Bulgaria and Gazprom Sign Construction Protocol for South Stream

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Researched by Industrial Info Resources (Sugar Land, Texas)--Bulgaria and the state-controlled Russian gas giant Gazprom OAO (PINK:OGZPY) (Moscow, Russia) agreed on technical aspects of the Bulgarian part of the 3,600-kilometer South Stream gas pipeline, the state-owned Bulgarian Telegraph Agency reported.

Gazprom's Deputy Chairman Alexander Medvedev, who signed the technical protocol, said construction in Bulgaria would begin next year. Gazprom plans to construct the South Stream pipeline to transport Russian gas via the Black Sea to Bulgaria and other countries in southern Europe, including Greece, Italy, Serbia, Hungary, Austria and Slovenia. Construction of the route is set to begin in December 2012, with the first commercial deliveries scheduled for late 2015. The pipeline will carry an annual 63 billion cubic meters of Russian gas to Europe, which will be fully operational in 2018.

Gazprom has already established national joint ventures with companies from Austria, Croatia, Slovenia, Greece, Hungary and Serbia to manage the onshore section of the South Stream pipeline. A final investment decision on the project is slated for November 2012, and construction is expected to begin in December, Gazprom has previously said.

Gazprom owns a 50% stake in the South Stream project. Other stakeholders are ENI SpA (NYSE:E) (Rome, Italy), with 20%, Electricite de France S.A. (EPA:EDF) (Paris, France) with 15% and BASF SE/Wintershall (Ludwigshafen, Germany) with 15%.

Separately, Bulgarian Minister for Economy and Energy Deyan Dobrev announced that Sofia had also signed a deal in which Bulgaria would get an 11% discount on Russian gas from April to December 2012. The markdown took effect April 1, 2012, and will be in effect until the start of next year. "How much Bulgaria will save due to the markdown will be known when it is clear what amount of gas Bulgargaz has purchased," Dobrev said.

In 2011, Gazprom exported 2.81 billion cubic meters of gas to Bulgaria, which represented a 6% increase on 2010 volumes.

Bulgaria, which is almost totally dependent on Russian natural gas deliveries via Ukraine, has backed both South Stream and the European Union's lagging Nabucco pipeline project as possible ways to diversify its supplies.

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