Gazprom, Russia's oil and gas behemoth on Friday signed deals with Italian, Greek, Bulgarian and Serbian energy majors to advance the construction of the much-hyped 3000 km South Stream gas pipeline, which will serve as an alternate supply route to the existing pipeline network through Ukraine.

The agreements were signed in the presence of the Russian prime minister Vladimir Putin and the Italian premier Silvio Berlusconi, in Russia's southern coastal resort of Sochi.

Gazprom CEO Alexei Miller told the estimated cost of the project is over €8.6 billion ($11.6 billion), stressing that there is no doubt that the project is financially viable, and he does not anticipate any problem with the funding for  the project.

A new additional agreement to the memorandum of understanding was signed between the key partners Gazprom and Italy's ENI on the future steps to be taken for the realisation of the project. It was agreed to enhance the gas pipeline's capacity from the earlier planned 31 billion cubic meters per annum to 63 billion.

Russian prime minister Putin said the agreements signed yesterday contributed to Europe's energy security.

Italian prime minister Berlusconi reiterated: "Under the circumstances, a major step toward boosting energy security was made."

However, a final agreement between the two partners could not be signed due to certain differences on distribution rights and controls. A 50:50 joint venture company SouthStream AG has already been formed to build the pipeline.

The agreements signed with Bulgarian Engery Holding, DESFA-Greece's main gas transmission operator- and Serbiagaz, lay down the terms for creating joint venture companies for the preparation of feasibility studies, design, construction and operation of the respective South Stream sections through their countries.

Gazprom's joint ventures with Bulgarian Energy Holding and DESFA will be on equal partnership like the one with ENI. However, with Serbiagaz, Gazprom plans to hold a 51 per cent stake.

The South Stream project envisages transportation of Russian and Central Asian gas to Europe across the Black Sea. The pipeline will be laid at the bottom of the Black Sea, maximum 2 km deep and covering a distance of around 900 km from Novorossiysk in the eastern cost of the Black Sea, to Varna in Bulgaria. Further, it will be bifurcated with the southern branch line going to Italy, passing through Greece and the northern line reaching Austria, traversing Serbia and Hungary.

The project is expected to go on stream by the end of December, 2015 although the partners would try to complete the project earlier if possible, Miller said. Techno-economic basis of the project and the final route of the pipeline would be worked out by October 2009 and the detailed report by July 2010, he added.

Russia contended that the South Stream along with the Nord Stream-another gas pipeline project through the Baltic sea to the northern Europe-would enhance the energy security of Europe.

Russia supplies almost a quarter of Europe's gas requirement which passes mainly through Ukraine and a dispute between Russia and Ukraine affected the gas supply in last winter, when Russia cut down the supplies for about a fortnight.

Gazprom's major partner for the project, ENI is an Italian multinational oil and gas company with 30 per cent Government ownership and Europe's third largest producer of oil and gas after Royal Dutch Shell and Total S.A. ENI's operations are spread over Italy, North and West Africa, the North Sea, Gulf of Mexico and Australia with exploration activites in a number of other regions.

Analysts say that the negotiations between the partners are still not smooth sailing; Gazprom wants to possess full rights over the sale of gas to the consumers in the transit countries, whereas, Italy is demanding a share of it apart from its right to sell gas in the domestic market. In addition, Italy wants the joint venture company SouthStream AG to have full control over the gas pumping stations as well.

Another partner Bulgaria is also a joint collaborator with five other European nations for the rival Nabucco gas pipeline project, an alternate link bypassing Russia-for transportation of gas from Central Asia, and probably from Iran, through Turkey to Europe. It is planned to have a capacity of 31 billion cubic meters of gas per annum and the estimated cost is €7.3 billion ($9.85 billion).