Actuality February 28, 2008

   Russia forces construction of South Stream gas pipeline. The agreement between Russia and Hungary about the cooperation for creation of gas pipeline for transit of natural gas through Hungarian territory was signed in Moscow. The document, foreseeing joining of Hungary to the project of South Stream gas transmission system, was signed by the head of the Ministry of Industry and Energy Viktor Khristenko and the minister for finance of Hungary Janos Verezs in presence of the Russian president Vladimir Putin, head of Hungarian government Ferenc Gyurcsany and first vice-prime minister Dmitry Medvedev.

Budapest preferred to secure Nabucco and followed the example of Sofia and Belgrade that supported the Russian gas project.

   Agreement with Hungary will become the third intergovernmental agreement that Gazprom needs for realization of ambitious project of gas pipeline construction from Russia on the Black Sea bottom and the Balkan countries to the Central Europe. In two other agreements, with Bulgaria and Serbia, already signed in January of this year, were consolidated principles of share of equity capital of companies that will be engaged in project realization on the territories of these countries. Gazprom agreed with Bulgaria about parity participation and management (50/50), in Serbia received a controlling stock interest – 51%.

   For construction of South Stream section on the territory of Hungary the state companies of each country will establish a joint venture. "Here we succeeded to agree that the gas pipeline section will be constructed by the joint venture that would belong Russia and Hungary on the parity basis 50/50", Ferenc Gyurcsany reported after negotiations with the Russian vice-prime minister Dmitry Medvedev. According to the Hungarian prime minister, "Hungary will be presented by the company that is the hundred-per-cent state property", and Medvedev explained that "Russian will be presented by Gazprom". "Registration will be carried out on the basis of the Hungarian right", Gyurcsany added.

   Within the project framework the underground gas storage with the volume about 1 bcm will be constructed in Hungary. Through the Hungarian section of South Stream, into construction of which will be invested no less than $2 bln, is planned to run through no less than 10 bcm of gas a year. According to the estimations of specialists, investments should pay their way within 10-15 years.

   Dmitry Medvedev did not hide the gladness of the attained agreements. After return to Russia he declared journalists that joining to this Hungarian project "makes it not only absolutely viable, but, in fact, it is its good, beautiful start". "We will hope that in the near future starts the active elaboration of technical moments of realization and transition to construction of capacities also", marked the first vice-prime minister and added that created Russian-Hungarian joint venture "signifies entrance of our Hungarian partners to this large program".

   One should mark that the Russian representatives underlined diligently, that South Stream is not the competitor to another gas project – Nabucco that is supported by the USA and European Union. So, answering the question, whether Russia disagrees to participate in development of Nabucco gas system in the future, which Hungary suggested constructing together with Austria, Romania, Bulgaria and Turkey, Dmitry Medvedev said evasively, that Gazprom task is to diversify maximally the supplies and the developed projects – Nord Stream and South Stream – are directed to that. "We constantly work on provision of energy security strengthening in Europe. First it is necessary to provide creation of operating projects and only then think about the future", he said.

   In his turn, the head of Gazprom Alexey Miller marked that he did not yet receive any official suggestions from the company that suggests constructing Nabucco gas pipeline. "If such will follow, the main will be the matter about the gas resources for filling this gas pipeline. These resources are not enough now, but Gazprom did not receive any suggestions yet about joining the project", he marked.

   The Hungarian prime minister tried to assure also that South Stream and Nabucco projects will not render the unfavorable influence on each other. "Hungary is interested that both gas pipelines crossed its territory, South Stream will not render negative influence on Nabucco", Gyurcsany declared. "Hungary needs additional gas supplies, additional sources and additional routes for supplies", he explained and reminded that now only one gas pipeline crosses the territory of Hungary. "Our purpose is that our vulnerable position would become less vulnerable, two things are needed: it is necessary to find new sources and open new routes", the Hungarian prime minister said. According to him, Hungary works in parallel at two programs and interested in both: "Nabucco project that includes five countries, is developed by Hungary and passed to the governments of the concerned states, Hungary is interested in execution of this agreement".

   We will remind that the Hungarian part completed project development of intergovernmental agreement about participation in construction of Nabucco and passed the document to the ambassadors of Austria, Bulgaria, Romania and Turkey, which should cross the planned gas highway. Nabucco, 3300 km long, should link the countries of Near East and Central Asia with European Union through Turkey and South Europe. The cost of Nabucco project is estimated at $5,8 bln. First gas supplies through this gas pipeline that will run from Azerbaijan are expected already in 2012. According to the estimations of experts of consortium for gas pipeline construction, that includes Austria, Bulgaria, Romania, Hungary and Turkey, after 2017 it would be possible to talk about flow of gas through this pipe from Iran and Iraq.

   In its turn, South Stream is considered the main competitor of this project. The projected through capacity of the Russian gas pipeline is 30 bcm of gas a year; the cost is over $10 bln. Gazprom plans to complete marketing researches and development of feasibility study of South Stream project by the end of 2008 and start the first supplies through the gas pipeline in 2013.

   However, unlike South Stream, which realization prospects become more and more real, Nabucco project becomes more and more ephemeral. They perfectly understand this in European Union – the largest European gas company Gaz de France already withdrew from participation. And there is nothing strange that Hungarian authorities did just the same choice and preferred the more reliable, and the main thing – the variant fully provided with raw material.