* EU budget for first time includes energy infrastructure
* Environmentalists fear too much compromise on efficiency
* Debate still preliminary
By Barbara Lewis
BRUSSELS, Feb 14 Cold weather disruption to European gas supplies underlines the need for streamlined European energy links and the end of an approach reminiscent of "19th-century principalities", the EU's energy chief said on Tuesday.
The European Union has made progress in breaking down barriers to energy supply across the 27-member bloc, but some national divisions persist.
Such divisions could aggravate the impact of any disruption, as during the extreme cold spell of the end of January and the start of this month when energy demand spiked and Russia reduced its gas supplies to the European Union.
"When it comes to transmission networks, particularly for electricity and gas, we're still living in a world of 19th-century principalities," Energy Commissioner Guenther Oettinger told a council of energy ministers in Brussels.
"After two-and-a-half weeks of quite cold weather, we have come to the brink of power outages," he said. "I am pleading with you that we should get together as a team."
Increased storage, instituted by the EU following previous supply crises, helped to protect member states during the frigid weather of the last weeks.
But security of supply could be improved further by better energy connections across borders, which would allow the distribution of available supplies to where they were most needed.
EU energy ministers were meeting to debate how to revamp energy infrastructure with the aid of 9.1 billion euros ($12.03 billion) allocated in the 2014-2020 EU budget for projects of EU-wide significance.
It is the first time energy infrastructure is being given money in the multi-year budget.
Oettinger, who is German, said his native country would probably not qualify for EU infrastructure funding, which would be more likely to be channeled to smaller states.
Still, its giant utilities, such as RWE and E.ON , would benefit from more joined-up infrastructure.
"We know the big member states might not need co-financing, but it's these big member states that have the big service providers. Therefore they will benefit from the completion of the internal market," he said.
EFFICIENCY HIGH PRIORITY
Tuesday's debate was a preliminary one on a subject that could feature prominently in the Danish EU presidency, which steers EU debate until the end of June.
But a still higher priority for the Danes is to achieve political agreement during its presidency on a draft Energy Efficiency Directive designed to increase the EU's progress on energy savings.
Without reform, the EU is only expected to half-meet a goal of increasing energy efficiency by 20 percent by 2020, through measures such as better building insulation.
In contrast to the public session on infrastructure, Tuesday's ministerial debate on energy efficiency was behind closed doors and member states are known to be sharply divided.
In the European Parliament, German centre-right politicians have said Germany is already very efficient and should not be expected to make as much further progress as other nations.
German Economics Minister Philipp Roesler said on the sidelines of Tuesday's council that the EU should allow member states to work out their own ways of reaching the 20 percent target.
"We should keep the right balance between the common goal to increase energy efficiency, on the one hand, and the most flexibility possible for the member states in implementing it," he said.
Environmental groups are concerned that leeway in calculating progress could mean proposed targets will only appear to be met.
Brook Riley, climate justice and energy campaigner for Friends of the Earth, referred to "a shabby accounting trick" through which some member states might try to claim credit for efficiencies achieved in the past.
Environmentalists are also worried that the infrastructure debate is not green enough.
"By prioritising fossil-fuel infrastructure they will be throwing money at the stranded assets of the future," Greenpeace EU energy policy director Frauke Thies said.
($1 = 0.7566 euros) (Additional reporting by Ilona Wissenbach; Editing by Sebastian Moffett and Alison Birrane)