UPDATE 1-Bulgaria PM says work on South Stream gas pipeline not stopped

Mon Mar 10, 2014 7:35am EDT

By Tsvetelia Tsolova

SOFIA, March 10 (Reuters) - Bulgaria hasn't stopped preliminary work on the Russian-led South Stream gas pipeline project, its prime minister said on Monday, but Sofia was "closely monitoring" relations between Brussels and Moscow over the turmoil in Ukraine.

The comments at a press conference came after Bulgaria's foreign minister over the weekend said work on the pipeline should probably be suspended for a few days or weeks in view of the political upheaval in nearby Ukraine.

"Preliminary work on South Stream is being carried out, it has not stopped. But in the next weeks we will monitor closely the relations between (the) European Union and Russia," Bulgarian Prime Minister Plamen Oresharski said.

Russia has started building the 2,400 km (1,490 mile) South Stream gas pipeline, intended to transport up to 63 billion cubic metres of gas through the Black Sea to southeastern Europe, bypassing Ukraine, by 2018. The aim is to bring up to 15 percent of Europe's annual gas demand via the Black Sea.

The huge South Stream project is a vital to Russian aspirations to cement its position as Europe's dominant gas supplier. While the project will not solve problems relating to supply diversity, it will increase security of supply by avoiding transit through Ukraine.

Disputes between Moscow and Kiev have led to fears for the security of gas transit through Ukraine. A pricing dispute in 2009 led Moscow to turn of the taps in the middle of winter.

But state-controlled gas producer Gazprom's South Stream plan has been frequently put in doubt because of legal conflicts with the EU, which is seeking to wean itself off over-reliance on Russia for gas supplies.

EU Energy Commissioner Guenther Oettinger is to delay talks with Russia on the project, he told a German newspaper on Monday, in response to the crisis in Crimea.

Oettinger said Europe was not facing a gas supply problem as a diplomatic solution is sought to Russian troops taking control of Crimea following the collapse of Ukraine's government. Energy stocks are ample and the winter is ending, taking urgency out of heating requirements.

EU member Bulgaria has started preliminary works on the pipeline on its territory, but has repeatedly said its operation should be in line with EU rules.

Oresharski said Bulgaria was among the countries most vulnerable to the escalating tensions between the West and Moscow, and did not want to aggravate the situation.

The Balkan country is largely dependent on Russian gas resources, as it meets over 85 percent of its gas supplies from Russia's Gazprom, its only oil refinery is controlled by Russia's LUKOIL and its only nuclear plant operates two Soviet-build reactors that run on Russian fuel.

Bulgaria has started to build up its gas stocks to prepare for a potential disruption of supplies. The government is reviewing also its existing gas and oil reserves and seeking alternatives to cope with any worsening of the Ukraine crisis, it said last week.

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