Gazprom secures Bulgaria pipeline deal

Russian gas giant Gazprom signed yesterday a deal allowing a major new pipeline to pass through Bulgaria on its way to Western Europe, stealing a march on rival EU-backed projects aimed at reducing the bloc's energy dependence on Moscow. "With the signing today of the final investment decision for the Bulgarian section of South Stream, we move toward the implementation of the project," Gazprom chief Alexei Miller said after inking the deal with the head of the state-owned Bulgarian Energy Holding (BEH) Mihail Andonov. "Bulgaria will now become a big transit point of Russian gas to Europe," he added. The 3,600-kilometer (2,200-mile) South Stream pipeline aims from late 2015 onward to bring huge volumes of Siberian gas to Europe under the Black Sea. The pipeline would then pass overland through Bulgaria, Serbia, Hungary and Slovenia to Italy. It and another new pipeline under the Baltic Sea to Germany, Nord Stream, bypass Ukraine and Belarus. Moscow has had angry disputes over transit fees with these countries in recent years, leading to supply problems in Europe. Amid fears about Moscow using its gas wealth for political ends, the European Union meanwhile has sought to diversify its supplies by backing rival projects that aim to bring gas from Azerbaijan via a route that skirts Russia. By signing the deal, former communist Bulgaria also managed to secure a 20-percent cut on the price it currently pays Gazprom in a new 10-year gas contract also inked yesterday. All of its gas — some three billion cubic meters annually — currently comes via Ukraine, and Bulgaria was one of the countries worst hit by a Moscow-Kiev price spat in January 2006. BEH and Gazprom had already set up in November 2010 a joint venture to plan, build and operate the 540-kilometre Bulgarian section of South Stream. The pipeline will "give additional security to gas deliveries for the country," Bulgarian Energy Minister Delyan Dobrev said yesterday. Gazprom and its European partners — Italy's ENI, France's EDF and Germany's Wintershall — are due to begin work on the Black Sea section of South Stream on Dec. 7. Gas is due to start flowing on the new pipeline to Europe from early 2015. The project aims to achieve an annual capacity of 63 billion cubic meters (2.2 trillion cubic feet) by 2018. Its estimated cost is about 16.5 billion euros ($ 21.1 billion).