Gazprom, OMV to Cooperate on Russia’s South Stream

OAO Gazprom, the world’s biggest natural-gas producer, and OMV AG, the Austrian company planning a pipeline from the Caspian region to Europe, agreed to cooperate on the South Stream gas project.

The companies are “looking to work together” on constructing the Austrian section of South Stream, Vienna-based OMV said in an e-mailed statement today. A feasibility study for the section is scheduled to be completed by the end of 2010, according to the statement.

Gazprom and OMV plan to set up a venture to design, finance, build and operate the Austrian section, Gazprom said in a separate statement. The Austrian section will transport at least 5 billion to 10 billion cubic meters a year, it said.

South Stream will run 900 kilometers (560 miles) under the Black Sea to the Balkans, where it will split into northern and southern routes. The link’s north arm will finish at OMV’s Baumgarten hub, where the competing European Union-backed Nabucco pipeline end. The EU pipeline is designed to deliver Caspian gas to Europe, reducing dependence on Russian fuel.

“The precise route will be determined and the costs of the project evaluated,” the OMV statement said. “The final investment decision is set to be taken within 18 months, with the pipeline due to become operational at the end of 2015.”

Austria, which is a partner in the Nabucco pipeline, today signed an agreement with Russia allowing South Stream to cross its territory.

“OMV and Gazprom have been partners for over 40 years,” said Philipp Chladek, an analyst at Raiffeisen Centrobank AG in Vienna. “I don’t see any indication that this changes Nabucco’s prospects.”

Gazprom plans to increase its supply to OMV by 2 billion cubic meters a year “on a long-term basis,” Gazprom said in the statement.

To contact the reporters on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net; Anna Shiryaevskaya in Vienna via the Moscow newsroom at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net

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