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Gasunie Chief Will Spearhead South Stream

ST. PETERSBURG — Gasunie’s outgoing chief, Marcel Kramer, will lead Gazprom’s efforts to build the South Stream undersea pipeline to Europe, giving the world’s biggest gas producer another international business leader to lobby a controversial project.

Gazprom previously hired former German Chancellor Gerhard Schroeder to oversee another undersea pipeline, Nord Stream. The project’s construction in the Baltic Sea started in April after protracted debate and protests in states that had to approve its passage through territorial waters.

Both pipelines were conceived to diversify gas export routes away from unreliable transit countries, notably Belarus and Ukraine. But the South Stream project, which would pass beneath the Black Sea, will cost too much to recoup the investment, industry insiders argue.

“We can’t do anything that’s not competitive,” South Stream board director and chief executive Kramer told The Moscow Times, defending the plan on the sidelines of a news conference where Gazprom chief Alexei Miller announced the appointment.

Kramer conceded that he was unaware whether the cost of carrying the gas under the water would be higher than shipping it overland through Ukraine, which has invited Russian and European Union investment in expanding its transit network.

Even so, such pipelines have long enough life spans — some 30 to 40 years — to make a return on the money spent building them, said Kramer, who helped construct a major underwater pipeline from the Netherlands to Britain as Gasunie chief.

Kramer will officially start in his new South Stream capacity Oct. 1, after resigning from Gasunie at the end of August. Gasunie announced that he would be leaving in April.

He told reporters that it was a “great honor for me to work for Gazprom and its partners” on the project.

Currently, Italy’s Eni is the only other investor, although France’s EDF, the world’s largest nuclear energy producer, agreed Saturday to join the project by the end of this year. It will take “at least 10 percent” from Eni’s 50 percent holding, the three companies said in a joint statement.

Kramer, who will turn 60 in August, joined Gasunie in 2003 after 12 years with Norway’s Statoil and several other international positions. Under his tenure, Gasunie built a major pipeline to Britain, BBL, and became a shareholder in Nord Stream, where he is also a board member.

Miller indicated that South Stream might change course to exclude Bulgaria, which had disappointed Russia by dragging its feet on other energy projects, such as construction of an oil pipeline and a nuclear power reactor. Instead of surfacing near Bulgaria’s city of Varna, the pipeline could run to Romania, Miller suggested.

“As for Romania, I mean studying the feasibility of a major transit pipeline to Serbia,” he said, adding that choosing the route would preclude a Bulgarian section.

The current plan is to lay the pipeline to Serbia — and on to other southern European customers — through Bulgaria. Gazprom and partners will complete the feasibility study in three months at most, Miller said, adding that Romania was also offering broader cooperation in the energy field.

Gazprom estimates South Stream will cost at least $28 billion to build and come on line in December 2015.

Miller also hinted that the undersea portion of the pipeline could pass through Ukraine’s economic zone of the Black Sea, rather than through Turkish waters as planned. He linked the option to the outcome of the ongoing merger talks with Ukraine’s national energy company, Naftogaz Ukrainy.

Asked by The Moscow Times about the chance of laying the potential pipeline to Romania through Ukrainian waters, he said enigmatically that Naftogaz would automatically become involved in South Stream, should it become one company with Gazprom.

As a first stage in a merger, Gazprom wants to set up a 50-50 venture with Naftogaz that would pull together assets including Ukraine’s gas transit network and production units with a major Gazprom field, Miller said. The venture will be possible only if the company agrees on an eventual merger, he said.

Ukrainian poilticians have been reluctant to agree to such a deal, which would see the much smaller Naftogaz virtually swallowed up by Gazprom.

Also on Saturday, France’s GDF Suez agreed to buy 9 percent in Nord Stream from Germany’s Wintershall and E.On Ruhrgas, the companies announced in a statement. The German partners will each cede 4.5 percent of their current 20 percent stakes. Gazprom holds 51 percent of Nord Stream, while Gasunie owns the remaining 9 percent.

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