Russia and Serbia firm up gas pipeline deal

BELGRADE Mon Feb 25, 2008 11:43am GMT

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BELGRADE (Reuters) - Construction of the Serbian arm of the South Stream gas pipeline should start by 2012, the spokesman for Gazprom, the lead company behind the pipeline, said on Monday.

The 10-billion-euro (7.5-billion-pound) project by Russia's gas export monopoly and Italy's ENI is designed to bring Siberian gas to Europe.

The deal under which Serbia joined South Stream in exchange for allowing Gazprom to buy control of Serbian oil monopoly NIS was widely seen as a politically-motivated agreement meant to thank Russia for its support on the issue of Kosovo.

The Russian and Serbian sides signed an agreement to create the joint company that will build the pipeline, Sergei Kupriyanov told reporters in Belgrade.

"We allocate three months for the creation of the company, and another 18 months for the feasibility study," Kupriyanov said. "We expect construction to start no later than 24 months after the feasibility study has been completed."

He added that it was important to negotiate with all the countries participating in the pipeline -- so far Russia, Italy, Bulgaria and Serbia, with Bosnia and Greece as possible partners -- "so that the feasibility study is integrated".

A Gazprom official said 2013 was the expected date for when South Stream should start operations.

Moscow is Belgrade's main ally in trying to fight the secession of its southern province Kosovo and block its recognition by international bodies.

"This agreement is in the interests of Russia and Serbia and lays down the foundation for energy security in Europe," Serbian Prime Minister Vojislav Kostunica said.

The European Union, worried about its dependence on Russian gas, has been promoting a rival pipeline called Nabucco which would take gas from Central Asia to Europe, but has had trouble finding enough gas supply to justify the project.

(Reporting by Oleg Shchedrov; Writing by Ellie Tzortzi)

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