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European companies to lose €2.5 bln on frozen South Stream project

December 02, 2014, 17:17 UTC+3 MOSCOW
Japanese companies will lose an order worth €320 million thus bringing the overall foreign losses from freezing the project to almost €2.820 billion
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© EPA/KOCA SULEJMANOVIC

MOSCOW, December 2 /TASS/. European companies will suffer direct losses valued at no less than €2.5 billion from the frozen South Stream project, according to the South Stream Transport Company.

Japanese companies will lose an order worth €320 million thus bringing the overall foreign losses from freezing the project to almost €2.820 billion.

German Europipe was supposed to supply 50% of pipes for the first spur of the South Stream pipeline under a contract worth €500 million.

Japanese consortiums Marubeni-Itochu and Sumitomo received a €320 million euro order for supplying 40% of pipes for the South Stream’s second spur.

In March this year, South Stream Transport B.V and Italian Saipem signed a contract for laying the South Stream’s first spur. Saipem is a sister company of Italian ENI, which acted as a contractor for laying pipes under the Blue Stream and Nord Stream projects. The contract was valued at €2 billion.

Infographics Russian gas supplies to Europe: existing routes Russian gas supplies to Europe: existing routes

THE MAIN EXPORT ROUTES OF RUSSIA’S NATURAL GAS SUPPLIES TO EUROPE. Infographics by TASS

The same South Stream Transport B.V. and the Swiss Allseas Group signed a contract for building the second spur of the South Stream’s offshore section in deep waters. Another contract was signed with Italian Saipem for the provision of construction services. The price of the contract was kept secret.

Vladimir Putin's on Tuesday said Russia cannot begin the implementation of the South Stream project. The Russian president said so on Monday after his meeting with his Turkish counterpart Recep Tayyip Erdogan in Ankara. Russia, according to the president, cannot begin the construction of the seabed section to the Bulgarian coast and is forced to revise its participation in the project.

International reaction to termination of South Stream project

CEO of Austria’s integrated, international oil and gas company OMV Gerhard Roiss said in the interview with the Austrian O1 radio that Russia’s abandoning the South Stream gas project is regretful for Europe.

“It is regretful developments for Europe, since it needs Russian gas, it cannot do without Russian gas,” he said. “But pipeline facilities are needed to ensure secure energy supplies. So, what is going on is a step in the wrong direction.”

“The problem today is that possibilities of supplying south-eastern Europe with gas are reduced and dependence on one supplier and one route via Ukraine is high,” he said.

Deputy chairman of Bulgaria's energy commission Martin Dimitrov said in an interview with the NOVA TV channel that Russia's decision to give up the South Stream gas pipeline project and redirecting it towards Turkey is merely another tactical move by Russian President Vladimir Putin.

Martin Dimitrov said that Russia by no means will abandon the South Stream project, and the statement is Vladimir Putin's tactical move. The official said that a possible redirection of the planned pipeline towards Turkey would make the project economically impractical. Dimitrov said the move aims at increasing pressure on Bulgaria and the European Commission.

Bulgaria may end up in the position of the loser

Bulgaria’s former economics and energy minister, Rumen Ovcharov, was less optimistic. “It is nakedly clear that Bulgaria will get no compensation for the suspension of the South Stream project and will find itself in the position of the loser. We must say “Thank you!” to Boyko Borisov (Bulgarian prime minister), who has over the past five years managed to suspend all three major infrastructure projects in Bulgaria, which could have drawn tremendous investments into the country and yielded major economic benefits,” he said.

“Turkey will now enjoy all economic benefits. As for us, theoretically speaking we may build an inter-system connector from Turkey to bring Russian gas to Bulgaria. I can see no extra opportunities for more talks. Russia has already displayed great patience,” Ovcharov believes.

Termination of South Stream bad news for Serbia

Serbia’s Prime Minister Aleksandr Vucic has described as bad news Russia’s decision to curtail the South Stream gas pipeline project.

“Serbia has been investing in this project for seven years, but now it has to pay the price of a clash between the great (powers),” the RTS quotes him as saying. Vucic would like to discuss this issue with Russian President Vladimir and other Russian officials upon his return from the session of the UN Security Council in New York.

On Monday evening Serbian Energy and Mining Industry Minister Aleksandr Antic said in the wake of the news Moscow was going to stop the project due to the European Union’s stance, that Serbia had not yet received any official notification from Russia’s Gazprom regarding any changes to the project.

He said the Russian president’s statement the project has been halted was regarded in Serbia as a message addressed in the first place to the EU members on which the gas pipeline’s construction depends heavily.

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