South Stream: timeout or defeat?

Oil&Gas Materials 2 July 2014 17:15 (UTC +04:00)

Baku, Azerbaijan, July 2

By Aygun Badalova -Trend:

The implementation of the South Stream gas pipeline project, which is being promoting by Russia, continues to face difficulties. Though this project is aimed at the diversification of European energy supplies, the EU does not show an interest to implement it.

Last year the European Commission launched an anti-monopoly probe of the South Stream project on grounds that it violated norms of the European Union's Third Energy Package. Recently it demanded that countries involved in the projects suspend its implementation.

The Ukrainian crisis has also become an argument to halt the negotiations on the South Stream with Russia. "The discussion on the South Stream gas pipeline project will not continue until Russia changes its course of its political crisis in Ukraine", European Commissioner for Energy Gunther Oettinger said in an interview with the Frankfurter Allgemeine Sonntagszeitung in early June.

In June the European Commission also asked Bulgaria to suspend works on the South Stream on the grounds that the project breaks EU law.

Despite the difficulties, the South Stream is not doomed to fail yet, Andrej Tibold, editor-in-chief at Eurasia Energy Observer believes.

"Practically the pipeline can be constructed if in accordance with EU regulation. But we know that much of the Third Energy Package is not acceptable to Russia," Tibold told Trend via e-mail.

Much will depend on how the situation in Ukraine evolves in the EU-Russia context for the EU to be more flexible on South Stream, Tibold believes.

"If both sides find a common language on Ukraine eventually, then chances for South Stream would again become better. The project is now even more in the centre of Eurasian geopolitics. Much will thus depend how this plays out. With the US taking a bigger stake in this," Tibold said.

The South Stream is often considered as a competitor to the Southern Gas Corridor project, which envisages the transportation of Caspian gas to the European market. Unlike the South Stream, the Southern Gas Corridor will provide the EU countries with new alternative gas supply sources through new supply routes. That is the reason why the EU is keen to implement it soon.

Tibold believes that the challenges on the way of the South Stream implementation, as well as the tensions around Ukraine improve the Southern Gas Corridor chances to be implemented in full scale with the possibility of new sources to get in.

"The tensions around Ukraine have again cast a shadow on Russian gas in Europe among policy makers," Tibold said.

At the same time he believes that it also means more damage to the image of gas as an energy source.

"So, although this might improve the chances for the Southern Corridor and alternative supply sources, altogether it is detrimental to the image of gas. The EU will further increase efforts to increase energy savings, increase renewables and reduce dependency on gas as an external energy source," Tibold said.