UPDATE 1-Bulgaria, Greece sign deal to start building gas pipeline

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SOFIA Dec 10 Bulgaria and Greece on Thursday signed a final investment agreement to build a natural gas pipeline to help Sofia reduce its almost complete reliance on Russian gas supplies.

The 180-km (110-mile) pipeline will be built by a Bulgarian-Greek joint venture that also includes Italian energy group Edison SpA.

After years of delays, construction of the Interconnector Greece-Bulgaria (IGB) with an initial annual capacity of 3 billion cubic metres per year is expected to start in October 2016.

"This signing gives the real start of the project, which is strategic not only for Bulgaria and Greece, but also for all southeastern Europe," Bulgarian Energy Minister Temenuzhka Petkova said after the ceremony, also attended by her Greek counterpart Panos Skourletis.

The pipeline aims to tap gas from Azerbaijan, and will also be able to carry gas from Greece's liquefied natural gas (LNG) terminal after 2018, when it is expected to become operational.

It is estimated to cost about 220 million euros and will be partially financed by an EU grant of 45 million euros.

Bulgaria's state owned energy holding company BEH has a 50 percent in the joint venture, while Greek state energy firm DEPA and Edison hold 25 percent each.

Bulgaria hopes to become a regional gas hub and transport both Russian and Caspian gas to central Europe and Prime Minister Boiko Borisov said Bulgaria will aim to boost the IGB's capacity to 20 bcm in the future.

Consecutive governments have declared connecting Bulgaria's network to its neighbours to diversify gas supplies a priority after a price spat between Russia and Ukraine left the country in the cold for two weeks in January of 2009.

The centre-right government of Boiko Borisov has stepped up work on the gas links, backed by its allies in Brussels and Washington, and has also voiced plans to turn itself into a regional energy hub.

Earlier this week, U.S. Secretary of State John Kerry praised Greece for embracing strategic energy projects that will cut Europe's dependence on Russian gas, including the IGB pipeline.

A gas connection with Romania is now expected to be ready by the middle of 2016 and a gas pipeline with Serbia should also be ready in 2018, the energy ministry said. (Reporting by Tsvetelia Tsolova and Angel Krasimirov; editing by Jason Neely and David Evans)