Oil and Gas

UPDATE 1-Putin says Russia may scrap Nord Stream pipeline

(Recasts, adds background, analyst comment)

MOSCOW, Nov 12 (Reuters) - Russia may scrap its Baltic Sea gas pipeline project, Nord Stream, and build gas liquefaction plants instead if Europe keeps delaying the pipeline, Russian Prime Minister Vladimir Putin said on Wednesday.

“Europe must decide whether it needs this pipeline or not,” Putin told Finland’s Prime Minister, Matti Vanhanen, at a meeting in Moscow.

“If you don’t we will build liquefaction plants and send gas to world markets, including to European markets. But it will be simply more expensive for you. You are free to make the calculations yourself,” he added.

The European Union has identified the plan to pump Russian gas under the Baltic Sea by to Germany -- involving Russia's Gazprom GAZP.MM, Germany's E.ON EONG.DE and BASF BASF.DE and Dutch Gasunie -- as a key project to ensure secure gas supplies for Europe.

But EU lawmakers have called for a new investigation into the pipeline’s environmental impact and it has been criticised by Poland, Lithuania and Estonia, angered at being shut out of a leading gas supply route.

An expert on Russian gas said Gazprom was unlikely to build any LNG plants quickly enough to give it an export alternative to Nord Stream, which the partners hope to start laying next year.

Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies, added Putin may be warning the EU that it needs Nord Stream to reduce the risk associated with importing gas from Russia across the Ukraine and Belarus.

“Essentially he is saying ‘if you want to take the transit risk on Ukranie and Belarus then fine, but we don’t want you to blame us if there’s a problem because we offered you Nord Stream and you couldn’t get your act together’,” he said.

“That’s the subtext of this.”

Ukraine’s ageing gas tranport network and its disputes with Russia over the last few years over gas pricing have heightened concerns in Western Europe over the reliability of gas flows across the country.

Nord Stream would bypass Ukraine by taking gas along the seabed of the Baltic from near St Petersburg to the German coast north of Berlin. (Reporting by Oleg Shchedrov, additional reporting by Daniel Fineren, writing by Dmitry Zhdannikov)