Gazprom, OMV sign South Stream deal

Pipeline plans: OMV's Gerhard Roiss, left, and Gazprom's Alexei Miller

Gazprom and OMV have said they expect the Austrian section of the South Stream to be commissioned by late 2016 after signing a co-operation deal for the proposed pipeline in Vienna.

The two companies will co-operate on the construction of the pipeline section, which runs from the Hungary/Austria border to the industrial hub of Baumgarten at an annual capacity of 30 to 32 billion cubic metres.

Tuesday’s signing by chief executives Alexei Miller of Gazprom and OMV's Gerhard Roiss included a final investment decision on the Austrian pipeline, which the two companies aim to see fully permitted for construction by late next year.

Miller said the pipeline will “offer additional guarantees of reliability and flexibility of Russian gas supplies to European markets”.

Roiss said the project would “cement the role of Baumgarten as a key European gas hub”, as well as “safeguard the security of supplies for Europe and, particularly, for Austria”.

Gazprom and its partners see the project as diversifying natural gas export routes and eliminating transit risks for gas supplies to Europe.

However, the pipeline has drawn heavy criticism from Brussels and Washington in the wake of Moscow’s annexation of Crimea for deepening Europe’s reliance on Russian gas imports.

South Stream is designed to pipe 63 billion cubic metres of gas per year from Russia to central and southern Europe.

Its planned route runs offshore from the Russian sector of the Black Sea to Bulgaria and then onshore via Greece, Serbia, Hungary, Croatia, Slovenia and Italy before terminating at Baumgarten.

Earlier this month, EU member state Bulgaria made a surprise decision to suspend all work on its section of the pipeline after a visiting US delegation warned Bulgarian companies could face sanctions if it did not halt the project.

Sofia had initially resisted earlier calls from Brussels to stop the pipeline both over political considerations given the crisis in Ukraine and concerns that the tenders for the project were not awarded in accordance with EU competition rules.

Serbia has said it is sticking with the project.

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