Gazprom's Black Sea Project 'White Elephant': EC, US Officials

Russian gas monopoly Gazprom’s latest idea to revive the South Stream pipeline project, which was scrapped in 2014, will probably fail for the reason it failed last time, according to western energy security officials.

Diversification of energy routes and sources are Europe’s main goals, they said answering an NGE question on the memorandum of understanding signed by Gazprom, Depa and Edison in Rome February 24. The proposal is to bring Russian gas under the Black Sea to Greece and Italy through unnamed transit countries.

“The Southern Gas Corridor project is a form of true diversification of Europe’s energy security,” said the special envoy and coordinator for international energy affairs of the US State Department, Amos Hochstein. “The only way to resolve the EU energy security is through diversification. More projects that simply bring the same gas from the same fields to the same consumers, although through a new pipe, will not contribute to energy security,” he said, adding that it is far better for EU consumers to focus on funding new routes for gas rather than discussing ideas that simply bring the same gas.

For every project that is presented, especially with the current situation in the energy markets, it is important to consider if it is a political or an economic project. The latest Gazprom proposals are simply a restatement of political projects without economic underpinning, said Hochstein.

“South Stream, Turk Stream, Nord Stream, all the other streams are simply restatements of political projects that have questionable economic value, especially in these market conditions,” he said.

“So far, what we have seen about this project is the announcement, so it is difficult to present a clear position at this stage,“ said EC vice-president for energy security, Maros Sefcovic. “It is not clear where the gas will come from and what should be the route.”  

However, if the operators take the decision to build this line they will have to make an assessment of its commercial viability considering that it will be bringing spare capacity into Europe.

“When we talk about Russian gas, you probably know that the existing infrastructure is being used at 50% of its capacity,” he said, adding that building more capacity will raise the question of what it means for current infrastructure. The important  thing is that all the proposed projects in EU territory have to comply with European law provisions, said Sefcovic.

Earlier on February 29, the latest project was presented by Gazprom’s CEO Alexei Miller to Russia’s president, Vladimir Putin. As Miller reported, the MoU signed with Italy’s Edison and Greece’s Depa stipulates a feasibility assessment of the project before the end of 2016.

“We and our European partners are working on the project, which was prepared and developed by the Greeks and Italians together with French colleagues — the so-called project Poseidon, for delivery of 12bn m³/r of Azerbaijani gas from Greece across the Ionian sea to southern Italy,” he said.

Azeri desk