Russia's undersea pipeline goes forward

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By Nataliya Vasilyeva ASSOCIATED PRESS

MOSCOW | Russia's natural-gas monopoly Gazprom and companies from four European nations signed agreements Friday advancing the South Stream pipeline and pushing forward with a project that has stirred concerns about increasing European dependence on Russian supplies.

The Russia-lobbied project could hamper European Union plans for a separate pipeline that would carry gas from the Caspian Sea westward and reduce EU energy dependence on Moscow.

South Stream is to pipe gas west from Russia across the Black Sea on a route that bypasses Ukraine, whose bitter price battles with Moscow have prompted Russian cutoffs that have decreased supplies to European nations.

Those problems have led the European Union to seek to diversify its import routes and Russia its exporting routes.

With Russian Prime Minister Vladimir Putin and Italian Prime Minister Silvio Berlusconi looking on, Gazprom chief executive officer Alexei Miller and the chief executive officer of Italy's Eni energy company, Paolo Scaroni, signed a deal that Mr. Putin said would enable organizers to double the planned capacity in the offshore section from 31 billion cubic meters to 63 billion cubic meters a year.

Mr. Miller also signed separate agreements with energy companies from Greece, Serbia and Bulgaria that foresee cooperation on feasibility studies, design, construction and operation of South Stream sections in those countries, Gazprom said.

"With Italy, Bulgaria, Serbia and Greece, this is our common contribution to European energy security," Mr. Putin said.

Russia also expects to sell gas from the pipeline to Hungary and Austria.

Before the signing ceremony in the Black Sea resort city of Sochi, Gazprom spokesman Sergei Kupriyanov told the Associated Press the exact route would be mapped out after feasibility studies that are to be completed by mid-2010. Gazprom and partner Eni want to complete construction on the undersea stretch in 2013.

Planners anticipate the pipeline will begin operating by 2015.

The Russian project is widely viewed as a rival to EU plans for a separate pipeline, Nabucco, that would bring gas from ex-Soviet republics south of Russia across Turkey and farther west. But there are concerns that there will not be enough gas to fill it - a potential problem to which Russian officials have repeatedly drawn attention.

"We have nothing against alternative projects," the ITAR-Tass news agency quoted Mr. Putin as saying. However, he added, "Before putting millions of dollars into a pipeline and burying it in the ground, you have to know where the gas for this pipeline is going to come from."

Russia supplies about a quarter of Europe's gas needs with exports of 150 billion cubic meters a year. Plans for South Stream and a Baltic Sea pipeline called Nord Stream have increased EU concerns about dependence on Russia.

Mr. Kupriyanov contended that South Stream is no threat to Europe.

"It's a helping hand," he said.

But analysts said Russia's South Stream push is a power play.

"Russia is very keen to keep and increase its control over Europe's gas imports," said Chris Weafer, chief strategist at UralSib investment bank in Moscow. "They want to kill off Nabucco or substantially delay it."

By securing commitments from transit countries, Russia may hope to lure Caspian shoreline nation Azerbaijan into the project and leave Nabucco without gas.

Other observers said that if the global economy recovers soon, the projects would not necessarily have to clash.

"If the demand is strong, both projects will be viable," said Valery Nesterov, oil analyst at Troika Dialog brokerage in Moscow.