Gazprom and its partners have taken a final investment decision on the offshore section of the South Stream gas pipeline, which will carry Russian gas to southern Europe, the South Stream consortium said on Thursday, Reuters reports.
The decision late on Wednesday gives South Stream an edge over rival projects to ship gas to southern Europe, some designed to break Russia's dominance on the European gas market, and helps it to secure financing.
But at an estimated 16 billion euros for the total project, it is seen as costly, and its status is unclear under the European Union's Third Energy Package, which bars suppliers from owning transportation capacity.
Gazprom, which is expected to fund half of the total capital expenditures, according to its share in the project, did not disclose the financial outlays, which, according to some analysts may exceed 25 billion euros.
The other partners are France's EDF (EDF.PA), Germany's Wintershall WINT.UL and Italy's Eni (ENI.MI).
The pipeline was designed to reduce transit risks associated with shipping gas across Belarus and Ukraine, which have disagreed on price with Russia, leading to cuts in supplies to Europe.
"South Stream's contribution into providing Europe with energy security is very significant. It allows us to create alternative and secure natural gas supply routes to our consumers," Gazprom's Chief Executive Officer Alexei Miller said in a statement.
The construction of the project, whose offshore section will stretch 900 kilometres across the Black Sea, will begin on December 7. The official launch is scheduled for late 2015 to ship gas at an annual pace of 15.75 billion cubic metres, with full capacity of 63 bcm to be reached in 2018.
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