South Stream vs Southern Gas Corridor: competition or complimentary?

South Stream vs Southern Gas Corridor: competition or complimentary?

Baku, Azerbaijan, Feb. 28

By Aygun Badalova -Trend:

Russia's large-scale gas pipeline project, the South Stream is reportedly is being met with success in its aim to diversify energy supply routes to Europe.

At the end of January it was announced that three companies secured one billion euros worth of contracts to supply part of the pipeline's offshore section. Germany's Europipe will supply half of the pipes, Russia's OMK will deliver another 35 percent, and Severstal's Izhora Pipe Mill in Russia will provide the remaining 15 percent.

The construction of South Stream's offshore section will start in autumn 2014, according to Gazprom. "The entire project is being built in compliance with the schedule," Gazprom said.

The period of the project's implementation covers from September 2010 to December 2019.

The implementation of the South Stream project goes parallel with the realization of the Southern Gas Corridor, which envisages the transportation of the Caspian gas to the European markets.

These two projects are considered as competitors. However, if carefully analyzed, we can see that the South Stream and the Southern Gas Corridor are quite different projects. They just have one common goal - to diversify European energy supplies.

In particular, the sources for these projects are different: South Stream proposes the transportation of Russian gas, while the Southern Gas Corridor initially relies on Azerbaijani gas with the future prospects to transport fuel from other Caspian region countries. That makes the Southern Gas Corridor multi-sources project, which is obviously the advantage over the Russia-backed project.

Despite the Gazprom's statements about a great importance of the South Stream project for the European consumers, it does not corresponds to one of the main principles of European energy policy - diversification of energy supply sources. Most of European countries are much dependent on one source - Russian gas. The concept of the South Stream project proposes the transportation of gas to the following countries - Austria, Bulgaria, Hungary, Greece and Slovenia. These are the countries that have already signed agreements with Gazprom on pipeline construction and gas transit. However, later, the European Commission came out with a statement that these bilateral agreements regarding the pipe are in violation of EU's Third Energy Package.

The pipeline's terminal will be in Italy.

It would be stressed that in 2012 Bulgaria's dependence on Russian gas supplies amounted to 100 percent, while Greece's dependence was at 54.8 percent, Italy's dependence- at 19.8 percent, Austria's - more than 52 percent, Hungary's - 56 percent, Slovenia's - 55 percent.

Here we can see that all these countries have very high rate of dependence on Russian gas. The South Stream pipeline will be nothing more than just additional route for additional gas volumes for them, which will not meet their main objective - to have an alternative supply source.

By providing European countries with large gas volumes (the pipeline's capacity is expected to be 63 billion cubic meters per year) the South Stream will just strengthen the country's dependence on Russia.

With this regard the European Commission repeatedly said that the Southern Gas Corridor remains a key policy priority for the European external energy policy.

Meanwhile, German MEP Jo Leinen, who is also president of the European Movement International, told New Europe that Europe is highly dependent on gas and oil imports. "It is a strategic interest of the European Union to have a diversification of the corridors towards the energy import," he said.

So, the South Stream and the Southern Gas Corridor projects cannot be competitors. Besides different technical characteristics, such as capacity, pipelines' length and etc., the projects have differing value.

Europe will need more and more gas in the future. Its dependence on gas import will also increase. But besides additional gas volumes Europe will also need new suppliers. And the importance of the Southern Gas Corridor will not diminish by the implementation of the South Stream. Conversely, the necessity of the Caspian gas will only noticeably grow.

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