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EDF, GDF Suez Join Pipeline Projects

Putin and Fillon on Friday overseeing the signing of the deal by EDF chief Henri Proglio, front right, and Miller. Michael Spingler

Electricite de France, Europe’s largest utility, and GDF Suez agreed on Friday to join Russian gas pipeline projects as European nations seek to boost security of supply following disruptions in the past three years.

EDF will take a 10 percent stake in Gazprom’s South Stream pipe, which will run under the Black Sea, bypassing Ukraine, Gazprom CEO Alexei Miller said. “The realization of South Stream will allow reliability and stability of deliveries to Europe for many decades,” he said.

GDF Suez, which operates Europe’s largest gas network, said it will join the Baltic Nord Stream pipeline project and is in talks to acquire a 9 percent stake.

“What we’re observing today is a real breakthrough in our economic cooperation,” Prime Minister Vladimir Putin said at a press briefing with French counterpart Francois Fillon. “As far as energy is concerned, a new quality of cooperation has been reached between Russian and French partners.”

France’s Total transferred a 10 percent interest in Russia’s Kharyaga oil deposit to state-owned Zarubezhneft, Total said Friday in a statement. Total is the operator of the field in northern Russia, which is being developed under a production-sharing agreement.

Separately, Gazprom said it was ready to acquire GDF Suez’s 5.26 percent stake in Verbundnetz Gas, the largest gas distributor in eastern Germany. GDF Suez has held the interest in VNG through a wholly owned subsidiary, according to Friday’s statement. The French gas utility said it remains in “constructive dialogue” with Gazprom over joining Nord Stream, which would connect Russia and Germany.

EU countries have sought to strengthen security of energy supply after Gazprom’s gas shipments through Ukraine were halted in January, the second cutoff since 2006. The bloc gets a quarter of its gas from Russia, most of which flows via Ukraine.

Gazprom signed a memorandum of understanding with EDF, under which the utility will coordinate details of its entry into the South Stream project with Italy’s Eni, which holds a 50 percent stake. Gazprom owns the other 50 percent. EDF will hold an interest in the offshore section of the pipeline, Miller said. The agreement signed Friday covers “work on French territory and in other countries” and is “practically an asset swap,” Putin said.

The 900-kilometer pipeline, due to open at the end of 2015, is designed to link Russia to the Balkans, where it will split into northern and southern routes.

“EDF’s entering the South Stream will foresee the conclusion of new long-term gas sales contracts,” EDF and Gazprom said in a joint statement. “Gazprom and EDF will also expand cooperation in the electricity sector in France and elsewhere.”

EDF will get as much as 6 billion cubic meters of gas a year under its agreement to join South Stream, Deputy Prime Minister Igor Sechin told reporters in Paris.

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