REVIEW: Gazprom Pushes Ahead with South Stream Austria Spur

MOSCOW, April 30 (RIA Novosti) – Russian energy giant Gazprom is pressing ahead with its plan to build an Austrian branch of the South Stream natural gas pipeline after being held up for months by the European Commission.

On Tuesday, Gazprom CEO Alexei Miller signed a memorandum of understanding with Austrian OMV chief Gerhard Reuss that aims to bring Russian natural gas to Europe via a route that bypasses Ukraine.

The Austrian spur of Gazprom’s pipeline is designed to carry an annual 32 billion cubic meters of gas from Bulgaria’s Black Sea coast across Serbia and Hungary to the Baumgarten gas transport hub in Austria.

The two companies said they expected to obtain all necessary permits by the end of next year, with the first deliveries scheduled in 2017 and the full commissioning due by January 2018.

The memorandum will also allow Gazprom to use OMV’s gas reservoirs in Austria and introduce the Russian energy major to the Central European Gas Hub (CEGH), an Austrian trading platform for international gas corporations.

Gazprom has long been seeking to gain access to the natural gas junction in Baumgarten, which is physically owned by OMV and conveniently located in the heart of Europe.

The construction of South Stream’s Austrian leg was agreed on by Moscow and Vienna in 2010, creating a legal basis for the pipeline construction. The same year, Gazprom and OMV set up a joint venture to run the gas pipeline project, to continue 40 kilometers from the Hungarian border.

Under the deal, Gazprom was also to purchase 50 percent of CEGH shares, before the European Commission threw a wrench in the works leading to a change in South Stream’s path that now takes the main pipeline through Slovenia to Italy’s Tarvisio.

The current South Stream project closely follows the route mapped out for the abandoned Nabucco pipeline, which was devised as an alternative to Russian gas transports and frozen after Azerbaijan and Turkmenistan refused to give it the green light.

Currently, nearly a third of all Russian gas exports to Europe pass through Ukraine, posing a threat to European energy security due to the country’s repeated disruptions and continuing conflict with Gazprom over gas prices.