UPDATE 1-EU "silk road" summit smooths route for Caspian gas

Fri May 8, 2009 11:23am EDT

* EU signs cooperation deal with Caspian gas suppliers

* Deal on gas transit terms seen by end-June

* Deal envisions central EU gas-buying consortium

(Adds detail, quotes)

By Pete Harrison and David Brunnstrom

PRAGUE, May 8 (Reuters) - The European Union moved to curb its heavy dependence on Russian gas on Friday by signing an agreement to smooth the way for more imports from the Caspian region.

In return for their commitment to supply gas to Europe, the EU offered to provide more trade and stronger transport links to gas transit countries such as Turkey and Azerbaijan, which form a so-called "southern corridor".

The deal, signed by leaders from Europe, Azerbaijan, Turkey and Georgia, envisions the creation of a central EU gas-buying consortium and new terms for the transport of Caspian gas.

"Our strategic priority in the EU is to enhance energy security, in particular by diversifying energy sources and energy routes," said European Commission President Jose Manuel Barroso. "The southern corridor initiative is a key priority project."

"Producer countries have committed to dedicating specific volumes of gas supplies for the corridor and for the EU, with a precise timetable for availability," Barroso added.

At the heart of the plan is a proposal to build the 3,300 km Nabucco pipeline to carry Caspian gas via Turkey, Bulgaria, Romania and Hungary to Austria.

But its commercial backers have only secured a fifth of the gas needed to make the $10 billion pipeline viable.

Czech Prime Minister Mirek Topolanek, whose country hosted the meeting of in Prague, described the wider project as a "new silk road" that would also aid the flow of information, goods and people.

NEW DEAL

The 11 leaders and ministers at the summit agreed EU countries and Turkey will sign an intergovernmental deal on conditions for putting gas through Nabucco by the end of June -- a move that would remove one of the main uncertainties for potential investors.

"We have the determination and we are ready," said Turkish President Abdullah Gul. "There is no hesitation, so we can go ahead."

The EU has talked about diversifying its gas supplies for decades, to no avail, but has strengthened its resolve since a row between Russia and transit country Ukraine in January left European homes unheated.

Simmering tensions with Moscow since Russia's brief war with Georgia last August also added to the EU's determination.

"They are not overly excited about this project," Topolanek said of Russia. "Any routes that lead outside Russia would, in their view, threaten their own supplies."

The summit agreement called for progress on a Caspian Development Corporation to act as a central EU gas-buyer -- a move aimed at ending the bloc's long-running problems with securing deals in the region.

European Investment Bank President Philippe Maystadt said the bank has held funding talks with the consortium behind Nabucco and those behind two other proposed pipelines to bring Caspian gas to Europe -- the TAP pipeline into Hungary and ITGI into Italy.

Maystadt said while the three projects were all focused on carrying gas from Azerbaijan, there was not enough Azeri gas to go around and some would need to find alternative sources.

"What is possible is that one project would go ahead faster and this project could supply Azeri gas," he said.

"Other projects that came later would need to get gas from Turkmenistan which would imply the creation of a link through the Caspian Sea."

The summit agreement laid out plans to look further south for new gas supplies, by seeking an energy memorandum with Iraq as soon as possible and by helping Egypt develop its own export potential.

For a FACTBOX on central and southern European energy pipelines double click on [ID:nL71025626]

(Additional reporting by Jan Lopatka; Writing by Pete Harrison; Editing by Sophie Hares)

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