February 17, 2011 / 9:26 AM / 7 years ago

EU pushes strategic gas pipelines to merge-sources

BRUSSELS/VIENNA, Feb 17 (Reuters) - European Union officials are pushing for a merger of two strategic gas pipeline projects, Nabucco and smaller Italian rival ITGI, to help secure supplies from Azerbaijan to Europe, industry and EU sources say.

The European Union has long been seeking to reduce its reliance on Russia, which provides about a quarter of EU gas needs, fearing that Moscow could hold Europe to ransom in any future political disputes.

The EU's main means of diversifying its suppliers is by tapping into the Caspian region's massive gas fields, initially in Azerbaijan.

The consortium controlling the next wave of Azeri gas, from the Shah Deniz II field, is expected to decide on a buyer and transporter for its gas by June.

Vying to transport the Azeri gas are the Austrian-led Nabucco consortium, and two smaller projects -- the Interconnector Turkey-Greece-Italy (ITGI) and the Trans Adriatic Pipeline (TAP).

Officials at the European Commission are urging ITGI and Nabucco to enter talks about merging their operations, EU industry and political sources said.

One option could be to start off with the low-cost ITGI pipeline plan, estimated at $3.4 billion, compared to Nabucco's $10.7 billion price tag, and then expand at a later date, one industry source told Reuters on condition of anonymity.

That implies downscaling the project with a low level of gas imports initially, but the parties are also considering ways to increase the size of the planned pipeline across Turkey and share it, to keep costs down.

The project might be launched in two phases: "Southern Corridor Phase I" would carry gas to Greece and onwards to Italy; the later "Southern Corridor Phase II" would create a spur from the main pipeline and follow Nabucco's original planned route northwards to Austria, an industry source said.

A spokesman from the Vienna-based Nabucco consortium said there were "no concrete talks" with ITGI about potential cooperation.

"There is an ongoing discussion on a political level ... but there is no discussion in the consortium about it," Christian Dolezal said.

A senior executive at ITGI shareholder Edison EDN.MI suggested on Tuesday his project might be able to work together with Nabucco, but did not give precise details. [ID:nLDE71E233]

TAP, the lowest cost option at $1.5 billion, is not currently involved in any possible Nabucco merger scenarios, industry sources say.

"We have always said we are open to cooperation and for other shareholders to join TAP," said a spokeswoman. "However, any possible cooperation would of course have to be commercially realistic." (Reporting by Pete Harrison in Brussels and Sylvia Westall in Vienna; editing by James Jukwey)

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