Oil and Gas Pipeline Watch

South Stream talks under way in Belgrade

Russian officials traveled to the Serbian capital, Belgrade, Monday to discuss building the South Stream natural gas pipeline from Russia.

Russian Emergency Situations Minister Sergei Shoigu met with Serbian Prime Minister Mirko Cvetkovic and a delegation from the Interior Ministry to discuss several joint projects in the region, the Serbian news agency B92 reported.

"During these meetings, discussions are planned regarding the implementation of ongoing Russo-Serbian projects, primarily the South Stream gas pipeline," a statement from Moscow said.

The officials from both countries spoke of construction issues through Serbia and the potential capacity of natural gas flow through South Stream.

Russian energy giant Gazprom and the state-run Serbian natural gas firm Srbijagas met last week to pave the way for a feasibility study on the $20 billion project.

Gazprom and Srbijagas plan to form a joint company in October to formalize the relationship involving South Stream's development.

The head of Srbijagas, Sasa Ilic, said plans for South Stream to split into two branches in Bulgaria will boost the capacity of the pipeline beyond 350 million cubic feet.

For their part, Russian officials said South Stream will have a positive impact on the region.

"Serbia's participation in the project will affect the overall stability of the country and economic and social stability and will also consolidate its international position," Russian Ambassador to Serbia Alexander Konuzin said.

Energy pipelines driving international politics

Moscow's courting of, or aggression against, European nations with key energy assets and pipeline arteries is defining the international agenda, analysts say.

Despite rhetoric concerning alternative energy and climate warming, analysts at an energy security summit in Budapest said regional oil and gas supply will be at the top of the geopolitical agenda for the foreseeable future, The Budapest Times said.

Christopher Walker, who attended the conference as a representative of the Washington-based Freedom House, pointed to data that suggest there is a relationship between energy price and the level of transparent governance in oil- and gas-producing states. With a rise in the price of energy, Walker noted, state conduct and official procedures become more opaque.

Analysts pointed to two rival pipeline projects, the Western-backed Nabucco pipeline from the Caspian Sea states and South Stream from Russia and Central Asia, as signs of the influence energy has on the geopolitical dynamic.

For example, the recent conflict in the breakaway republic of South Ossetia in Georgia, a potential Nabucco host, has raised concerns Russia is seeking to undermine energy security in the region by interrupting, at least tacitly, development of several regional pipeline projects, the Times said.

"The summer conflict in the Caucasus will have severe ramifications for the energy market in the years to come," said Adam Hug, policy director at the British Foreign Policy Center.

Ukrainian political crisis haunting Odessa-Brody

The crisis in the Ukrainian government threatens the use of the Odessa-Brody crude oil pipeline with the prime minister and president favoring rival plans.

In August, pro-Western Ukrainian President Viktor Yushchenko signed a measure to ensure the 419-mile Odessa-Brody pipeline would run in its intended direction, from east to west. It had run in the reverse direction toward Russia following supply concerns.

Yushchenko's decree mandated a Sept. 1 deadline to implement the required procedures to direct the flow of oil westward by the end of 2008 in an attempt to bolster the declining energy sector in Ukraine.

Ukrainian Prime Minister Yulia Tymoshenko, however, called attempts to direct Odessa-Brody as planned a "trick," putting the proposal in question.

Belarus, the Czech Republic, Poland and several other regional countries expressed interest in implementing the plan, the journal Oil and Gas Eurasia noted.

Any further developments on Odessa-Brody, however, will depend on regional interest in joining the pipeline, putting parts of the Ukrainian economy at risk.

Furthermore, with the collapse of the pro-Western Ukrainian government last week, the future of the project hangs in doubt, the report said.

--

(e-mail: energy@upi.com)