Russia Oil and Gas Competitive Intelligence <strong>Report</strong> 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 <strong>the</strong> agreement, EdF can buy as much as 6bcm per year. Following <strong>the</strong> finalisation of <strong>the</strong> contracts, <strong>the</strong> partners are hoping to take a FID on <strong>the</strong> project in 2010. In April 2010, EdF was awarded a larger, 20% stake, in <strong>the</strong> pipeline project. The 20% stake is to be taken equally from <strong>the</strong> 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 <strong>report</strong> by The Moscow Times. Putin, who declared <strong>the</strong> granting of a 20% stake to EdF, added that a partnership deal would be signed between EdF, Gazprom and Eni during <strong>the</strong> St. Petersburg International Economic Forum in June. He also said that following <strong>the</strong> signing of agreements with <strong>the</strong> Austrian government and <strong>oil</strong> company OMV on April 24, <strong>the</strong>re were now no expectations of fur<strong>the</strong>r delays to <strong>the</strong> project. Putin confirmed that <strong>the</strong> main terms for <strong>the</strong> admission of EdF to <strong>the</strong> 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 <strong>the</strong> Baltic Sea from Vyborg to Greifswald in Germany. The project is 51% owned by Gazprom along with German partners E.ON Ruhr<strong>gas</strong> 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 <strong>the</strong> onshore segment began in 2005 and was completed by early-2010, while construction of <strong>the</strong> 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, <strong>the</strong> 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 <strong>gas</strong> interconnector between <strong>the</strong> countries, <strong>the</strong> head of foreign projects at Russia's state-run Gazprom, Stanislav Tsygankov, told industry data provider Platts in April 2010. Two potential <strong>gas</strong> pipeline options between Russia and South Korea are on <strong>the</strong> table: an overland pipeline via North Korea and a direct undersea pipeline. The first option suffers from severe geopolitical risks while <strong>the</strong> second option presents formidable technological and financial challenges. In November 2008, state-run Korea Gas (Ko<strong>gas</strong>) announced its intention to team up with Gazprom to build an undersea <strong>gas</strong> pipeline from Russia if plans for an overland transit through North Korea fail. With <strong>the</strong> erratic Pyongyang government under Kim Jong-il announcing periodically that it will © Business Monitor International Ltd Page 75
Russia Oil and Gas Competitive Intelligence <strong>Report</strong> 2010 end all political and military agreements with Seoul, <strong>the</strong> latter option seems unfeasible, despite <strong>the</strong> north's opportunity to earn up to US$100mn a year in transit fees. © Business Monitor International Ltd Page 76