Russia Scraps South Stream Natural Gas Pipeline, Chooses New Route to Turkey

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russia has scrapped the South Stream Pipeline Project, which would have bypassed Ukraine to supply natural gas to Europe. In a state visit to Turkey, Russian President Vladimir Putin cited Bulgaria's reluctance to take part in the project as the reason for the decision not to build the pipeline.

"Don't you understand that it is ridiculous for us to put hundreds of millions of dollars into a project to go through all the Black Sea, and then come to the surface before the Bulgarian shore?" asked Putin during a press briefing in Ankara. He also said the European Union (EU) pressured the Bulgarian government to block the project, which would have gone through Bulgaria, Serbia, Italy and Austria. Currently, Russia supplies almost 30% of Europe's annual gas needs.

Bulgaria first supported the project, but then reversed its position in June after the European Commission said Bulgaria had breached the bloc's competition rules by the way it awarded contracts for the project.

"If Europe doesn't want it implemented, it won't be implemented," Putin said.

A New Pipeline for Turkey
After criticizing the EU, Putin said Russia plans to build a natural gas pipeline to satisfy Turkey's needs. Currently, Turkey is the second-largest importer of Russian natural gas after Germany, according to figures from Russia's state-owned natural gas exporter OAO Gazprom (PINK:OGAZPY) (Moscow, Russia).

"We decided to construct a new gas transfer system to meet Turkey's needs and to create a hub for natural gas supplies for Southern European consumers through Turkish territories," Putin said.

Separately, Gazprom Chief Executive Officer Alexei Miller said the company signed a memorandum of understanding with Turkey's BOTAS (Ankara, Turkey) to build a new pipeline under the Black Sea. The new pipeline will have a capacity of 63 billion cubic meters (BCM) per year, of which 14 BCM will be allocated to Turkey, the same amount planned for the South Stream Project. The remainder would be transported to the Greek border, where a delivery point would be arranged, Miller said. The pipeline will start from Russkaya.

Blue Stream Expansion
Also, Russia has agreed to discount the price of natural gas exports to Turkey by 6%, effective as of January 1, 2015. Further price cuts are possible. In a joint press briefing by Putin and Turkish President Recep Tayyip Erdogan, Putin said Russia's natural gas supply capacity will be extended 3 BCM per year through the expansion of the Blue Stream pipeline, which has a 16 BCM capacity.

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