the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
Gas Pipelines
Blue Stream
Russia’s first post-Soviet westbound pipeline system is Blue Stream, which carries gas directly to Turkey
under the Black Sea. Blue Stream is a JV between Gazprom and Italy’s Eni. The US$3.4bn system
consists of two pipelines that run for 1,213km from southern Russia to Ankara in Turkey. The 385km
subsea sections of the pipelines run from the Beregovaya compressor station in Russia to a gas terminal
outside the Turkish port of Samsun. The pipelines were completed in 2004 and were officially
inaugurated in 2005, since when they have been gradually ramped up to their maximum capacity of
16bcm per annum. It is the world's deepest underwater pipeline system and reaches a maximum depth of
2,150m below the surface of the Black Sea.
There has since been much talk of expanding the pipeline both geographically and in terms of capacity,
including branches to Italy and the Middle East. In February 2006, Turkish energy ministry officials
claimed that talks were under way between Gazprom and Turkish state-run gas distributor Botaş about
extending the pipeline through Turkey to Syria, Lebanon, Israel and Cyprus in a project known as Blue
Stream II. Speaking during an official visit to Turkey in June 2010, however, Putin said Israel is now
likely to be excluded from the Blue Stream II project. Putin said that gas discoveries in recent years in
Israel have reduced the country's future gas import projections, making an extension of the pipeline to
Israel unnecessary.
South Stream
Emboldened by Blue Stream’s success, in November 2007 Gazprom and Eni agreed to construct a new
trans-European gas pipeline that will cost the companies EUR10bn by the time it comes onstream in
2013/14. The 900km South Stream pipeline is routed via the Black Sea to south-eastern Europe. In
Bulgaria, the pipeline will split into a northern route going to Austria via Romania and Hungary, and a
southern route crossing the Balkan Peninsula to Italy. The northern route passes through the same
countries as the 30bcm Nabucco pipeline from Turkey to Austria, which the EU is promoting in order to
reduce dependence on Russia.
Government officials of Bulgaria, Greece, Italy and Russia met in May 2009 to sign transit agreements
for South Stream, creating separate JVs between Gazprom and the countries’ gas distribution companies.
These JVs will be responsible for the design, construction and operation of the pipeline within their
respective territories. Slovenia joined the project later that year, while Turkey agreed to let the pipeline
pass under its territorial waters in return for a transit fee in August 2009. A deal between Gazprom and
Eni has been signed under which the two companies have agreed to double the pipeline's capacity to
63bcm. Austria now remains the last country on South Stream's preliminary route yet to sign up for the
project.
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