Russia kick starts South Stream project

A European delegation is in the resort city of Sochi to sign agreements with Russia's Gazprom, finalizing the multi-billion dollar gas pipeline.

The pipeline, which bypasses Ukraine, plans to deliver Central Asian and Russian gas to European consumers, with the first deliveries expected to begin in four years time.

The alternate gas route which promises to pump up to 47 billion cubic meters of gas per year from Russia to Europe is about to become one step closer to reality.

A meeting between the prime ministers of Italy and Russia is set to focus on energy and begin the process of creating the South Stream Pipeline.

Italy’s ENI and Russia’s Gazprom will then green-light the next stage in getting the joint project underway.

Dmitry Alexandrov, an analyst for Financial Bridge consulting company, sees South Stream as a self-sufficient project.

“The amount of gas required to fill it will come from the Middle Asia. Further on, there’s an opportunity to switch to the South Stream, the gas that is now transited across Ukraine. Another strong point of the project is the government support and the resources of Gazprom behind it,” he says.

The pipeline will cross through the Black Sea and countries like Romania and Bulgaria, rather than transiting through Ukraine, which has caused Europe’s supplies to grind to a halt for two consecutive years.

“We need to make energy supply routes to Europe as diverse as possible. We need not only use existing transport facilities, but also minimize risks, diversify flows, and build new pipelines. I mean the Nord Stream on the Baltic seabed, and the South Stream that goes across the Black Sea to the Balkan countries,” Russia’s Prime Minister Vladimir Putin has said.

Russia and Italy first signed up to South Stream in June 2007 and now the next phase is about to take off.

The signing between Italy’s ENI and Russia’s Gazprom will bring both Europe and Russia one step closer to the next generation of energy transport and a promise to deliver reliable Russian gas to the EU through more stable partners.

South Stream is seen by some as a challenge to Nabucco, an EU-led project to build a pipeline that would bypass Russia.

On the contrary, others say there is no competition, because even though Nabucco might cost less, it could never fully compete with the planned capacity and supply which South Stream is expected to provide.

“The future of Nabucco is rather uncertain, as the political component is very important in this project. Apart from Azerbaijan, only clearly anti-Russian countries have declared a willingness to participate in it. South Stream has a great chance to be completed earlier, as it looks far more substantial at this stage,” Alexandrov says.