A popular saying in the business arena has it that great deals are done in informal circumstances, such as in a bar or restaurant. This seems to have been the case for the successful agreement between Russia and Bulgaria regarding the South Stream gas pipeline project. The two heads of state met last week in the Sinatra bar in Sofia to discuss the detail of the union. This was a triumph for the state gas company from Russia, Gazprom, which has found an alternative way to the Nabucco project to inject gas into Western Europe. The Russian victory resuscitated the discussions around the Nabucco gas pipeline project, which will transport gas from Azerbaijan and other countries from Central Asia, with the aim of liberating the EU from its reliance on Russian gas. The agreement signed between Russia, Bulgaria and Serbia for the South Stream project was acknowledged as a “clear triumph for Putin and his energy strategy” by American expert Steve LeVine.
Furthermore the CEO of Rompetrol Group, Dinu Patriciu, said recently that the South Stream project was more feasible than European project Nabucco. “There is a lot of talk about the Nabucco project today, but I think it would be more realistic to talk about the South Stream project. At the same time, any company offering an alternative could become the hero of the day. Today, with such potential, we can talk about joint projects. These could be either tanker deliveries via Batumi and Constanta or construction of a gas pipeline across the Black Sea,” said Patriciu.
South Stream and/or Nabucco?
Jean Constantinescu, president of the Romanian National Institute for the Study of Energy Sources (IRE), believes that from a strategic point of view, South Stream improves the conditions to get gas from Russia and therefore Romania should support the project. The pipeline, which supplies local gas at the moment, will have a supplementary capacity if Bulgaria and Greece have the South Stream option. On the other hand, he added, the EU, including Romania and Bulgaria, needs the Nabucco project, which will provide gas from Russia's competitors. “So, we had better pay attention to why we should buy such expensive gas from the Russians? Are not the discussions on Nabucco, South Stream and all parties involved a diversion to cover up the real problem here?” said Constantinescu.
After the agreement for the South Stream was signed, the EU, US and even Nabucco shareholders said that the two projects were not in competition and were independent of one another. “Let me stress again, that we do not consider South Stream competition for Nabucco. First of all the need for imported gas to Europe will rise to 74 percent by 2030 (today it's over 41 percent). For that reason Europe needs various projects to cover the need in the future. Second, we would have different supply sources and different target markets – Nabucco in Western Europe, South Stream in Southern Europe. Furthermore Nabucco is a European project, not an anti-Russian project,” Reinhard Mitschek, managing director of Nabucco Gas Pipeline, told Business Review.
Ferran Tarradellas, spokesperson of Energy Commissioner Andris Piebalgs, added that the Commission did not oppose South Stream, but admitted that it was not promoting South Stream as actively as Nabucco. “We don't believe that Nabucco and South Stream are in conflict. Nabucco is essential because it will bring gas from non-traditional suppliers through a different transport route, thereby increasing diversification and security of supply. South Stream will bring more gas from a traditional supplier (Russia),” said Tarradellas.
Across the Atlantic, the US has a firm point of view on this subject. “Nabucco is the best project on the drawing board right now to deliver new gas from new sources to the European market. There are other complementary means to achieve this end, and I believe we will begin to see more and more of them,” Blair LaBarge, economic attach