Gazprom
January 06, 2014
TheSrpskaTimes

The new map of the South Stream Pipeline, the map of gas pipeline construction of Republika Srpska, the already signed agreements and memoranda on cooperation between Republika Srpska Government and „Gazprom“, statements by the responsible persons on both sides, leave no space for the doubt and give a final answer to the question: „Will Republika Srpska be a part of the project of the construction of gas pipeline „South Stream“? Yes, Republika Srpska is one of the countries that will be directly reached by the Russian gas. The job that precedes is something that the Republika Srpska faces for the first time. It has Serbia as an example for most activities, where the stage of beginning of works on the construction of the pipeline has been reached, the point where the Republika Srpska could find itself in at the end of the next year.

By: Senka Trivić

The route of the future pipeline for Republika Srpska starts in the area of Centa in the Republic of Serbia, it crosses the Drina river off Novo Selo (Macvanski Prnjavor), then runs along the reserved railway corridors (Milosevac-Bijeljina), and proceeds along the highway routes which are in the stage of construction, design or analysis, and stretches as far as to Novi Grad. Republika Srpska joined the South Stream Project quite late. After signing the protocol with the ministry of electric power of the Russian Federation in September 2010, the Memorandum on Cooperation with the Company „Gazprom“ was signed in September last year and the Roadmap in June 2013.

All the next steps to be taken are stated in the Map and will imply forming of a joint company „South Stream – Republika Srpska“, developing a technical-economic feasibility study, making design and bidding documents, and finally selecting the bidder and beginning of works.

A pre-condition for forming of a joint company between the Russian „Gazprom“ and Gas Res d.o.o. (RS) is signing of the Agreement between the Government of the Russian Federation and BH Council of Ministers that will define the contents and the manner of connection of Republika Srpska and BH Federation to the South Stream gas pipeline.

Another issue to be solved between Republika Srpska and FB&H is the issue of the debt owed to the Russian Federation for the gas delivered during the period 1991-1995.

„Given the fact that the implementation of this project is of national importance for Republika Srpska, it is necessary to lay down a legal framework for its implementation, not only in the segment of land expropriation but also relating to the other activities accompanying a capital project like this. Therefore, there is a plan to pass the Law on the Implementation of the Project „South Stream“ in the next year, said Zeljko Kovacevic, the minister of industry, energy and mining of Republika Srpska.

It has been announced that a joint company should be registered in Switzerland at the beginning of 2014, with the planned shares of 60% of „Gazprom“ and 40% of „Gas Res“, i.e. Republika Srpska.

Minister adds that the implementation of the project of connecting the RS to „South Stream“ gas pipeline represents an event of exceptional, even historical importance for the overall economic development of Republika Srpska, as well as the entire B&H. He says that the estimated value of the investment, which implies the construction of about 450 km of gas pipeline and construction of two gas-fired power plants, is about 1.5 billion Euro.

According to the Ministry as well as „Gas Res“, it is still early to speak about the financial construction of the project given the fact that Technical and Economic Feasibility Study will be made only in the next year.

„Financing of the project will be accomplished in a similar way envisaged by the agreements made between the Republic of Serbia, „Gazprom“ and „Srbijagas“. This will mainly include project financing and the possibility of „Gazprom“ to provide more than seventy percent of loan facility on very favorable terms, in the same proportion as the share in the company „Republika Srpska South Stream“. It is known that the Italian ENI, the French EDF and German Wintershall take part in financing of the whole project“, clarifies Slobodan Puhalac, acting manager of the state-owned company for gas projects, „Gas Res“. He adds that it is very likely that concessions will be granted for construction of distribution networks to interested entities, as well as for construction of other power facilities for which there is interest.

Juzni tok

The connection for Republika Srpska should be of 19 billion cubic meters of gas annually and potentially 10 billion cubic meters more gas for BH Federation. According to „Gas Res“, all the capacities to be covered in the Study will be based on the balances of energy needs as of 2025.

During his attendance at the inauguration of the works on construction of the South Stream in Serbia, the president of Republika Srpska Milorad Dodik said that it was confirmed during the talks with the president of the Board of the Directors of „Gazprom“, Aleksey Miller, that all the formalities should be complete in September next year and that the works should works start on construction of „South Stream“ gas pipeline in Republika Srpska.

„The Roadmap aimed at continuation of the project South Stream in the territory of Republika Srpska was signed in June 2013 between „Gazprom“ and Republika Srpska. This Map is currently being implemented, that is to say, preparations are ongoing for the construction of the South Stream”, it was confirmed from the information service of „Gazprom“ Company.

That the next year is crucial as a preparatory stage for the beginning of works is also indicated in the draft Economic Policy of the RS for 2014, which states that „the plan is to intensify the activities on the realization of the Gas project i.e. construction a section of gas pipeline „South Stream“ in Republika Srpska and implementation of the obligations arising from the Road Map. The goal is to provide energy stability and strengthen Republika Srpska, develop the gas sector as well as taking the lead by Republika Srpska in BH gas industry“.

New laws, business opportunities and jobs

According to the responsible persons, as part of preparatory activities for the beginning of the construction of the section and further of the pipeline in the RS, it is necessary to pass new legal solutions. The first law that should be enacted is the „Law on Determining General Interest and Special Expropriation Procedures Aimed at Construction of the Natural Gas Transport System „South Stream“. The proponent of the Law, the Republic’s Administration for Geodetic and Property Legal Affairs, underline that, according to the previous practice in implementation of construction of infrastructure facilities, the procedure for determining general interest under the current Expropriation Law would take significant amount of time and thus prolong the realization of the project itself.

