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Moscow —
Russian gas giant Gazprom, Italy's Edison and Greece's Depa have agreed to establish a southern route for Russian gas supplies to Europe, which will run across Turkey to Greece and on to Italy.

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The signing highlights interest from countries in the south of the region to proceed with a new gas transportation route from Russia despite continuing opposition from Brussels to the expansion of Russian gas infrastructure in the area.

Under the deal, the three companies agreed "to coordinate the implementation of the TurkStream project and the Poseidon project in the area from the Turkish-Greek border to Italy in full compliance with applicable legislation," Gazprom said Friday.

"The construction of [TurkStream's] second string would make it possible to annually deliver 15.75 Bcm of gas to the border with Europe," Gazprom said after the meeting with Edison CEO Marc Banayoun.



Italy's economy minister Carlo Calenda described this as a "very important agreement" signed on the sidelines of the St Petersburg International Economic Forum.

"The launch and commissioning of the gas pipeline Poseidon from Greece to Puglia...is important for us. Why? Because Nord Stream cannot be the only one, it should be balanced with South Stream," he told the forum.

"We feel it is important to have South Stream which you know was somehow halted, but which should be re-launched soon," he said.

Russian deputy prime minister Arkady Dvorkovich, in turn, offered the full support to the project of the country's authorities but cautioned that the EU's position will be "important here."

"I want to confirm that we support our joint approach in developing both Northern and Southern gas corridors in Europe in parallel. Both projects are commercially beneficial, including when implemented simultaneously," Dvorkovich said. "Of course, the European Union's position is important here, but Italy has a very pragmatic position in this regard, we will try to implement it together."

South Stream, a project designed to carry up to 63 Bcm/year of Russian gas across the Black Sea to Bulgaria and further on across southern Europe to Italy and Austria, was blocked by the EU amid concerns of Europe increasing its dependency on Russian gas and calls for the region to diversify its energy sources.

Alternative routes being developed in the region, however, offer much lower volumes of new gas.

Following the EU's ban on South Stream, Gazprom opted to double the capacity of the existing Nord Stream pipeline across the Baltic Sea to 110 Bcm/year.

Gazprom also started building the first part of the offshore section of the TurkStream route, which is expected to be completed by 2019, to bring 15.75 Bcm/year of gas to the domestic Turkish market.

Friday's document followed the signing of a Memorandum of Understanding between the three countries in February 2016 to ensure natural gas deliveries from Russia across the Black Sea and third countries to Greece and onward to Italy "in order to set up a southern route for Russian gas supplies to Europe."


GAS EXPORTS ON THE RISE


The signing followed meetings by Gazprom CEO Alexei Miller with heads of a number of European gas companies, including some from southern and eastern Europe.

Gazprom's gas deliveries to Europe were at record high levels last year and continued to grow through the first five months of this year.

Gazprom even said in May that it would need to reconsider its production plans on the robust demand as stocks across Europe fell to historically low levels last winter.

In particular, Miller met with Bulgarian energy minister Temenuzhka Petkova to discuss "the prospects for deeper collaboration in the gas sector, noting that Russian gas exports to Bulgaria had been growing every year since 2013."

Bulgaria increased purchases of gas from Gazprom by 2.1% to 3.18 Bcm in 2016, with the deliveries building up further by 15% on the year in January-May, Gazprom said.

Hungarian volumes in January-May rose by 37% on the year, the Russian company said, providing no absolute figures. Deliveries to Hungary amounted to 5.7 Bcm in 2016.

Gas supplies to Greece rose 35% year on year to 2.7 Bcm in 2016, and continued rising through the first five months of 2017, gaining 49% in May, Gazprom said.

Gazprom's natural gas deliveries to Austria rose by 38% to 6.1 Bcm in 2016, and jumped by 80% year on year in January-May, according to Gazprom.

Supplies to Serbia increased by 42% year on year in January-May, after a 4.3% increase to 1.75 Bcm in 2016, Gazprom said.

--Nadia Rodova, nadia.rodova@spglobalc.com
--Nastassia Astrasheuskaya, nastia.astrasheuska@spglobal.com
--Rosemary Griffin, rosemary.griffin@spglobal.com
--Paul Hickin, paul.hicking@spglobal.com
--Edited by James Leech, james.leech@spglobal.com