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Extra South Stream natural gas branch deemed economically unviable

09 Nov 2012 15:44:42 | esgm

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Russian natural gas producer Gazprom has shelved plans to build an extra branch of the planned South Stream pipeline to southern Italy after rethinking the economics of creating an additional spur.

A Gazprom source confirmed comments made by the head of the company's project management department Leonid Chugunov stating that the construction of an extra line would not be economically viable.

"Given the current gas consumption in Europe and because of alternative projects such as the Trans-Adriatic Pipeline (TAP), the Italy route is not viable," Chugunov said. "TAP's route is very similar to that of the proposed southern branch of South Stream."

South Stream is Gazprom's planned 63 billion cubic metre/year project to transit Russian gas to western Europe under the Black Sea. The company had initially planned for the pipeline's route to split in Bulgaria, with one fork destined for southern Italy via Greece and the main pipeline travelling north to ultimately connect with CEGH, the Central European Gas Hub, in Austria.

Chugunov confirmed that the original transit route remains unchanged, with South Stream reaching Italy at Tarvisio, its northern border point with Austria.

Construction date

Meanwhile, Gazprom has set a construction commencement date for South Stream of 7 December. Foundations will be laid for a compression station on the Russian coastline of the Black Sea, near Anapa. Construction of the Serbian section of the pipeline will also commence in December, though an exact date has not been specified.

The Gazprom source also confirmed that a final investment decision (FID) will be reached in each participating country by 15 November. Gazprom is waiting for FID in Bulgaria and Slovenia and expects to have this tied up by Thursday. FID was reached in Hungary and Serbia at the end of October (see ESGM 31 October 2012).

Gazprom wants to commission the first 15.75Gm³/year phase of South Stream in 2015.

Gazprom is a 50% direct shareholder in the South Stream project. The remaining share is owned by Italy's Eni with 20%; Germany's Wintershall Holding with 15%; and France's EDF with 15%. JE

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