The proposed law states that the construction of the gas pipeline „South Stream“ is of general interest and that to that end both a complete and incomplete land expropriation may be done, as well as temporary occupancy of the real property covered by as-built physical planning document, for the purpose of construction, passage, management and maintenance of the gas pipeline „South Stream“.

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The Law further defines that the Company „Gas Res“ is the expropriation beneficiary, with all the rights, obligations and responsibilities envisaged by the expropriation legislation. Article 7 states that the expropriation beneficiary acquires the right to take the possession of the expropriated real property before the expropriation decision becomes final, i.e. before payment of the fee, provided that a proof is given on the situation and the value of expropriated real property. Residential or office buildings, which are subject of expropriation and for which the expropriation beneficiary did not provide other corresponding real property are an exception to this rule.

„In order to monitor the implementation of construction of Pipeline „South Stream“ and after coming into force of this Law, Republika Srpska Government will form a temporary body made of the representatives of the ministries responsible for energy, physical planning and construction and of the administrative body responsible to carry out the expropriation procedure“, this is the wording of the proposed Law.

“Due to a big importance of the project and the fact that the gas pipeline runs throughout the territory of Republika Srpska (from Bijeljina to Novi Grad), which has not been the case so far, it is quite understandable that a separate law should govern that the construction of the natural gas transport system South Stream – Republika Srpska, as well as the expropriation of real property necessary for its implementation, is of general interest. In this way the RS National Assembly, as the supreme body decides on the law, which additionally strengthens and gives even more importance to this project“, says Mladen Kovacevic, the acting director of the Republic Administration for Geodetic and Property and Legal Affairs of the RS.

He particularly underlines that all the rights and interests in the expropriation procedure are guaranteed and safeguarded for all land owners, be they physical or legal entities, in accordance with the Constitution and other laws and by-laws.

Minister Kovacevic says that the realization of the project opens up a possibility to engage significant domestic capacities, both on construction of gas infrastructure and in production of the equipment for gas installations and other related service activities. This will consequently imply hiring more workers.

The president of the RS Union of Employers has recently signed a letter of intent with the president of the Center of Business Initiatives of Serbia, Maks Djukic, to enable as many companies from the Republic of Serbia and Republika Srpska to join the tasks around the „South Stream”.

“We have recently witnessed the beginning of works in Serbia, so looking realistically at the possibilities in this part of the job, our companies should be engaged as sub-contractors or partners in the territory of Serbia too, to cover the lack of workforce and technology – as it is certain that there will be less workforce and technology than this job requires“, Zgonjanin says.

Delivery deadlines are short, which was a reason why the first tender for selection of the contractor in Bulgaria was annulled. The director of „Srbijagas“, Dusan Bajatovic announced that tender would be published in mid-December. Realistically speaking, specific works in both countries are expected to begin after the New Year’s holidays.

„We will certainly not manage to adapt as quickly to the tender requirements as Serbian companies, but we will accept any invitation from Serbian companies to take part in carrying out of these works, as this will enable us to meet our members who are capable of performing such works. It would be very bad if , for example, Romanian or companies from other countries turned up in Serbia and participated in part of the job that can be done by our companies“, Zgonjanin says.

In addition to the possibility for domestic companies to participate in the construction of parts of the South Stream, one of the potential benefits for Republika Srpska is an increase in security of power supply with the construction of gas-driven power and heating plants. „RS and B&H will provide necessary quantities of gas at market prices, which are much lower, for existing and new consumers (the price of gas in B&H is the highest in the region, and one of the highest in Europe)“, minister Kovacevic explains ad adds that there will also be an increase in revenue from excises, transportation and other dues, etc.“

Russian gas via the South Stream

South Stream is the global infrastructure project of Company „Gazprom“ for construction of the gas pipeline 2.385 km long, of 63 billion cubic meters of capacity through the Black Sea surface to south and central European countries.

The land section of gas pipeline will cross the territories of Bulgaria, Serbia, Hungary and Slovenia. The end point will be the measurement stations Tarvizio in Italy. From the main route, connections will be built for Croatia and Republika Srpska, while a possibility is being considered for one section of the gas pipeline to run toward Macedonia and Kosovo and Metohija. The value of the whole project is estimated at 16 billion euro, and the first quantities of natural gas supply should start running in 2015.

According to „Gazprom“estimates, the deposits in Russia, from where gas will be transported, have the stock sufficient for 250 years. We were also told in „Gazprom“ that the project would ensure impeccable and consistent supply of gas to south-eastern Europe without any transit risk, and that it would provide energy security in Europe.

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This year is marked by the first beginnings on the construction of parts of South Stream through Bulgaria and Serbia. Scheduled work completion deadlines are 2016 for Serbia and 2017 for Bulgaria, for all works, and gas should start being distributed as of 2015. The world agencies report that the sea part of the gas pipeline in Turkish economic area will start to be built in the next year.

„This is the first time in recent history that a huge project of European importance passes in our direct and friendly environment, with our open and defined participation in it. We are lucky to be able to be a part of „South Stream“ project both at the level and at the time offered to us, and in reference to obligations that we will have“ Slobodan Puhalac says.

Construction of the section of the South Stream toward Republika Srpska represents an initial stage of gas pipeline construction in the RS, the main route of which runs to Novi Grad. However, there are still no precise definition how the plans on the whole network will be realized according to the map developed by Gas Res. It is certain that if the designed network is realized, part of the population, primarily from Banjaluka and Prijedor will have an opportunity to have gas heating.

Nevertheless, before all that, Republika Srpska should catch up with the countries that have already started the construction stage, and to do the whole preparatory work so that, after the last pipeline is laid and the node at Centa is built, it can start building a section that will bring the Russian gas to the Srpska households and business subjects.