Bulgaria, Russia agree on South Stream roadmap

19/07/2010

Bulgaria and Russia reach a key deal on the South Stream gas pipeline project, after Moscow agreed to lower the price of gas deliveries when new contracts are signed.

(Dnevnik.bg, Sofia News Agency - 19/07/10; Mediapool, Dnevnik.bg, Sofia News Agency - 18/07/10; Reuters, AFP, Bloomberg, Itar-Tass, RIA Novosti, BTA, Focus News Agency, Dnevnik.bg, Mediapool - 17/07/10)

The 900km pipeline will connect Russia to the Balkans, before splitting into two routes. [SETimes illustration by Catherine Gurgenidze]

Bulgaria and Russia struck their deal Saturday (July 17th) following lengthy talks in the city of Varna on Bulgaria's northern Black Sea coast, agreeing to speed up construction of the South Stream natural gas pipeline on Bulgarian territory.

The roadmap deal covers the stages and deadlines for implementing the project, which is scheduled to become fully operational in 2015. It was signed by the two countries' energy ministers -- Traicho Traikov of Bulgaria and Sergei Shmatko of Russia.

Under the agreement, a technical and economic feasibility study for the project must be prepared by next February, when a joint project company for the construction of the Bulgarian section of the pipeline should also be established.

"We are now speeding up the work on South Stream," Shmatko said on Saturday at a joint news conference with Traikov and Gazprom Deputy CEO Alexander Medvedev, who also participated in the negotiations.

The pipeline is designed to carry up to 63 billion cubic metres of Russian natural gas per year to Europe, bypassing Ukraine. According to plans, it will run under the Black Sea, from the Beregovaya compressor station in Russia to Varna, and will then split into two branches, with the northwestern one ending in Austria and the southwestern in Italy.

The Bulgarian section of the South Stream pipeline will cost about 644m euros, Bulgarian officials said. They also explained that 17 billion cubic metres of the total gas volume will flow through already existing pipes and the remaining 46 billion cubic metres will be pumped into new pipes.

Ownership of these new pipes has been a sticking point in the talks. The agreement reached in Varna envisions that Bulgaria will have 50% ownership of them.

Bulgarian Prime Minister Boyko Borisov, who did not participate in the talks, but travelled to Varna for the signing ceremony, said the South Stream pipeline will benefit not only his country, but also Serbia and Croatia, which have joined the project as well.

"As good neighbours, we do not want to prevent them from using Russian gas," Russian news agency Itar-Tass quoted him as saying.

Bulgaria, which is almost 100% dependent on Russian gas, has also joined the EU-backed Nabucco pipeline project, which is designed to transport natural gas from Central Asia and the Middle East to Europe, in a bid to diversify its supplies. Sofia has repeatedly said that it considers both projects a priority.

The negotiations in Varna, which began Friday, also focused on Russian gas supplies to Bulgaria. The roadmap agreement was announced only after Moscow committed to reduce gas prices for the Balkan nation and to remove intermediaries from the gas supply contracts. This implies that, in the future, any such deals will be concluded directly between Gazprom and Bulgarian state gas company Bulgargaz.

"We have no outstanding issues and we also put an end to the participation of intermediaries," Shmatko confirmed.

Traikov explained that Bulgaria will sign new long-term contracts with Russia after the current ones expire in 2011 and 2012. Sofia expects to receive a first draft by August 10th. The two sides are then to negotiate the exact details of the new gas delivery contracts by the end of June next year.

"What we have negotiated is just the beginning, not the end," Traikov said on Sunday.

This content was commissioned for SETimes.com.