Gazprom handed Eni subsidiary Saipem a termination notice for the South Stream pipeline project to transport gas via a pipeline in the Black Sea.
Image of South Stream pipelay.
Gazprom said in a statement that the contract with Saipem to build the first line of the South Stream pipeline project was terminated. Gazprom’s subsidiary South Stream Transport will move forward with potential contractors to lay the first line of the South Stream replacement project, now called TurkStream.
“The termination for convenience is a standard contractual clause, which provides for the termination of the agreement in the absence of a contractual breach, with compensation determined in accordance with the terms and conditions of the contract,” Saipem said in a statement.
Saipem also confirmed that the Castoro 6 pipelay vessel was in the process of mooring in Russian waters to start pipelaying activities.
From South Stream to TurkStream
On 28 January 2015, Gazprom approved a new route for the pipeline, TurkStream, with 63 Bcm of gas per year capacity that will run across the Black Sea from the Russkaya CS near Anapa to Kiyikoy village in the European part of Turkey and further via Luleburgaz to Ipsala on the border between Turkey and Greece. About 660km of the pipeline’s route will be laid within the old corridor of South Stream and 250km within a new corridor toward the European part of Turkey. Gazprom will work with Turkey's Botas on the project, but Gazprom will be solely responsible for the offshore section, Gazprom said.
Gazprom said that of the 63 Bcm, 14 Bcm is slated for Turkish consumers, and nearly 50 Bcm will be transported to the border between Turkey and Greece, where a delivery point will be arranged.
Gazprom is expecting first gas deliveries to be in December 2016, as work had already started at the Russkaya compressor station in the Krasnodar Territory, which will serve as the pipeline starting point. The first string’s throughput of 15.75 Bcm will be exclusively intended for Turkish consumers.
South Stream’s on-and-off-again history
The original plan for the South Stream project was to begin in Russia, run under the Black Sea, emerge in Bulgaria, and then travel through Serbia, Hungary and Siovenia before ending in Tarvisio, Italy. In addition, it was to supply gas to Croatia and Bosnia and Herzeovina. The project was to consist of four parallel gas pipelines, each 931km long, to be laid at depths of 2200m.
Gazprom, Botas signing MOU for TurkStream gas pipeline construction on 8 May.
South Stream Transport had awarded Saipem the US$2.7 billion contract in March 2014 to construct the line of the project, along with the shallow water parts, shore crossings and associated facilities for all four pipelines. The first offshore string was due to be built in 3Q 2015.
However, in early December 2014, Russian President Vladimir Putin announced that Russia would discontinue plans for the South Stream pipeline, and instead go ahead with preliminary plans to create a gas hub for southern Europe at the Turkish-Greek border. Gazprom and Turkey’s Botas Petroleum Pipeline Corp. signed a memorandum of understanding to construct the TurkStream gas pipeline on 1 December 2014.
By the end of December 2014, Gazprom announced it was buying out its South Stream Transport partners Eni, Wintershall and EDF just weeks after the project, which was already in construction phase, was cancelled. The joint venture company between Gazrpom (50%), Eni (20%), Wintershall (15%) and EDF (15%) was created to construct the offshore section of the South Stream gas pipeline.
In May 2015, Saipem announced that it received notice from South Stream Transport that it was lifting the suspension work under the contracts and that Saipem was able to continue work on the South Stream project.
On 8 May, Gazprom moved on to the construction stage of the TurkStream offshore gas pipeline.