EU trio takes 50% stake in Russia's South Stream

16th September 2011, Comments 0 comments

Three EU energy majors on Friday agreed to take a 50-percent stake in a Black Sea natural gas link Russia is developing for Europe's growing market in competition to one backed by the United States.

The partners said Italy's ENI will receive a 20-percent stake in South Stream's offshore operator while Germany's Wintershall and the French firm EDF will each get 15 percent.

The remaining 50-percent share will belong to Gazprom -- the Russian energy monopoly and world's largest gas producer that is developing routes to bypass nations such as Ukraine with which it has been embroiled in several price disputes.

"The European energy majors' decision to join this project is a clear indication of the EU nations' recognition of its timeliness and importance," Gazprom chief Alexei Miller said at a signing ceremony attended by Prime Minister Vladimir Putin in the Black Sea city of Sochi.

The shareholder structure had been under review since the venture -- founded by Gazprom and ENI -- was joined by BASF's hydrocarbon subsidiary Wintershall and EDF under deals lending further European legitimacy to the link.

EDF boss Henri Proglio called it a "cornerstone... project that will play its role in providing for growing European gas needs."

South Stream is being set up in direct competition to the onshore Nabucco pipeline the United States is backing in hopes of relieving the inherent risks to Europe's strong dependence on Russian gas.

Both routes have faced questions about their feasibility because of their reliance on Caspian Sea and Central Asian fields that are already drawing interest from the booming markets of Asia such as China.

The lack of rapid progress and the EU's preferred commitment to Nabucco have spurred talk of an eventual merger between the two rival plans.

Such ideas have been dismissed in the past and a top Gazprom executive voiced confidence in Russia's choice.

"We have everything that is required: We have the gas, we have the market, we have the contracts, and we have the partners who have just signed their shareholder agreement," the Interfax news agency quoted Gazprom's deputy chief executive Alexander Medvedev as saying.

Gazprom has promoted South Stream as a way of improving European energy security after a price dispute between Russia and Ukraine led to a partial three-week cutoff of supplies to EU nations in 2009.

Tensions with Ukraine resurfaced again on Friday when its President Viktor Yanukovych unexpectedly suggested diverting a part of the link across his country instead of going through the western part of the Black Sea.

It only took minutes for Gazprom to dismiss Yanukovych's comments as irrelevant.

"They have been offering this for a long time," the firm's deputy chairman Valery Golubev was quoted as saying by Interfax. "But why do that when we can just run the pipeline straight?"

The two uneasy neighbours have over recent weeks been locked in a new crisis during which Kiev has tried to negotiate down the price of gas agreed under the disputed 2009 deal.

The Kremlin said Yanukovych would meet his Russian counterpart Dmitry Medvedev in Russia on September 24 without providing further details.

© 2011 AFP

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