South Stream of South Stream AG

The South Stream project is directed to strengthening of energy security of Europe. It is the next real step to strategy implementations of Gazprom on diversification of routes of supply of the Russian natural gas. The new gas pipeline system meeting the most modern ecological and production requirements considerably will increase safety of power supply of all European continent.

Owners

Own the consortium South Stream Transport created especially for project implementation South Stream (November, 2012)^[1]:

• Russian Gazprom (a share in 50 percent),
• Italian Eni (20%),
• German Wintershall (15%) and
• French EdF (15%).

Route and power

According to November, 2012 the start of construction of South Stream was planned for December 7, 2012. South Stream had to pass under the Black Sea from Russia to Bulgaria, and then will be separated into two branches: one through Serbia and Hungary to Austria, and the second - through Greece on the South of Italy.

Pipe extent on the project should exceed 900 kilometers, and design capacity 63 billion cubic meters.

In total it was going to construct four 15.75 billion cubic meters of gas gas pipelines everyone. The first supply of fuel to Europe had to begin at the end of 2015. Were going to begin commercial deliveries in 2016, and to output the project at full capacity - by 2018.

The gas pipeline repeatedly rose in price and for November, 2012 is estimated at 16 billion dollars^[1].

The existing and projectible gas pipelines to Europe for August, 2016

Respect for environmental standards

When implementing the project the latest technologies with observance of the most strict ecological requirements will be used. Environmental impact assessment (EIA) will be carried out in full accordance with the Convention Espoo.

Project History

2014: Putin announces project closure after investment of €5 billion

On December 1, 2014 during the visit to Ankara the president Russia Vladimir Putin announced project closure. Counteraction of European Commission and the decision of the authorities of Bulgaria to prohibit Gazprom an implementation of works became the reason. At that time the first object (Banatski Dvor underground gas storage) was already constructed and put into operation.

By the end of 2014 about €5 billion were invested in the project.

2012: Company registration in Amsterdam

On November 15, 2012 the Board of Directors of South Stream Transport - operator of the South Stream gas pipeline - made the final investment decision by a sea part of the project.

Besides, at a meeting of the Board of Directors the decision on company registration of South Stream Transport in Amsterdam was made. In the message it is noted that the project of a sea part will be implemented on the conditions approved at the beginning of 2012^[1].

On November 15, 2012 Gazprom agreed about the final investment decision on project implementation South Stream with Bulgaria.

Bulgaria was the last from the countries interested in the onshore section of the gas pipeline with whom signed agreements Gazprom. Before the concern agreed upon the onshore section with Hungary, Slovenia and Serbia.

The protocol on the investment solution was signed with Bulgaria by the chairman of the board of Gazprom Alexey Miller and the chief executive of Bulgarian Energy Holding Mikhail Andonov. As specifies Interfax, earlier the Minister of Economy, Energy and Tourism of Bulgaria Delyan Dobrev said that investments into the Bulgarian section of South Stream 538 kilometers long will make 3.3 billion euros^[1].

2011: Agreement on the offshore section

On September 16, 2011 the Agreement of shareholders of the offshore section of the South Stream project is signed. According to the Agreement the German company Wintershall Holding and the French EDF received on 15% share in the offshore section of the South Stream project due to reduction of a share of Eni for 30%.

Henri Proglio (EDF), Harald Schwager (BASF), Vladimir Putin, Alexey Miller and Paolo Scaroni (Eni)

As a result of a share in the offshore section of the South Stream project were distributed as follows:

• JSC Gazprom — 50%,
• ENI — 20%,
• Wintershall Holding и EDF — по 15%.

As of the end of 2011 it was provided that the offshore section of the gas pipeline will pass under the Black Sea from Russkaya compressor station on the Russian coast to the coast of Bulgaria. Total length of the Black Sea section will be about 900 kilometers, the maximum depth — more than two kilometers, design capacity — 63 billion cubic meters. For the onshore section from Bulgaria two possible routes — one on the northwest, another on the southwest are considered.

For providing a gas supply in the South Stream gas pipeline in necessary volume expansion of the gas transmission system in the territory of the Russian Federation is supposed: construction of additional 2300 km of a linear part and 10 compressor stations with a total power of 1473 MW.

2008-2010: Company registration of South Stream AG, agreement with the countries by participants

• On January 18, 2008 in Switzerland the special purpose company for construction of a sea part of the gas pipeline of South Stream AG is registered. As founders of the company on the parity basis Gazprom and Eni acted.

• In 2008-2010 intergovernmental agreements about project implementation with Austria, Bulgaria, Hungary, Greece, Serbia, Slovenia and Croatia are signed.

Gazprom signs bilateral agreements about cooperation in project implementation with the authorized national companies: Serbian JP Srbijagas, Hungarian development bank (MFB), "Bulgarian Energy Holding of EAD", operator of the Greek DESFA gas transmission system, Austrian OMV.

Joint project companies for project implementation in the territory are founded

• Serbia — South Stream Serbia AG (a share of Gazprom — 51%, JP Srbijagas — 49%),
• Hungary — South Stream Hungary Zrt. (on 50% at Gazprom and the Hungarian development bank, MFB),
• Greece — South Stream Greece S.A. (on 50% at Gazprom and DESFA),
• Bulgaria — South Stream Bulgaria AD (on 50% at Gazprom and Bulgarian Energy Holding of EAD).

• On June 19, 2010 JSC Gazprom, Eni and the French energy company EDF signed the tripartite Memorandum providing entry of EDF into a shareholding structure of South Stream AG until the end of 2010 due to decrease in a share of Eni in joint project company. At the same time the share of EDF will make not less than 10%.

• On October 1, 2010 Marcel Kramer is appointed the Chairman of the board of directors and the chief executive officer of South Stream AG.

• On November 13, 2010 Gazprom and Bulgarian Energy Holding of EAD signed the Agreement of shareholders and the Charter of South Stream Bulgaria AD joint project company. The field of activity of South Stream Bulgaria AD will include implementation of pre-investment project stage South Stream and also financing, construction and operation of the gas pipeline in the territory of Bulgaria.

• November 16, 2010 The Cooperation agreement between Gazprom and Administration of Krasnodar Krai for project implementation of construction of the South Stream gas pipeline in 2010-2014 is signed. In the territory of the region within project implementation South Stream is planned construction of unique compressor station. It will provide a possibility of transportation of gas on 900 km by a sea part of the gas pipeline which will pass at big depths.

• On March 21, 2011 Gazprom and Wintershall signed the Memorandum of understanding concerning the South Stream project providing accession of Wintershall Holding GmbH to implementation of the offshore section of the project. The memorandum also provides the conclusion of new long-term contracts on supply of natural gas of joint company Wintershall Erdgas Handelshaus Zug AG (WIEE).

• On March 22, 2011 Gazprom and Geoplin Plinovodi d.o.o. signed the Agreement of participants of South Stream Slovenia LLC company — the joint project company created on a parity basis for project implementation South Stream in the territory of Slovenia.

2007: The memorandum between Gazprom and Eni on implementation of South Stream

On June 23, 2007 Gazprom and Eni signed the memorandum of understanding on project implementation South Stream. The memorandum defined the directions of cooperation of two companies in design, financing, construction and management of South Stream.

2006: Partnership agreement between Gazprom and Eni

In November, 2006 Gazprom and Eni signed the agreement on strategic partnership according to which Gazprom had an opportunity since 2007 to perform direct deliveries of the Russian gas on the Italian market. According to the agreement current contracts are prolonged for Russian gas supply to Italy till 2035.

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