Gazprom to Buy $1bn Worth of Pipes for South Stream Project

South Stream Pipeline — A pipe made for the South Stream pipeline at the OMK metal works in Vyksa in the Nizhny Novgorod region Reuters

Gazprom is set to buy $1bn worth of pipes from Russian companies, Interfax news agency reported.

Russia's state-owned gas giant will buy steel pipes from Severstal, ChelPipe, OMK and a trader, the news agency said, citing company documents.

Gazprom had issued tenders to supply pipes for the eastern section of the pipeline that will connect the company to the South Stream pipeline.

The South Stream project is designed to transport gas to Europe via the Black Sea, passing through Bulgaria, Serbia, Hungary and Slovenia and Austria, while cutting out Ukraine.

If completed, the South Stream pipeline could halve the value of Ukraine's gas transportation network.

Russia and Ukraine are embroiled in a dispute over the price that Kiev pays for gas. Moscow hiked gas prices in the wake of the annexation of Crimea.

Kiev refused to pay the new price, resulting in Russia cutting off gas deliveries to Ukraine in June.

Some European Union states have agreed to reverse flows of gas to Ukraine for the cold winter period when gas consumption is at its highest.

The South Stream gas project has been hampered by difficulties amid questions over its compliance with competition and energy laws of the European Union.

In June the EU Commission ordered Bulgaria to halt work on the project amid concerns that it had broken EU procurement legislation by favouring Russian and Bulgarian bidders.