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In face of EU sanctions, Gazprom to extend pipeline into Austria

04.30.2014  | 

OAO Gazprom agreed with oil and gas producer OMV AG to extend a planned natural gas pipeline into Austria. As much as 32 billion cubic meters per year of gas will be delivered through a section of the South Stream pipeline.

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By ALEXANDER WEBER
Bloomberg

OAO Gazprom agreed with oil and gas producer OMV AG to extend a planned natural gas pipeline into Austria, on the same day the EU expanded sanctions against Russian officials.

As much as 32 billion cubic meters per year of gas will be delivered to Baumgarten, Austria, through a section of the South Stream pipeline. The first gas deliveries are planned for 2017.

Europe imports about 30% of its gas from Russia, and half of that amount flows through Ukrainian pipelines, making it essential to European energy security. The EU, along with the US, has said it may levy penalties on Russian industries, including banking and energy, if Russian President Vladimir Putin sends troops to eastern Ukraine.

Gazprom has pushed the South Stream project to lower transit dependence on Ukraine, which presently carries about 15% of Europe's gas through its pipes from Russia, after repeated disagreements over pricing. Gazprom cut supplies to Ukraine in freezing weather during disputes in 2006 and 2009, which led to disruptions in flows to Europe.

OMV, which began importing Russian gas in 1968, said the deal will significantly increase Austria's security of gas supply and strengthen Baumgarten’s role as a gas hub for Central and Eastern Europe.

Austria's South Stream section will be jointly owned by Gazprom and OMV. The companies will split the project’s financing. Under the agreement, the Austrian section of South Stream will run from the Black Sea coast of Bulgaria, crossing Serbia, Hungary and ending in Baumgarten, OMV said.

Gazprom, majority-owned by the Russian government, has declined 8% this year as tensions continue to escalate in Ukraine.



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