Gazprom Considering Less Investment in South Stream - Report

Russian supplier Gazprom is considering a big cut in the amount it is willing to spend on the South Stream project next year, according to Russian business daily Vedomosti.

Citing a document its journalists had apparently seen, to be presented at the EU-Russia Summit tomorrow [December 21], the paper also said that Gazprom was contesting parts of an EU plan that restricted the control a gas supplier had over its transportation network.

According to Gazprom’s draft budget for 2013, South Stream was among the projects where the company was cutting back the amounts earmarked for 2013, the daily said. In the case of South Stream, the cut would be 27% , to about €2.2 billion.

South Stream, key to Russia's policy avoiding Ukrainian territory when transporting its gas to Europe, is to run from the Black Sea, going through Bulgaria, Serbia, Hungary and Slovenia on its way to northern Italy. At full capacity, which it is scheduled to reach by 2018, Gazprom would pump 63 billion cubic metres of gas a year through South Stream.

The European Commission backs the rival Nabucco pipeline project. Gazprom was yet to secure the required documentation to start laying pipes under the Black Sea, Vedomosti said, quoting an unnamed source familiar with the situation.

Gazprom was reducing its 2013 investment programme in half and its capital expenditures for the next three years by one third, according to Vedomosti, but analysts quoted by the newspaper said that the company often allocated additional funds for infrastructure investment during the year, so the current plans should not be interpreted as final and unalterable.

Meanwhile, in the wake of last week’s new daily record of deliveries of gas to Europe, Gazprom officials are said to be confident that the company could reverse the recent trend for declining exports to Europe.

Gazprom chief executive Alexey Miller took the opportunity to again tout South Stream and its Baltic Sea twin, Nord Stream, as profitable projects that will operate at maximum capacity to meet demand from European customers.

But statistics show Gazprom’s European exports declining by 9.3%in the first 11 months of this year. 

“Demand is driven not so much by the economy, which in the euro zone seems unable to shake off the downturn, but by weather. Gazprom can count only on the help of General Winter, who is always on the side of Europe’s fuel suppliers,” Vedomosti said, quoted in other Russian media. 

See also: Minister Seeks Exemption for Energy Package, Oettinger: Europe Has to Take the Russians Seriously