Bulgaria, Gazprom Launch Construction of South Stream Pipeline Stretch
Friday, 01 November 2013
Bulgaria and Russian gas giant Gazprom launched on Thursday construction works on the Bulgarian section of the South Stream gas pipeline.
Bulgaria's economy minister Dragomir Stoynev and Gazprom CEO Alexey Miller gave the go-ahead to the construction works via a video conference link with the Rasovo compressor station, near the northwestern Bulgarian city of Montana, the government said in a press release.
The construction works on the 540-kilometre section will be financed with a 620 million euro ($843 million) loan which Gazprom will provide to the state-run Bulgarian Energy Holding (BEH).
Earlier in the day Bulgaria and Gazprom reached an agreement on the details of the project's financial parameters. Under the financial terms of the project, BEH and Gazprom will borrow 70% of the funding and provide 30% from their own funds. The 22-year loan which Gazprom will provide to BEH will have a 4.25% annual interest, he added. The loan will be secured with the proceeds which the company will get from the transportation of natural gas via Bulgarian terriortiy, the economy minister added.
BEH will start earning dividend from the project the first year that the pipeline's capacity is filled, Stoynev said, adding that this is expected to happen in 2018.
He also said that BEH and Gazprom have agreed they could grant third-party access to the pipeline.
South Stream, initiated by Gazprom and Italy's Eni, aims to diversify gas routes within the European Union and to provide stable gas supplies from Russia to central and southern Europe. The onshore pipeline will connect Varna on the Black Sea to northern Italy, via Bulgaria, Serbia, Hungary and Slovenia.
South Stream is planned to go on stream by the end of 2015 with a pipeline capacity of some 63 billion cubic meters per year.