MOSCOW – Russian gas giant Gazprom advanced its plan to lay a major pipeline network across Europe by striking a deal on Tuesday with Slovenia.
The South Stream pipeline project, due to start operating in 2015, is set to pump up to 63 billion cubic meters of natural gas annually. The gas would be piped from Russia under the Black Sea to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg, and to Croatia and Greece in a second. Russia provides about a third of Europe's natural gas consumption. Last year, Gazprom exported about 180 billion cubic meters of natural gas.
The project is funded by Gazprom, which owns 50 percent in the pipeline, with the other half owned by partners France's EdF, Italy's Eni and Germany's Wintershall.
Gazprom's chief executive Alexei Miller said Tuesday that the final investment agreement on the South Stream would be unveiled on Wednesday while construction would begin on Dec. 7 on the Russian Black Sea's coast.
Miller's statement came after Russia's Prime Minister Dmitry Medvedev and his Slovenian counterpart, Janez Jansa, attended the signing of an agreement in Moscow giving the green light for the project.
Analysts and investors have warned that the project is too costly and the considerable investment involved in its construction and maintenance would hurt Gazprom's balance sheet.
Russia has also yet to secure approval for the pipeline's construction from Bulgaria, which is looking negotiate lower gas prices as part of the project.
Bulgaria's Prime Minister, Boiko Borisov , said Tuesday that he expects the final decision on Thursday when Bulgaria and Russia are due to sign an agreement on Russian natural gas supplies. Borisov said that the pricing and terms of the gas deal are crucial for his country and that he favored a short-term gas supply contract.
"I am convinced that in the next three or four years we will have a lot of gas from the Black Sea, so we should avoid contracts for over six years," Borisov told reporters.
Gazprom's stock was down 1.6 percent Tuesday afternoon at the MICEX stock exchange, in line with the market.
Veselin Toshkov contributed to this report from Sofia, Bulgaria.