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Gazprom cancels Saipem pipeline contract

The company will no longer lay the first line of subsea pipeline South Stream

Gazprom has informed Saipem that it is cancelling the contract to lay the first line of the subsea pipeline South Stream that was concluded in 2014, it said 8 July. “The decision has been dictated by the impossibility of reaching an agreement on many practical and commercial questions to do with the execution of the Turkish Stream project,” the Russian exporter said.

However, other work is continuing and in the very near future, South Stream Transport will enter into talks with possible contractors for laying the first line of Turkish Stream, it said.

South Stream Transport morphed into the project company for Turkish Stream when Russia’s president, Vladimir Putin, resolved to scrap South Stream last December. Rules on competition prevented Gazprom owning all the pipeline’s capacity anywhere in the EU. Turkish Stream was born when he said that if Europe wanted Russian gas, it would have to come and get it from Turkey, just the other side of the EU border. But by that point all the linepipe had been bought and Saipem had been contracted to lay the pipeline underwater from southern Russia to the Bulgarian coast, the original route of South Stream.

Plans to expand Nord Stream from 55bn cubic metres per year (cm/y) to 110bn cm/y might make the entire 63bn cm/y Turkish Stream project unnecessary. Although Turkey and Russia have agreed on the pricing terms for the gas it will carry, according to Gazprom there is no intergovernmental agreement. However Gazprom says at least the first line (16.75bn cm/y) will be built. The aim is to bypass Ukraine, which currently carries about half of Russia’s exports of 160bn cm/y to Europe. 

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