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Gazprom mulls funding Srbijagas's share of South Stream pipeline construction costs

BELGRADE (Serbia), October 10 (SeeNews) - Gazprom is considering funding Serbian state-owned gas monopoly Srbijagas's share of the construction costs for the South Stream gas pipeline, the Russian giant's wholly-owned subsidiary Gazprom Export said on Thursday.

"Taking into account that Srbijagas currently experiences scarcity of funds for investment activities, Gazprom was requested to consider arranging finance of Srbijagas share out of the funds of Gazprom with following compensation," Gazprom Export said in response to an emailed SeeNews inquiry. 

Gazprom's investments, both owned and borrowed, would be returned from the transportation services committed by the joint venture South Stream Serbia which operates Serbian part of the South Stream pipeline including gas pipeline branches, it added.

At the moment the parties are discussing the terms of cash flow allocations.

In April, Serbia's energy minister said Srbijagas's debts total around 1.1 billion euro ($1.5 billion), adding that the business will have to be restructured.

The costs for the construction of the South Stream gas pipeline section on Serbian territory at the stage of feasibility study was estimated at 1.6 billion euro in 2010 prices, Gazprom Export said.

The Serbian section of the South Stream pipeline will ultimately have an annual capacity of 40.5 billion cubic metres of gas while stretching for 422.4 kilometres (km). The initial plans involve building a 52.8 km spur to Croatia and a 105.8 km offshoot to Bosnia's Serb Republic as well as possible branches towards Macedonia and Montenegro.

($=0.739 euro)