Gazprom, Hungarian bank form South Stream joint venture

Russian oil and gas behemoth Gazprom and MFB Hungarian Development Bank Private Ltd (MFB) have created a joint venture company, South Stream Hungary Plc, to implement the Hungarian portion of the proposed gas pipeline project from Russia to Europe through the Black Sea, bypassing Ukraine.

The agreement has been signed yesterday in the Hungarian capital, Budapest, in the presence of the Hungarian prime minister Gordon Bajnai and Russia's first deputy prime minister Viktor Zubkov.

The new 50:50 joint venture will organise the preparation of a feasibility study of the Hungarian segment of South Stream, and also, finance, build and manage the gas pipeline in Hungary.

The 3,000-km South Stream gas pipeline is being constructed with a capacity of 63 billion cubic metres (bcm) by Gazprom and Italian energy giant Eni SpA, along with other European partners at a cost of $11.6 billion, as an alternative to the existing network through Ukraine.

Russia supplies almost a quarter of Europe's gas requirement most of which passes through Ukraine, which has been locked in a pricing dispute with Russia, leading to gas supply to Europe being cut off by Moscow for almost a fortnight during last winter.

The pipeline's offshore section will run under the Black Sea from Beregovaya in Russia to the Bulgarian coast, where it will bifurcate towards southwest and northwest directions.