Gazprom told New Europe the Russian gas monopoly will supply gas to Greece using the existing pipeline system. Gazprom was asked to comment on earlier reports it has shelved plans to build the southern section of South Stream gas pipeline ending at southern Italy via Greece because demand in their markets cannot cover the cost of the investment.
“Gas supply to Greece will be implemented by using existing pipeline system. This is determined by demand in the market, which does not include the need to expand existing facilities,” Gazprom said on 15 November.
Earlier, Leonid Chugunov, head of the company’s Project Management Department, reportedly told a press conference in Moscow that Greece and Italy have been removed from construction plans for South Stream since Greece and Italy do not offer significant consumption prospects. Greece’s Environment, Energy and Climate Change Ministry told New Europe on 16 November that it has not been notified by Gazprom.
South Stream’s north-western route is expected to run towards Slovenia and Austria via Bulgaria, Serbia and Hungary. Chris Weafer, chief strategist for Moscow’s Sberbank Investment Research, told New Europe by phone on 16 November it’s possible the South Stream programme will now change. “The economic case for actually building it as extensively as it was originally proposed is no longer relevant so it’s very likely that we will now see a shift of emphasis towards the northern part,” Weafer said, adding that the southern branch may not be built at all.
The first reason is that it’s expensive and capex is now important as Russian President Vladimir Putin tries to make Gazprom more valuable, more attractive and increase the dividend payout, he said. The second reason is that the markets have changed with shale gas and liquefied natural gas (LNG) and there is less justification for such an extensive and expensive project. The third reason is that there is a considerable doubt over the future economic condition of countries on the southern part of Europe, Weafer said. The fourth reason is that the competing EU-backed Nabucco now looks also less likely to happen for the same reasons. “It’s an expensive project at a time when alternative energy sources from shale gas and LNG are becoming more available to the customer base it was also targeting. So they have the exact same problems as South Stream but they don’t have ‘the big brother’ in form of the Kremlin or Gazprom’s cash flow to fund it,” Weafer said. “There’s probably more of a sense that Nabucco isn’t likely to happen for economic and cost reasons and therefore there’s less need to head them off at the passes with the southern link of South Stream,” he said. When it comes to energy with Russia there is always a mix of economics and politics involved.
Weafer said the Trans-Adriatic Pipeline (TAP) planned to transport Azeri gas via Greece and Albania and across the Adriatic Sea to southern Italy seems more likely. “That at least has more an economic logic to it,” he said, adding that Azerbaijan wants to get into the European market. “I think TAP will get built because Azerbaijan wants to build it.”
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