Transgaz and Bulgarian Bulgargaz are Nabucco shareholders. Therefore, the talks with Romania will probably be aimed at persuading Bucharest or Sofia to choose South Stream over Nabucco.

A source in the Energy Ministry confirmed that Gazprom was looking at a possibility of Bulgaria replaced with Romania, but did not elaborate. Romania was initially discussed as an alternative to Serbia. However, Russia and Serbia have recently removed all legal obstacles over the north leg of South Stream.
Still, analysts think rerouting South Stream to Romania will be economically efficient. "The way to Romania across the Black Sea is 60 miles shorter than to Bulgaria, which means the offshore pipeline will be 12% cheaper," said Mikhail Korchemkin, director of the East European Gas Analysis consultancy.

Source: Novosti

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