Oil report

Gazprom mulls plan to boost South Stream capacity

MOSCOW, Jan 28 (Reuters) - Russian gas export monopoly Gazprom GAZP.MM is considering a plan to add 50 percent to the capacity of the proposed South Stream pipeline, a potential supply route to Europe that would bypass Ukraine.

The proposal, if approved, would increase capacity of the pipeline to 47 billion cubic metres (bcm) from the 31 bcm already planned, a Gazprom spokesman said on Wednesday.

“We are in the process of evaluating a proposal, which most likely will increase the capacity by 16 billion cubic metres,” the spokesman said by telephone.

“It’s additional gas that we think the market can absorb.”

Both Russia, which supplies a quarter of Europe’s gas, and customers in Europe have expressed interest in accelerating the construction of routes that would bypass Ukraine after a row between Moscow and Kiev disrupted EU supplies for two weeks.

The South Stream natural gas pipeline, a project also involving Italian energy firm Eni SpA ENI.MI, would run under the Black Sea and deliver gas to southern Europe via the Balkans.

“We don’t see any big obstacles to increasing capacity. It will significantly decrease our incremental costs,” the Gazprom spokesman said. He added any decision would be taken by the board, as well as by all partners involved in South Stream.

But some analysts say the South Stream project might face opposition, as its proposed route cuts go through countries still smarting from the supply losses that resulted from the dispute between Russia and Ukraine.

European officials on Tuesday expressed support for the Nabucco pipeline, an alternative route that would bring gas from Central Asia and the Caspian to western Europe, bypassing both Russia and Ukraine. [ID:nLR302927]

Czech Prime Minister Mirek Topolanek, who holds the EU’s rotating presidency, said the bloc should move the project forward to diversify supply and reduce dependence on Russia.

Alexander Medvedev, Gazprom’s deputy chief executive, told Reuters late on Tuesday he did not consider Nabucco to be a competing project, but expressed concern that Europe wanted to diversify away from Russian gas.

“Mr Topolanek de facto raises the goal of cutting Europe’s reliance on Russian gas,” Medvedev told Reuters. “From what he said, we make the conclusion that he is supporting only diversification of supply sources, not routes.” (Reporting by Robin Paxton and Dmitry Zhdannikov; editing by Sue Thomas)