UPDATE 2-TAP pipeline irks rivals in EU race for Caspian gas
* Germany's E.ON Ruhrgas joins Trans Adriatic Pipeline group
* Project's architects say E.ON brings captive gas market
* E.ON says TAP pipeline more cost-efficient than rivals
(Adds detail, quotes)
By Pete Harrison
BRUSSELS, May 20 (Reuters) - The Trans Adriatic Pipeline gas consortium took a step forward on Thursday, signing Germany's E.ON Ruhrgas (EONGn.DE) as a partner and irking its rivals in the race to carry gas to Europe from the Caspian region.
E.ON Ruhrgas brings with it a well developed gas market in Italy, helping the 1.5 billion euros ($1.86 billion) pipeline compete for Azerbaijan's future gas supplies with rivals such as the ITGI pipeline, and the 7.9 billion euro Nabucco project.
Future gas supplies from Azerbaijan's Shah Deniz gas fields are seen as Europe's best bet for increasing gas imports and are hotly contended by the pipeline consortiums.
"In our view, TAP is the most promising route for moving gas to southern and central Europe," E.ON Ruhrgas's head of gas supply, Jochen Weise, told reporters.
The European Union has encouraged the rival projects to help curb its dependence on Russia, its biggest supplier, but also an occasional political rival.
The EU's exposure was highlighted in 2008 when Russian forces rolled into Georgia and came perilously close to energy infrastructure. Repeated cuts to Russian supplies travelling to Europe via Ukraine have increased that sense of insecurity.
The TAP pipeline could eventually carry 10-20 billion cubic metres (BCM) of Caspian gas a year along a 520-kilometre route through Greece and Albania to Italy, say the consortium's other partners, Norway's Statoil (STL.OL) and Swiss EGL EGL.S.
"We are living in fairly turbulent times so what you really want to aim at is a very cost-efficient project," said Weise.
"A strong supply base in the Caspian and a good market in Italy needs to be combined in the most efficient way, and I think you should also ask Nabucco consortium whether that is also in place in the case of their project," he added.
Nabucco was quick to defend its 3,300-kilometre vision.
CHINA ENTERS RACE
"The Nabucco Gas Pipeline offers the best overall solution," its backers said in a statement in a response to TAP's announcement. "The overall investment is 7.9 billion euros -- 4.5 billion euros will be invested in the Turkish infrastructure alone. The Trans Adriatic Pipeline offers no such contribution at all."
All major pipeline projects face the threat of weak future demand, with the Paris-based International Energy Agency warning that Europe's debt crisis might push demand back to 1999 levels.
But Weise said E.ON Ruhrgas' Italian business, which uses 4-6 BCM of gas a year, would help the project endure demand slumps.
"We have gas-fired powered stations and a consumer base up and running, so even in a period of oversupply, we can be pretty sure to have a market for that gas," he said.
Meanwhile, China and Russia are also vying to sign up deals for central Asian gas supplies, raising the threat that the gas will be flowing north and east before the European projects are finished. [ID:nLDE63S1Z8]
China and central Asian countries opened their first cross-border gas pipeline in December, which will be able to pump up to 40 bcm a year to China by 2013.
But Statoil, which is a shareholder in both TAP and Azerbaijan's Shah Deniz field, said it didn't foresee a problem.
"Today's announcement further strengthens TAP's ability to compete for volumes from the Shah Deniz field," said Statoil's vice president of gas Rune Bjornson.
Statoil and EGL reduced their respective stakes in the pipeline to 42.5 percent, from 50 percent in the deal, handing 15 percent to E.ON Ruhrgas, which would not disclose how much it paid. (Reporting by Pete Harrison, editing by Dale Hudson and Amanda Cooper)
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