Gazprom says Nabucco still lacking gas

Gazprom Deputy Chief Executive Alexander Medvedev talks to Reuters in Moscow September 11, 2009. Europe will depend on Russia for one-third of its gas within the next decade and the financial crisis has done nothing to erode the market share of the world's number one gas producer, Medvedev said on Friday.

MOSCOW (Reuters) - Russian gas export monopoly Gazprom (GAZP.MM) doubts the rival Nabucco pipeline to Europe can be built as it still lacks gas, while the Russian giant is speeding up talks to secure more energy from the Caspian Sea.

"At the (Nabucco) signing ceremony, I looked at the photos and tried to find any gas supplier," Gazprom Deputy Chief Executive Alexander Medvedev told the Reuters Russia Investment Summit.

"With all my attempts, I could not find any. And it looked strange."

In July, European Union member governments and Turkey signed a transit agreement for the EU and U.S.-backed Nabucco pipeline project, which aims to reduce Europe's energy dependence on Russia by securing gas from the Caspian region.

Medvedev said Gazprom was not worried by the development and does not even consider the project a rival to its own pipelines, which are designed to help raise European dependency on Russian gas to as much as 33 percent by 2020 from about 25 percent now.

Russia is building new pipelines to southern and northern Europe, known as South and Nord Stream, under the Black and Baltic Sea to cut transit risks it has experienced in the past during pricing disputes with ex-Soviet Ukraine and Belarus.

"I believe that South and Nord Stream will definitely be built," said Medvedev, adding that Europe will need at least 100 billion cubic meters a year of additional gas by 2020.

"If we imagine that all the gas from South and Nord Stream will be new gas (produced in Russia) ... there is still room for certain volumes," he said.

"Diversification of transit routes is a big challenge for the world. We are doing our job. We have gas for this, we have markets and we have technical expertise," said Medvedev.

He also said he believed offshore pipelines were more appealing than onshore links in the long term.

"Some people do not understand: why the hell construct expensive offshore pipelines when there is a possibility to make new routes through very reliable transit countries?

"Even if we take it for granted, and take a 25-year horizon, the maintenance of offshore pipelines is 15 percent lower than with onshore pipelines. And the emission of CO2 (carbon dioxide) is also substantially lower," he said.

AZERBAIJAN

The Nabucco consortium -- Austria's OMV (OMVV.VI), Hungary's MOL MOLB.BU, Romania's Transgaz TGNM.BX, Bulgaria's Bulgargaz, Turkey's Botas and Germany's RWE (RWEG.DE) -- has said it would rely on gas supplies from the Caspian Sea, mainly Azerbaijan and Turkmenistan, and potentially Iraq.

The European Union Energy Commission said in July Nabucco had received 16 non-binding bids from companies keen to buy up capacity of the planned 31 billion-cubic-meter line.

Russia has said that, so far, the only realistic gas supplier for the link has been Azerbaijan, with its giant BP- (BP.L) and StatoilHydro-led (STL.OL) Shakh Deniz field.

And Gazprom itself has agreed with Azeri state energy firm Socar to buy some gas from Shakh Deniz [ID:nLT104419]. Medvedev said talks were under way on gas purchases from the second phase of the field.

"We have offered our Azeri colleagues to off-take gas which could be available from Shakh Deniz 2. We should not forget that no investment decision has been taken on Shah Deniz 2. I'm rather sure that our price is absolutely competitive," he said.

But he said Gazprom was not in talks to buy a stake in Shakh Deniz, in which Russian oil firm LUKOIL (LKOH.MM) is a partner.

"If the question was asked 20 years ago, I would definitely have said 'yes'. Now it is more complicated."

(Additional reporting by Vladimir Soldatkin, Tanya Mosolova, Michael Stott, Katya Golubkova, Anton Doroshev and Gleb Gorodyankin; editing by Simon Jessop)