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Russia Gazprom and Hungary MVM to sign deal for South Stream pipeline section

Russian energy giant Gazprom and Hungarian energy wholesaler MVM will build the Hungarian stretch of the South Stream natural gas pipeline through a joint venture they agreed to form on Wednesday. Hungary gets nearly all of its natural gas supply from Russia under a long-term import agreement with Gazprom, which shipped 6.26 billion cubic metres of gas to Hungary in 2011.

The joint venture, South Stream Hungary, will build and operate a 229-kilometre stretch of the pipeline that will transport Russian gas to Europe.

"The decision to build the Hungarian stretch of the gas pipeline is now final," Gazprom deputy CEO Alexander Medvedev told a news conference. "It will contribute to the security of natural gas supply for the whole of Europe."

The pipeline will have a capacity of 30 billion cubic metres per year, which is enough to cover Hungary's import needs as well as provide the necessary transit capacity, Medvedev said.

It will cost more than 600 million euros, 30 percent of which will be covered by the companies and 70 percent through bank financing, MVM Chief Executive Officer Csaba Baji said.

The pipeline will begin commercial operation by Jan. 1, 2016, he said.

The current gas pipeline that transports gas from Russia to Hungary via Ukraine will remain operational, the executives both said.

"South Stream will have gas both from new and old sources, and the utilisation of the Ukrainian system will depend on any additional capacity that we see in Europe," Medvedev said.

"Europe will need an additional annual 200 billion cubic metres of gas by 2030, so even if all currently planned infrastructure is built that will still not be enough to cover all the extra demand."

He added that there was an option to build a side branch of the pipeline into Croatia but the country will not be part of any gas transit by Gazprom.

Source: Reuters

Last Updated on Friday, 30 August 2013 09:11



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