"I am very positive a legislative solution will be found for South Stream. However, this will take some time,” Andrey Konoplyanik, adviser to the director general of Gazprom Export, told Interfax at the European Gas Conference in Vienna on Wednesday.
"I expect this solution to be within the Third Energy Package – so that none of the negotiating parties will lose face,” he added.
Working with the European Commission "ultimately means the legislation is not yet final”, Konoplyanik said, adding the next meeting between the EU, Russia and Gazprom is expected to take place on 31 January.
Brussels recently clashed with Moscow over bilateral intergovernmental agreements (IGAs) Russia has signed with several European countries on their respective parts of the South Stream pipeline. The EU has repeatedly stressed the IGAs do not comply with rules related to unbundling, third-party access and tariff setting.
"We will see more discussions between the EU and Russia over the coming months than in the last couple of years,” Marcel Kramer, senior counsel to Gazprom Management on the South Stream project, said at the conference. "Even at flat gas demand, the EU needs more gas imports – and the market demands new supply roads,” he added.
Recent meetings between Russia and the EU have helped to advance negotiations over the bilateral agreements for the construction of South Stream, EU Energy Commissioner Günther Oettinger told journalists last week.
Legislative solution
The exact form a legislative solution for South Stream will take remains largely unclear to all participants, however. The South Stream consortium did not apply for exemption from the third-party access requirement of the Third Energy Package – the legislation that would require opening up access to its infrastructure.
"This could undermine the commercial viability of the project and burden Russia and its partners with risks to returns on the estimated €30-50 billion [$39-65 billion] of investment,” Tomas Maltby, energy politics researcher at the University of Manchester, told Interfax.
"It is generally agreed that, after an FID has been taken, the operators have found a sufficient business case and do not apply for exemptions – which may well be too late now,” Katja Yafimava, senior research fellow at the Oxford Institute for Energy Studies, told Interfax. The case is further complicated by the fact no other EU legislative framework exists other than the Third Energy Package.
If a legislative solution were found for a similar cross-border project, it could serve as a potential ‘blueprint’ for future potential suppliers of the EU. "A solution to South Stream could become a milestone for how to deal with future imports,” Konoplyanik said.
Gazprom’s advisers said that, for future gas imports to reach Europe, the EU needs to remain competitive and consider the global implications of its energy framework.
"Future potential gas suppliers such as Iran don’t need to deliver west – as India is also a possibility. Therefore, a solution needs to be found, so the EU’s legislative framework does not ‘kill’ business cases such as large pipeline projects,” Kramer said.
South Stream was not listed in the commission’s Projects of Common Interest (PCIs) in October last year. However, the commission has on several occasions welcomed it, provided it complies with EU law. The first South Stream deliveries are scheduled to reach Bulgaria in December 2015.
(interfaxenergy.com, 30 Jan., 2014)
