Gas crisis shows need for Nabucco-RWE

DUESSELDORF (Reuters) - The gas transit row between Russia and Ukraine drives home the importance of diversification for the European gas industry, the RWE utility group's chief operating officer said on Thursday.

In an interview with Reuters, Ulrich Jobs said the gas crisis underlined the importance of the Nabucco pipeline, a multi-country project aimed at bringing Caspian region gas to Europe via Turkey and the Balkans.

"The current incident shows all (Nabucco) partners and transit countries how important the project is for Europe's gas supply," he said.

Russian gas flows via Ukraine have stopped completely this week, forcing Europeans to draw on reserves, alternative supplier countries and routes.

Hundreds of thousands of south-east Europeans are shivering in their homes and industries are cutting usage while the row escalates.

Germany has so far been spared as it can draw on underground gas reserves and take more gas from North Sea origins.

RWE is part of the consortium for Nabucco, which expects to make a final investment decision this year with a view to starting construction in 2010 and transporting gas from 2013.

The group hopes to tap Turkmen, Kazakh and Azeri gas. Jobs said 8 billion cubic meters could be shipped annually via Nabucco from 2013 and from 2019 this could rise to 31 billion cubic meters.

Jobs said in light of the current crisis, apart from new sources and shipment routes, Europe also needed to lower its reliance on gas.

The RWE group supplies both power and gas across continental Europe and Britain.

It is currently biased toward coal burning from domestic and imported supplies to generate power.

But it is also looking to using more gas as part of its long-term plans, to be received via pipelines and as liquefied natural gas (LNG) on tankers.

One reason is that Germany, which produces a quarter of its electricity from domestic brown coal, faces higher costs after 2013, when EU power producers must abide by climate protection decisions for the bloc.

These entail heavy costs for CO2 pollution rights to be bought by coal generators as a penalty for environmental damage.

Gas produces far fewer CO2 emissions.

(Reporting by Tom Kaeckenhoff, Editing by Peter Blackburn)