Eni, Gazprom Sign Deal to Study Gas Pipeline from Russia to Bulgaria

Italian energy company Eni and Russia's state-controlled Gazprom on Saturday said they signed a memorandum of understanding on the possibility of supplying Russian gas to European Union countries through a pipeline under the Black Sea.

The deal, which foresees a feasibility study by both companies, was announced at a news conference by Eni chief Paolo Scaroni and a top Gazprom executive, Alexander Medvedev.

Gazprom energy executives had held talks earlier in the week with Eni and Italian government officials.

Scaroni told a news conference he expects it would take three years to build the pipeline, starting from when all necessary authorization is obtained and assuming the feasibility study turns out favorably. The study itself will take months, he said, meaning any construction would not begin before 2008 or 2009.

Without being more specific, he told reporters the pipeline would carry a "multi-billion" U.S. dollar price tag.

The pipeline, to be called South Stream, would run under the Black Sea and through Bulgaria, and could distribute gas to northern and southern Europe.

The feasibility study would determine capacity. But Medvedev said the yearly capacity of South Stream could be about 30 billion cubic meters (1.15 trillion cubic feet).

Under the plan, more than 900 kilometers (550 miles) of pipeline could be laid down under the sea and across Bulgaria before splitting off in two directions, north through Hungary to reach Austria, and south through Greece and on to Otranto, a port near the southeastern tip of Italy, the Italian news agency Apcom said.

The companies might decide to build in only one direction or both, Scaroni indicated, with the decision linked to what the study into technical and economic aspects turns up.

Italian company Saipem SpA has already begun a preliminary study, Eni said.

"The South Stream project aims at strengthening energy security in Europe," said Italian Industry Minister Pierluigi Bersani, who attended the signing along with Russia's energy minister.

"We thought of launching a plan for the European Union that would reinforce the network of gas transport and increase the interconnections between eastern Europe and western Europe," Scaroni told the news conference.

An Eni statement quoted Medvedev as describing the memorandum as part of Gazprom's strategy aimed at "diversifying Russian gas supply routes toward European countries and at significantly contributing to Europe's energy security."

Economic ties between the two countries have been boosted primarily in the energy sector, as last year Gazprom concluded an asset-swap deal with Eni, Italy's biggest oil and gas company.

Earlier this year, Russia, Greece and Bulgaria signed a deal to build a pipeline to transport Russian oil to a port in northern Greece that the three governments hailed as helping to secure Western oil supplies. That project will improve networks in southeastern Europe that transport oil and gas from the Caspian Sea region to the European Union.

Russia already provides other parts of Europe with a third of its oil and 40% of its natural gas.

There has been some concern about deepening dependence on energy from Moscow, whose reliance as a supplier has been questioned.

Europe's energy concerns grew sharper after Russia cut off gas taps feeding Ukraine, and by extension customers farther west, in early 2006 and a year later oil supplies through Belarus as part of disputes.