OMV, Gazprom to cooperate on South Stream gas line

Christopher E. Smith
OGJ Pipeline Editor

HOUSTON, Apr. 29 -- OMV AG and OAO Gazprom signed a cooperation agreement to construct the Austrian section of the South Stream natural gas pipeline between the Austrian-Hungarian border and the Baumgarten gas distribution hub.

At the same time, Austrian Federal Minister Reinhold Mitterlehner and the Minister of Energy of the Russian Federation Sergey Shamtko signed a cooperation agreement for construction and operation of this gas pipeline on Austrian territory.

The South Stream line will extend from the eastern Black Sea coast in Russia across the sea to Bulgaria. From there one route option would pass through Serbia and Hungary to Austria, where it will flow into the Baumgarten hub. Other route options run from Hungary to Slovenia and on to Italy, and from Bulgaria through Greece and also on to Italy.

The companies expect the feasibility study for the Austrian subsection of South Stream to be complete by yearend. The study will determine the precise route and evaluate costs. The companies plan to make a final investment decision within 18 months, with the pipeline to become operational by yearend 2015.

OMV said the planned South Stream and Nabucco gas lines will further increase the role of OMV’s Baumgarten hub as a key European natural gas transit point and boost security of Europe’s supply.

The agreement between Mitterlehner and Shamtko gives the project political backing and a legal framework to make financing from the private sector easier to obtain.

The agreements came 9 days after European Union Energy Commissioner Gunther Oettinger underlined the importance of establishing a southern transit corridor through which Caspian natural gas supplies could reach the EU (OGJ Online, Apr. 15, 2010).

A recent Wood Mackenzie study, however, said despite both Nord Stream and South Stream’s intent to reduce Russia's dependency on transit countries, it is likely more than 50% of Russian gas exports to Europe will continue to move through Ukraine, Belarus, and Poland (OGJ, p.30, Mar. 22, 2010). Neither Russia nor Gazprom are a participant in Nabucco.

Contact Christopher E. Smith at [email protected].