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Gazprom, Eni sign deal on South Stream gas pipeline

Russian energy giant Gazprom and Italy’s Eni S.p.A. signed a deal on Thursday to build a gas pipeline that will run under the Black Sea from Russia to the European Union.

The document to establish the South Stream joint venture was signed in the Kremlin by Gazprom’s CEO, Alexei Miller, and Eni S.p.A. President Paolo Scaroni in the presence of Russian President Vladimir Putin and Italian Prime Minister Romano Prodi. The project is expected to strengthen Russia’s position as Europe’s energy supplier. “The South Stream project has strategic significance for the energy security of Europe as it is based on transparency, and consideration for mutual interests of suppliers and consumers. We are grateful to the European Commission for supporting the project,” Putin said after negotiations with Prodi.

State-controlled Gazprom and oil and gas giant Eni agreed in June to build the 900-kilometer South Stream pipeline, which will deliver 30 billion cubic meters of gas annually via Bulgaria to Austria, Slovenia and Italy. Under the memorandum on establishing the South Stream, Gazprom and Eni will each hold 50% in the company, Scaroni said, adding that a third company could join the project during the feasibility study. Investment in the South Stream project is expected to exceed $10 billion, Scaroni said. Gazprom and Eni have also agreed that feasibility study will be completed by the end of 2008, and the pipeline will come on stream in 2013.

The South Stream project, announced by Gazprom in June, replaces previous plans to extend the Blue Stream pipeline, which runs from Russia to Turkey and which is also operated by Gazprom and Eni. Russia’s state gas monopoly has actively sought new export routes to avoid transit countries since energy disputes with Ukraine and Belarus in the past two years. In November 2006, Gazprom and Eni signed an agreement which opened the way for direct Russian gas exports to Italy from 2007. The supplies are to be gradually increased to 3 billion cubic meters a year by 2010. The agreement also extended the current contracts for Russian gas supplies to Italy until 2035. (