Slovenia & South Stream: See How We Roll

South Stream enjoys a lot of support in Slovenia from numerous development perspectives, according to Marjan Eberlinc, General Manager, Plinovodi d.o.o., who spoke at South Stream: The Evolution of a Pipeline in Ljubljana, Slovenia.

Explaining that Plinovodi, which has a 50% stake in South Stream in Slovenia, was a transmission system operator that dealt with Slovenia's gas infrastructure, he said that numerous efforts towards building the natural gas pipeline had been made and pledged to give a run down of those, as well as offer what had yet to be realized.

He recalled the well developed natural gas transmission system that had been well developed several decades ago. “The capacities at the entry points were insufficient in the past, especially bordering Austria. We identified shortcomings and this is why the capacity was increased.”

Mr. Eberlinc showed a map of several developed or ongoing gas infrastructure grid projects that had been completed in Slovenia.

“This project,” he explained, “enables and supports the development perspective of Slovenia; it is an enrichment when talking about the South Stream pipeline. In the last 5 years we've constructed some 200km of pipeline infrastructure. All spatial plans, all the rights that needed to be acquired have been acquired. More than 15 projects related to the national station plan were conducted – this is a high number. We also managed to finance the projects through the European investment bank with the guarantees of foreign commercial banks, so we have blazed a trail so far and we are looking forward to the challenges ahead.”

Two compression stations, he reported, were also being planned in Slovenia.

Of South Stream, he said key events should be mentioned, from the agreements on the behalf of Slovenia and the Russian Federation, a feasibility study, agreement to form “South Stream Slovenia,” and the adoption of the investment, among others.

Talks between Slovenia and Russia in connection with European legislation had been ongoing since 2008-09. “And the directives and our agreement, according to the data we possess, is in line with the European Commission except for certain details, which we believe that the Republic of Slovenia will resolve.”

According to the original agreement, the capacity of South Stream in Slovenia would be 8BCM/year, but later on it was left open so that investors could determine that number, said Mr. Eberlinc, who said that the feasibility study set out 25.9BCM/year.

This meant that at the beginning Plinovodi's existing capacity could be used, but when it exceeded 8BCM/year, an additional, parallel pipeline would be necessary.

Formation of the company South Stream Slovenia between Gazprom and Plinovodi, he said, took place in 2011.

According to Mr. Eberlinc, the document of agreement included a pledge to respect European legislation. He said, “The partners will file an application for an exception, and ACER as well as the European Commission will take part in the procedure, issuing the decision on certification. These are all valid agreements and both partners have to cooperate.”

He noted the long length of procedures in Slovenia, but that his company had stayed within 5 years of mentioning projects and had always stuck to its deadlines. “This gives us further credibility,” commented Mr. Eberlinc.

He spoke of three spatial plans, that technical solutions and their coordination had been ongoing.

“There is a wish to increase the capacity, namely over 30BCM. This changes the concept of the project, pressure conditions. Hypothetically, we could also change the diameter of the pipeline, so this is really a very big challenge upon which we are depending on our neighbors, the Italians and Hungarians, not only in the coordination of implementation points, but systemic operators also have to be coordinated.”

Increased capacity would mean that the project's financial model would need to be verified.

He explained: “We have to check the return on investment, prepare for the financing of the project – one of the more important elements. We have agreed on the starting points, but not the details. The interest of potential investors and financiers is huge, but the question is the guarantees and collateral obtained from the bank.”

Major projects in Slovenia, he said, required bank guarantees. Still, the partners were committed and had signed the contract, which could replace a bank guarantee.

“Many investors have changed their minds because these procedures, siting of facilities, take so much time in Slovenia. Environment and risk assessment is also important and a long process.”

Still, Mr. Eberlinc said he remained optimistic given his company's progress on pipeline sections.

He said special attention should be placed on cross border environmental impacts of construction.

Taking the acquis communitaire into full account, he said the parties involved would take every opportunity to have bi- or tri-lateral talks with the European Commission on South Stream.

Of his company's cooperation with what he characterized as a distinguished partner, he said, “We have a lot of willpower, but I would wish for more coherency in our cooperation. With good will, I am sure that this project can be implemented. Of course every major infrastructural project connecting the entire territory of Slovenia pose numerous challenges.”

Mr. Eberlinc noted that each plot of land involved had to be identified and entered into the land register before the company could apply for a construction permit.

Fielding a question regarding reverse flow, he said that gas through South Stream would only be directed one way, from Russia to each country the pipeline passed through. He added it was hard to imagine it ever hosting gas from Iran or Israel, especially considering the political obstacles to that.

According to the project feasibility study, nearly EUR 1 billion will be invested in the Slovenian leg of the project, but that figure could deviate plus or minus 25%, according to Plinovodi's Marjan Eberlinc, who admitted that this could present a high risk for the project.

Total investments in South Stream, including offshore and onshore, could total approximately EUR 17 billion in 2010 prices – EUR 10 billion for the offshore and EUR 7 billion for the onshore portion.