South Stream Pipeline Project, Europe

Oil pipeline image

The South Stream gas pipeline project will transport Russian natural gas across Europe via Bulgaria to Italy.

Construction of the Russian section of the pipeline was started in December 2012, near Anapa at the Krasnodar Territory. Construction of the Bulgarian section started in October 2013.

South Stream pipeline is being built by Gazprom (Russian) and Eni (Italian) and will be fully operational by late 2015.

"South Stream pipeline is being built by Gazprom (Russian) and Eni (Italian) and will be fully operational by late 2015."

It will be a direct competitor to part of the planned extension of the existing Blue Stream pipeline which runs from Turkey across Europe through Bulgaria and Romania to Hungary.

South Stream will also be a strong rival to the Nabucco pipeline for competitive supplies.

Gazprom signed bilateral agreements with major international companies such as Serbian Srbijagas, Hungarian Development Bank (MFB), Bulgarian Energy Holding, DESFA and Austrian OMV to implement the project.

Four joint project companies were formed to implement the project in Serbia, Hungary, Greece and Bulgaria, which respectively include South Stream Hungary (Gazprom: 50%, MFB: 50%), South Stream Greece (Gazprom: 50%, DESFA: 50%) and South Stream Bulgaria (Gazprom: 50%, Bulgarian Energy Holding: 50%).

South Stream pipeline route

For the offshore section, the South Stream pipeline will cross the Black Sea from the Russian coast of Beregovaya (the starting point of the Blue Stream pipeline where a compressor station is sited) to the Bulgarian coast at Varna, with a 900km (560 miles) pipeline reaching a maximum water depth of 2,000m.

Wintershall Holding will construct the offshore section of the pipeline. The construction is scheduled to begin by mid 2014.

Two different routes are being studied for the onshore section: north-west and south-west.

From the coastal town of Varna, the south-western route will pass through Greece and the Ionian Sea to southern Italy (this could also supply the Turkey-Greece-Italy pipeline).

The north-western route will run to the northern region of Italy with an additional branch line to Austria.

Start of the South Stream pipeline

The project to construct the new South Stream pipeline was announced in June 2007 (a strategic agreement to build the pipeline was signed in November 2006 by Eni and Gazprom).

A joint venture company, called South Stream AG, was set up in January 2008 to construct and operate the pipeline.

This is a 50 / 50 joint ownership between Gazprom and Eni (South Stream AG was incorporated in Zug, Switzerland, with a share capital of SFr100,000).

A memorandum of understanding was signed in November 2007 for the construction of the new pipeline. The feasibility and marketing studies for the project were completed in 2012 by Saipem, a subsidiary of Eni.

The South Stream project is the third pillar of the strategic agreement signed by Eni and Gazprom in November 2006, according to Paolo Scaroni the CEO of Eni.

In November 2010, a feasibility study for the Romanian section of the project was completed by Transgaz and Gazprom. The final investment decision for the project was approved in October 2012.

South Stream branches and territory

Branches of the pipeline will have separate agreements. Russia and Bulgaria signed an agreement in January 2008 for the construction and operation of the pipeline in Bulgarian territory (there are two possible routes through Bulgaria under consideration: north-west and south-west, which Gazprom and Bulgargaz will build and operate).

"The South Stream gas pipeline project will transport Russian natural gas across Europe via Bulgaria to Italy."

An agreement between Serbia (Srbijagas) and Russia was signed in December 2006 (before South Stream was announced) to study the possibilities of a pipeline from Bulgaria through Serbia and Croatia to Italy.

In January 2008 Russia and Serbia agreed the route of the South Stream pipeline through Serbia (in February 2008 a joint venture company was formed to build and operate the Serbian section to supply ten billion cubic metres (bcm) a year).

Additionally, in February 2008 Hungary and Russia set up a company to build the pipeline. Other countries that may be involved including Slovenia, Croatia, Bosnia and Herzegovina and Romania.

A government-level meeting between Russia and Italy with Gazprom and ENI was held in 2008 to outline the schedule for reaching agreements with transit countries along the gas pipeline's route.

Aims of South Stream gas pipeline

The pipeline is expected to carry around 63bcm of gas a year. The sections through Serbia and Hungary will both have a capacity of at least 10bcm per year.

In June 2010, EDF Group signed a MoU to participate in the Eni, Gazprom joint venture project and is expected to have a stake of about 10%. Gaz de France has also been in negotiation to join the project.

The construction for the Serbian section of the pipeline is expected to start by the end of 2013. The cost of the pipeline is estimated at €15.5bn.

A 540km linear section of the pipeline and 366km of loop lines will be constructed in Bulgaria. Three compressor stations will also be installed in Bulgaria.

Russia and Serbia signed a contract in March 2013 to supply up to 1.5bcm of gas per year to the latter for the next ten years. South Stream gas pipeline will also be used for this supply, upon completion.

European oil

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