the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
The South Stream was originally a 50:50 JV between Gazprom and Eni, but France’s EdF signed an MoU
to take a 10% stake in November 2009. Under the agreement, EdF can buy as much as 6bcm per year.
Following the finalisation of the contracts, the partners are hoping to take a FID on the project in 2010.
In April 2010, EdF was awarded a larger, 20% stake, in the pipeline project. The 20% stake is to be taken
equally from the two existing South Stream project partners, Gazprom and Eni. The decision was
announced following discussions between Vladimir Putin and his Italian counterpart Silvio Berlusconi on
April 26, according to a report by The Moscow Times. Putin, who declared the granting of a 20% stake to
EdF, added that a partnership deal would be signed between EdF, Gazprom and Eni during the St.
Petersburg International Economic Forum in June. He also said that following the signing of agreements
with the Austrian government and oil company OMV on April 24, there were now no expectations of
further delays to the project. Putin confirmed that the main terms for the admission of EdF to the project
had been completed and that South Stream was on course for start-up in H215.
Nord Stream
Russia’s second major export pipeline project is Nord Stream. The 1,200km pipeline is designed to carry
an eventual 55bcm annually under the Baltic Sea from Vyborg to Greifswald in Germany. The project is
51% owned by Gazprom along with German partners E.ON Ruhrgas and Wintershall, each with 20%,
and later Dutch entrant Gasunie with 9%. In December 2008, French energy group GDF Suez signalled
its intention to participate in Nord Stream as a minority partner. After more than a year of negotiations,
GDF Suez is expected to receive 4.5% each from Nord Stream's two German partners, under a letter of
intent (LoI) signed in March 2010.
Construction of the onshore segment began in 2005 and was completed by early-2010, while construction
of the underwater segment stalled owing to ongoing environmental concerns, rising costs, technical
obstacles and political objections from neighbouring states. The project, however, made major
breakthroughs in late-2009, securing final approvals from transit states Sweden, Finland and Denmark.
The undersea construction is now set to begin on April 1 2010. At its start-up in 2011, the pipeline will
have a capacity of 27.5bcm. The second 27.5bcm phase is planned to come onstream in 2012.
Russia-South Korea Gas Interconnector
South Korea and Russia are expected to begin a new round of talks on a gas interconnector between the
countries, the head of foreign projects at Russia's state-run Gazprom, Stanislav Tsygankov, told industry
data provider Platts in April 2010. Two potential gas pipeline options between Russia and South Korea
are on the table: an overland pipeline via North Korea and a direct undersea pipeline. The first option
suffers from severe geopolitical risks while the second option presents formidable technological and
financial challenges. In November 2008, state-run Korea Gas (Kogas) announced its intention to team up
with Gazprom to build an undersea gas pipeline from Russia if plans for an overland transit through North
Korea fail. With the erratic Pyongyang government under Kim Jong-il announcing periodically that it will
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