The Gazprom-led South Stream gas pipeline is not a top priority for the European Commission, but Brussels recognizes it value, EU Energy Commissioner Guenther Oettinger said in his speech on 25 May, following a meeting in Brussels about the South Stream pipeline. Russia is an indispensable partner for European energy security, Oettinger said, adding that the EU-Russia energy partnership is at the core of security of supply considerations in the EU, and of energy relations on the European continent.
“Turning towards South Stream: it is not our top priority, but we recognize its value, in particular for Russia, for diversification of routes. We will support South Stream in its administrative processes in the EU, and we will not impose any unreasonable or unjustified level of administrative or regulatory requirements. We will act as fair partners,” Oettinger said. “Today, I have come to listen and to learn. For me, South Stream so far seemed more of a concept than a concrete project. What we know is that the gas in South Stream will leave Russia, cross the Black Sea and arrive in Europe. Beyond that, there are a number of questions. Where will the gas actually come from? Where will it arrive? How will it arrive, by ship or by pipeline? Will it divert gas from Ukraine? Once it gets to Europe, what will happen? Most importantly, who can ship gas in the project? Is it only Gazprom, or also other players?” the EU Energy Commissioner asked.
“If South Stream for example gives access to gas independents active in Russia, then South Stream would deliver on two essential criteria: namely diversification of routes and counterparties. That means a stronger contribution to European diversification efforts,” Oettinger said.
He noted that he is also interested in a balanced trilateral EU-Russia-Ukraine solution on future gas flows to the EU. Turning to legal issues, he said that South Stream, when it is on EU territory, it will be subject to the Third package, and as a transmission pipeline, it will be subject to the internal market rules. “First, South Stream will normally have to allow all shippers to book, within the EU, capacity on the pipeline at non-discriminatory conditions; Second, tariffs charged to shippers will normally be subject to regulation by the national regulators in the countries concerned; Third, reverse flows must be technically feasible in case of emergencies. I understand that certain EU Member States entered into bilateral agreements with the Russian Federation which may partially contradict these principles. If this is true, these Member States will nevertheless have to apply the internal market rules and they are under an obligation to bring their IGAs in line with the EU legislation. I want to come to fair solutions. One practical way to do this would be to do this directly on a European level,” Oettinger said.
Meanwhile, Energy Minister Sergei Shmatko was quoted as saying by the press after the meeting that the EU’s recent reforms of its energy policies could discourage investment. “The creation of a new long-distance gas pipeline system is a massive project requiring very substantial amounts of capital,” Shmatko said. “If companies aiming at realizing the project are deterred from initiating them or face restrictions over the returns they can expect on their investments, the result will be detrimental, above all to the interests of consumers,” he added. The minister was criticizing EU legislation that includes rules forcing energy companies to share their infrastructure with competitors.
South Stream is designed to supply Russian gas to Italy and Austria via the Black Sea – circumventing Ukraine, with which Moscow has had several rows over transport costs. Construction on the 3,600-kilometre pipeline is expected to get underway in 2013. Russian gas monopoly Gazprom is one of four companies involved in the South Stream project, along with Italy’s ENI, France’s EdF and Germany’s BASF. Gazprom Chief Executive Alexei Miller participated in the South Stream-organized meeting in Brussels, which was billed as a presentation on the project and an opportunity for “a more general overview of EU-Russia energy relations.”