Gazprom Ends Plan To Build Pipeline To Italy

Posted by Joseph R. Fonseca
Wednesday, April 30, 2014
South Stream gas pipeline

 

Gazprom has abandoned plans to build a section of its disputed South Stream gas pipeline to Italy, two sources close to the company said on Wednesday, a day after Gazprom announced a deal with OMV to build a branch to Austria.

The memorandum of understanding with the Austrian oil and gas company foresees building a section of the giant pipeline from Hungary to OMV's Central European Gas Hub near Vienna.

"The additional Italian spur option was effectively ditched. Gas will now be delivered to the Austrian hub, from where it could go to many destinations in Europe along the existing pipelines," one of the sources said.

"Without the Italian spur, the project's costs will drop by as much as $1 billion."

Gazprom is pushing ahead with South Stream, whose total construction costs are estimated at around $40 billion, despite Western sanctions against Russia over the crisis in Ukraine.

Neither Gazprom nor its chief executive, Alexei Miller, a long-standing ally of Russian President Vladimir Putin, have been targeted by the sanctions.

Italy signalled on Wednesday it still supported the South Stream project. "The project is not frozen," a government spokesman told Reuters, denying an earlier report.

Earlier on Wednesday, a government source said the project had effectively been put on ice, adding that Rome would focus on the Trans Adriatic Pipeline (TAP), which will transport Azeri gas, and the ITGI Interconnector pipeline through Turkeyand Greece into Italy.

The South Stream's proposed 2,500 km (1,500) route stretches from Russia under the Black Sea through Bulgaria and Serbia to Hungary and now Austria. It bypasses Ukraine, through which almost half the gas Europe buys from Russia currently passes.

Europe is worried about its dependence on Russian gas, which accounts for around a third of EU imports, particularly after Russian-Ukrainian gas disputes in 2005 and 2009 led to supply disruptions. But the bloc has yet to come up with a realistic alternative.

The European Commission, the EU's executive arm, says South Stream does not comply with its regulations on ownership and pipeline access and put the approval process on hold following Russia's annexation of Crimea in March.

A commission spokeswoman on Wednesday said she could not comment on the proposed route of South Stream.

Some European leaders see South Stream as a solution to avoid future potential supply disruptions.

Italy's Eni is one of Gazprom's partners for the offshore part of South Stream, along with Germany's Wintershall and France's EDF.

Eni Chief Executive Paolo Scaroni said last month the project's future had been called into question by the escalating dispute over Ukraine, which could complicate an already complex permitting process in the different transit countries.

EFFICIENT OPTION

Gazprom and OMV said on Tuesday they would rely on a 2010 intergovernmental agreement between Russia and Austria as the legal basis for their deal.

South Stream is designed to have a total capacity of 63 billion cubic metres per year, enough to meet about 13 percent of EU gas consumption, and the Austrian section would have half that capacity, OMV and Gazprom said.

Some of the gas from Russia could flow to markets such as Turkey, Bulgaria orHungary before reaching the Austrian border.

Bringing South Stream to Austria would be a bittersweet victory for OMV. In a contest to bring Azeri gas to Europe, OMV's Nabucco consortium lost out to the rival TAP, which ends in southern Italy.

EU support for Nabucco West faded as South Stream, with its similar route through central Europe, moved closer to reality.

South Stream is also a potential way for OMV to import gas from any future Black Sea discoveries of its own, which it says may prove to be its biggest ever.

Following the selection of TAP as the pipeline for Azeri gas, the need for a second major pipeline such as South Stream to deliver gas to Italy, an already oversupplied and depressed market, has decreased.

"One of the main reasons (for switching the end point to Austria) was the fact that consumption in Italy has fallen significantly compared to the years when the project was first designed," the Gazprom source said. "Delivering gas to the Austrian hub is a very efficient option."

(Additional reporting by Alberto Sisto in Rome and Stephen Jewkes in Milan; Writing by Georgina Prodhan; editing by Jane Baird and Leslie Adler)

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Legal

ASEAN Breaks South China Sea Deadlock

Manila drops request to refer to court ruling in statement. Southeast Asian nations overcame days of deadlock on Monday when the Philippines dropped a request

China sets up South China Sea environment protection fund

China has set up a 15 million yuan ($2.25 million) environmental protection fund for the South China Sea having already spent double that in the past four years,

Los Angeles Pushes for Valero Terminal Improvements

The Port of Los Angeles has released an Initial Study/Notice of Preparation (IS/NOP) — the first step in the Environmental Impact Report (EIR) process — for a Marine

Finance

Funding Approved for Georgia’s New Inland Terminal

At its July board meeting, the Georgia Ports Authority (GPA) approved a spending package of $19.7 million to construct the Appalachian Regional Port in Chatsworth, Murray County, Ga.

Baltic Index Falls on Weak Freight Rates

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Monday due to weaker rates across all segments, except handysizes.

As Market Sours, LPG Tankers Anchor off Singapore

Record U.S. LPG exports to Asia flip market into a glut. Last year, liquefied petroleum gas (LPG) supplied to Asia was being snapped up by petrochemical makers.

Energy

Los Angeles Pushes for Valero Terminal Improvements

The Port of Los Angeles has released an Initial Study/Notice of Preparation (IS/NOP) — the first step in the Environmental Impact Report (EIR) process — for a Marine

Canada Seek to contain Oil Spill

Authorities are building a new containment boom to fight an oil spill in a major western Canadian river, officials said on Saturday, after the spill breached a

Ecuador Pays $112 mln Award to Chevron

Ecuador has paid $112 million to energy company Chevron Corp over a four-decade-old contract dispute, even though it remains in disagreement, the head of the central bank has said.

LNG

Two DNV GL Approvals for GTT Training Software

GTT Training, a GTT subsidiary dedicated to training liquefied natural gas (LNG) professionals and to the development of associated simulation tools, has obtained

As Market Sours, LPG Tankers Anchor off Singapore

Record U.S. LPG exports to Asia flip market into a glut. Last year, liquefied petroleum gas (LPG) supplied to Asia was being snapped up by petrochemical makers.

IOC Mulls Buying GSPC's Stake in Mundra Terminal

Indian Oil Corporation (IOC), the country's largest oil company,  is in talks to buy debt-laden Gujarat State Petroleum Corp’s (GSPC) stake in the under-construction Rs.

News

Boeing 767 Shipped by Barge

MTS Statum completes marine towage of barge carrying Boeing 767 from Shannon Airport   Marine service provider Marine and Towage Services Group Ltd. (MTS) has

New Ferry MV Woods Hole Delivered

The newly built ferry M/V Woods Hole has been delivered to serve Woods Hole, Martha’s Vineyard and Nantucket.   Built by Conrad Industries of Morgan City, La.

New Details Emerge on Loss of USS Indianapolis

A Naval History and Heritage Command (NHHC) historian has recently uncovered information that sheds new light on the loss of the World War II cruiser USS Indianapolis (CA 35).

 
 
Maritime Careers / Shipboard Positions Maritime Security Naval Architecture Navigation Pipelines Salvage Ship Electronics Ship Repair Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1233 sec (8 req/sec)