August 2010 Vol. 237 No. 8

Projects

Former Gasunie Exec Leading South Stream Project

Gasunie’s outgoing chief, Marcel Kramer, will lead Gazprom’s efforts to build the South Stream offshore pipeline to Europe. Gazprom previously hired former German Chancellor Gerhard Schroeder to oversee another offshore pipeline, Nord Stream.

Construction in the Baltic Sea started in April after protracted debate and protests in states that had to approve its passage through territorial waters.

Both pipelines were conceived to diversify gas export routes away from unreliable transit countries, notably Belarus and Ukraine. But the South Stream project, which would pass beneath the Black Sea, will cost too much to recoup the investment, industry insiders argue.

“We can’t do anything that’s not competitive,” Kramer told The Moscow Times, defending the plan. He said he was unaware whether the cost of carrying the gas under the water would be higher than shipping it overland through Ukraine, which has invited Russian and European Union investment in expanding its transit network.

Even so, such pipelines have long enough life spans — some 30-40 years — to make a return on the money spent building them, said Kramer, who helped construct a major underwater pipeline from the Netherlands to Britain as Gasunie chief.

Italy’s Eni is the only other investor, although France’s EDF, the world’s largest nuclear energy producer, agreed to join the project by the end of this year.

Gazprom indicated that South Stream might change course to exclude Bulgaria, which had disappointed Russia by dragging its feet on other energy projects, such as construction of an oil pipeline and a nuclear power reactor. Instead of surfacing in Bulgaria, the pipeline could run to Romania.

Gazprom estimates South Stream will cost at least $28 billion to build and come on line in December 2015. There are also hints the undersea portion of the pipeline could pass through Ukraine’s economic zone of the Black Sea, rather than through Turkish waters as planned.