In December, the company made a slight modification to its originally-planned route. Following the EU's blocking of Gazprom's purchase of 50% of the Central European Gas Hub in Austria, a Gazprom spokesman told Reuters the project was no longer considering that country as a transit route. "Only a spur will run to them," he said, adding that the route would now end in Italy instead of Western Europe. Whether this decision will hold is uncertain, however, since in April 2012 the head of ENI (Italian energy company and South Stream partner) announced that the northern leg of South Stream to Austria will be built before starting work on the southern leg to Italy. This report was contradicted by Gazprom in May, when they published a story that they might abandon the offshore section of the pipeline to Austria entirely. The report added that the line would end in the northeastern Italian city of Tarvisio.
Gazprom CEO Alexei Miller confirmed in February that final investment decisions on the pipeline would be made in November, with construction scheduled to begin in December. "We have entered into the stage of actual construction of South Stream," he said in a statement. "I can say without exaggeration that Gazprom is working on the project 24 hours a day."
There had been a discussion within Gazprom whether it should be built for its maximum capacity of 63 bcm per year, or if the project should be started with a smaller pipeline that could be expanded at a later time. In Winter 2012, however, Italy shivered without natural gas during some of the coldest weather in recent years. Many analysts believed Russia had cut back deliveries to foreign customers while servicing their domestic customers. In their review of the situation, however, Gazprom blamed the shortages on Ukraine's siphoning fuel from the transit line. Gazprom CEO Alexei Miller told Russian president Demitri Medvedev, "On certain days, as much as 40 million cubic meters of gas remained on Ukraine's territory... Our Ukrainian partners took as much gas from the export pipeline as they felt necessary." In reply, Medvedev told Miller to build the pipeline at full capacity. This decision will eliminate the need to use the Ukrainian pipeline to export Russian gas to Europe. (Ukraine denied any diversion had taken place).
Julian Lee, senior energy analyst at the Center for Global Energy Studies in London, theorized as to why South Stream's tempo has increased. In an interview with New Europe, he said "We are seeing a general sort of shift at the moment in the region of countries that are favoring South Stream. There is a realization that Nabucco is not going to happen, at least in its original form...I think supporting or at least voicing support for South Stream is no longer perhaps seen as undermining Nabucco because I think the idea of Nabucco has largely evaporated now."
The European Commission continues to oppose South Stream because it is only a diversification of supply routes, instead of a diversification of suppliers. Others, such as Russian energy consultant Mikhail Krutihin, oppose the project because of the price. Citing a potential cost of construction of $40 billion, he told Nezavisimaya Gazeta, "This is madness. It would be cheaper to strike a deal with the Ukranians."
