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Russia will not drop South Stream project due to rival pipeline

Moscow will not cancel the South Stream natural gas pipeline over a rival project, Nabucco, which will supply Caspian gas to Europe bypassing Russia, a government official said on Thursday.

„I am 100% sure that it [the South Stream pipeline] will be built, and this makes the Nabucco project extremely uncompetitive,” a government source said. He said that although the route for South Stream, which will pump gas from Russia to Bulgaria and on to other European Union states, has not been finalized, and not all project participants have been determined, the project is a „settled issue. Although no feasibility study has been conducted and the route has not been determined, European countries including Italy and Greece have a strong interest in the project, and there is market demand for gas. There are no obstacles to the project,” the official said.

Russia’s energy giant Gazprom and Italy’s Eni signed a deal in late November to set up a joint venture to conduct a feasibility study for South Stream at a ceremony in Moscow attended by President Vladimir Putin and Italian Prime Minister Romano Prodi. The pipeline is set to cover over 900 km (560 miles) under the Black Sea from Russia to Bulgaria and supply 30 billion cu m of gas annually. Possible routes for the land section of the pipeline in Europe, connecting to Austria and Italy, are still being discussed. The project is set to strengthen Russia’s position as Europe’s main energy supplier. The country already provides 40% of the continent’s natural gas needs. Russia has sought to build direct export routes to the EU since bitter disputes with the ex-Soviet republics Ukraine and Belarus, which affected supplies to Europe.

European nations have expressed concerns over growing energy dependence on Russia and sought to diversify supplies to enhance their energy security. Russian Kommersant daily said on Thursday that Hungary’s oil and gas company MOL has suggested merging at least eight gas transportation companies in Central Europe into a consortium tentatively called New Europe Transmission System in a bid to secure more beneficial loans, including for Nabucco. The $6 billion pipeline is to pump gas from Azerbaijan via Georgia on the Black Sea floor to Ukraine and further on to Europe. Construction is scheduled to start in 2009, and the pipeline is set to go on stream in 2012. The paper said the European Commission has approved the deal. (