(Bloomberg) -- Saipem SpA, Italy’s biggest oil-and-gas contractor, lost its $2.2-billion contract to lay a Russian natural-gas pipeline under the Black Sea after its fleet waited for the start of the work for seven months.
Russia’s OAO Gazprom decided to cancel the deal as it was impossible to reach an agreement on “many working and commercial issues” related to the project, the Moscow gas exporter said late Wednesday in a statement. The pipeline works will proceed as Gazprom plans to start talks with potential contractors soon, it said.
Russia kept Saipem waiting since December after President Vladimir Putin abandoned a $45 billion gas-pipeline link to Bulgaria and on to the European Union as his ties with the region soured over the conflict in Ukraine. Saipem had two contracts for the scrapped link worth 2.4 billion euros ($2.7 billion), most of the money coming from laying the first undersea line.
While Saipem shares slid on the last year’s news, Russia said it would build a link to Turkey instead of through Bulgaria as it aims to bypass Ukraine’s network from 2020. Saipem, controlled by Italy’s state-run energy company Eni SpA, was to start work on the new project in June, Gazprom executives said in May.
Russia and Turkey then stalled over the pipeline deal, people with knowledge of the matter said, though the Russian government approved access for Saipem’s fleet to Russian territorial waters last week.
Gazprom has been paying Saipem for two pipe-laying ships hired to build the scrapped link, people familiar with the matter said in March. Gazprom declined to comment on the costs. Kommersant newspaper reported Saipem was getting about 25 million euros a month for standing idle.
Saipem would receive early termination fees if the deal were canceled, the company’s then-head Umberto Vergine said in February. Vergine was trying to restore profit and clean up the company’s backlog from lower-margin contracts.
--With assistance from Stephen Bierman in Moscow and Marco Bertacche in Milan.
To contact the reporter on this story: Elena Mazneva in Moscow at email@example.com. To contact the editors responsible for this story: Will Kennedy at firstname.lastname@example.org John Simpson
Copyright 2017 Bloomberg News.
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