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Romania to join South Stream

Romania to join South Stream
On February 17 in Bucharest, Gazprom Vice-President Aleksandr Medvedev conferred with Romanian officials on a range of bilateral projects.

Gazprom, Romania, and South Stream Routes in the Black Sea.

On February 17 in Bucharest, Gazprom Vice-President Aleksandr Medvedev conferred with Romanian officials on a range of bilateral projects. Medvedev hinted at possible Romanian participation in Gazprom's South Stream pipeline project, from Russia to Europe via the Black Sea.

On the previous day in Sofia, Gazprom CEO Aleksei Miller had unsuccessfully tried to ?reactivate? Bulgaria"s participation in South Stream (see EDM, February 18).
According to Medvedev"s concluding statement and a press release from Gazprom, the Romanian side confirmed its interest in the South Stream project and presented technical data, which Gazprom had requested earlier, toward a feasibility study for South Stream in Romania. The Russian side suggested that Romania"s state-owned gas transmission operator, Transgaz, join South Stream by entering into a venture with Gazprom (Interfax, February 17; Mediafax, February 18).

Those Romanian-delivered technical data pertain almost certainly to the seabed of the Black Sea in Romania's exclusive economic zone. Gazprom had indeed requested the seabed data last year and Bucharest was slow to respond. The Romanian Economics and Trade Ministry"s press release (February 17) listed ?developing the [gas] transit network?--apparently, an allusion to South Stream--as one among the topics discussed with Medvedev. The ministry ruled out a joint venture of Romgaz, the state-owned gas producing company, with Gazprom.

Previewing the talks, Russian representatives in Bucharest had told the press that Romania has good chances to be included in South Stream due to the country"s location and the unfinished negotiations between Gazprom and Bulgaria (Adevarul, February 17).

Moscow has made several overtures to Romania in this regard since autumn 2009, just after the new Bulgarian government had halted its participation in South Stream for the time being and ordered a review of the project"s terms. Moscow is trying to impress Sofia that the South Stream pipeline can be routed through Romania, if Bulgaria stalls.

Gazprom"s overtures to Romania can also unsettle Turkey, if the government in Ankara truly believes South Stream to be a realistic project. Ankara has already agreed to allow the South Stream pipeline to pass from Russia through the Turkish exclusive economic zone in the Black Sea, en route to Europe. The Russian and Turkish prime ministers signed energy partnership agreements in August 2009 and January 2010, envisaging the Turkish seabed route for South Stream (Interfax, Anatolia news agency, January 13). However, Gazprom"s use of the Romanian zone would rule out the use of the Turkish zone for the pipeline.
Bulgaria is the only country through which South Stream must necessarily pass in order to reach all the countries that have signed up to this project.
Theoretically, South Stream has two options for crossing the Black Sea from Russia to Bulgaria. One option is from the Russian through the Ukrainian, Romanian, and Bulgarian exclusive economic zones, to a landfall point in Bulgaria. The other option is through the Russian, Turkish, and Bulgarian zones, again to a Bulgarian landfall point. On the first option, Ukrainian permission seems unimaginable, as it would allow Gazprom to shift massive volumes of gas from Ukraine"s own transit pipelines into South Stream. The second option is convenient to Russia politically; but the Turkish seabed route is the longest, deepest, and the most expensive of all options.

Theoretically again, Gazprom has two bypass options against Bulgaria in the Black Sea. One option is from the Russian via the Ukrainian and Romanian zones to a Romanian landfall, then overland into central Europe. The other option is via the Russian and Turkish zones to a landfall on the European side of Turkey, then overland into southern Europe. These options, however, would imply bifurcating the South Stream pipeline in the middle of the Black Sea, then following two circuitous routes around Bulgaria toward southern Europe and central Europe, respectively. Russian planners can not consider these options seriously.
Thus, Bulgaria holds an unassailable position and its government is well placed to bargain hard with Russia over the terms of South Stream or other energy projects in Bulgaria.

South Stream can only reach the Romanian exclusive economic zone after crossing the Ukrainian zone in the Black Sea. Thus, Gazprom"s overture to Romania makes no practical sense, if it refers to the seabed route; unless, inconceivably, Ukraine sacrifices its own transit role by allowing South Stream on the seabed through the Ukrainian zone.

It is possible to speculate that Gazprom is offering to build an extension of South Stream into Romania overland, branching off from a neighboring transit country. This offer, however, would have to presuppose Bulgarian participation in South Stream. If a branch-off is laid, Romania would not be considered a transit country for South Stream, but an ordinary customer country, forfeiting transit revenue, among other advantages lost. This is the model that Moscow is currently offering to Croatia, in return for major concessions from Zagreb. In Romania's case, a branch-off line from South Stream could reduce Romania's reliance on Ukraine for the transit of Russian gas.
By all public evidence, Medvedev failed to mention any gas reserves that might be available in Russia or elsewhere for the South Stream pipeline. Nor did he mention financing. These omissions occur invariably when Russian government and Gazprom officials discuss the South Stream project with countries that have joined or consider joining the project.

Compared with most countries in its region, Romania is less reliant on natural gas in its overall energy mix; and less dependent on Russian gas in the Romanian consumption of this fuel, thanks to internal production. Gazprom, however, is the sole external supplier. Romania is said to have imported 2.04 bcm of Russian gas in 2009 (Interfax, February 17).

Economics and Trade Minister Adriean Videanu led the Romanian team in these (and some previous) talks with Gazprom. The Romanians have three main objectives in these negotiations. The goals are:
Creating a joint venture between Romania"s state-owned gas producer Romgaz and Gazprom to build underground gas storage sites in Romania. The capacities would total 5 to 6 billion cubic meters (bcm), including one site at Margineni (northeastern Romania) for 2 or 2.5 bcm. The parity-based joint venture would market the gas in European Union member countries (Agerpres, February 17).

Eliminating trading companies that Gazprom has inserted in its supply relationship with Romania. The existing supply contracts will expire in 2012, at which point Romania wants the two intermediaries, WIIE and Imex Oil, removed, and new contracts signed with Gazprom directly. Medvedev showed some receptiveness to this proposal (Mediafax, February 18).

Negotiating the prolongation of transit agreements for Russian gas via Romania en route to Bulgaria, Greece, and Turkey, through existing pipelines. The transit agreements between Gazprom and Romanian state-owned transmission operator Transgaz will expire in 2011. Bucharest is now well placed to demand an increase in the transit fees, as Bulgaria demands and Ukraine has, as of January 2010, obtained (see EDM, February 18).

One day ahead of Medvedev"s visit, and apparently timed to it, Romania"s Chamber of Deputies (lower house of parliament) ratified the inter-governmental agreement on the Nabucco project.

Source: http://www.jamestown.org/programs/edm/

www.turkishmaritime.com.tr

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