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Source: www.asiaecon.org |

RUSSIA AND HUNGARY REACH GAS PIPE AGREEMENT


Russian energy firm Gazprom and the Hungarian Development Bank recently signed an agreement to create and manage a joint venture on a 24 billion euro ($30.5 million) project that will build the Hungarian section of the South Stream gas pipeline by 2015. The deal also includes the construction of a large underground gas storage facility in Hungary. The facility would allow the country to increase its storage to up to 1 billion cubic meters of gas, which would sufficiently supply half of its annual demand.


Russian energy firm Gazprom and the Hungarian Development Bank recently signed an agreement to create and manage a joint venture on a 24 billion euro ($30.5 million) project that will build the Hungarian section of the South Stream gas pipeline by 2015. The deal also includes the construction of a large underground gas storage facility in Hungary. The facility would allow the country to increase its storage to up to 1 billion cubic meters of gas, which would sufficiently supply half of its annual demand.

The deal was signed by Gazprom’s chief Alexei Miller and the Hungarian Development Bank’s president Janos Eros. Prime Ministers Vladimir Putin and Ferenc Gyurcsany presided over the signing of the deal.

The Russia-Hungary deal comes after nearly two months of disputes between Moscow and Kiev over Ukraine’s nonpayment for the gas it gets from Russia. The disputes disrupted gas supplies to Hungary, which gets its gas delivered through Ukraine, and the rest of Europe, for nearly two weeks.

“It’s a major agreement that is needed to ensure the energy security and stable operation of Hungary’s energy sector,” Putin said after a signing ceremony.

Gyurcsany echoed Putin’s comments. “Hungary is not interested in there being one gas pipeline or one oil pipeline,” he said. “Hungary is interested in having as many pipelines as possible.”

The South Stream project is one of two Russia-backed pipelines that is intended to diversify European gas supplies by circumventing Ukraine. It is also seen as Russia’s answer to the U.S.-backed Nabucco pipeline. It is a joint project between Gazprom and Italy’s Eni to transport gas from Russia to Italy and Austria through several transit countries, including Hungary, Serbia and Greece. The project was first announced in June 2007, but has since seen several delays and cost revisions, including the most recent postponement of shipments from 2013 to late 2014 or 2015. Recent estimates put the total cost of the South Stream project at 10 billion euros. It is estimated that the South Stream pipeline will have a capacity of 10 billion cubic meters a year, or about one third of Russian gas exports to Europe.

But Hungary’s Prime Minister insists that the South Stream pipeline should not be seen as a rival to the Nabucco pipeline, as Budapest stands to benefit from transit fees from both pipelines. Gyurcsany also said that two pipelines is always better than one, even if both originate from Russia, and that a third pipeline that delivers gas from other sources besides Russia would be beneficial for Hungary. He was referring to the Nabucco project, which Hungary supports.

The final decision on the investment will be made within 24 months of the signing of the agreement. Until then, a feasibility study for this specific part of the South Stream project will be completed by December 31, 2009. Another feasibility study for the entire project will be conducted by Gazprom by June 30, 2010.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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