The route, which will be jointly built by Russian gas export monopoly Gazprom and Italy's Eni, is expected to carry 30 billion cubic metres of gas per year and rival the US and EU-backed Nabucco pipeline to southern Europe.

The ministry spokeswoman told Reuters that Energy Minister Sergei Shmatko said the project could cost $20 billion at his meeting with Italy's Minister for Economic Development, Claudio Scajola, earlier this week in Moscow.

Eni boss Paolo Scaroni said last year South Stream may cost at least €10 billion ($15.73 billion).

"This (the $20 billion figure) is one of the preliminary estimates we have, based on a preliminary feasibility study. The cost is likely to be changed in future," the spokeswoman told Reuters.

A Gazprom spokesman declined to comment and said it would issue a final estimate of South Stream's cost after its feasibility study is concluded by the end of next year.

The pipeline, which is expected to be commissioned in 2013, will travel 900 kilometres under the Black Sea to Bulgaria and then split into two onshore routes - one to Italy and one to central Europe.

Russia has agreed to route the pipeline through Bulgaria, Serbia, Hungary and Greece. Gazprom is currently in talks with Slovenia to join South Stream as well.

Analysts see the South Stream project posing a major challenge to the planned Nabucco pipeline scheme, under which gas would come from Azerbaijan to south Europe via Turkey in an EU effort to diversify energy sources away from reliance on Russia.