Oil report

UPDATE 1-Bosnian Serbs to join Russia-led gas pipeline

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BANJA LUKA, Bosnia, March 5 (Reuters) - The Bosnian Serb Republic will join the South Stream gas pipeline project, which will bring Russian gas to Europe, its prime minister said on Friday.

The Serb Republic plans to build a 480 km pipeline in northern Bosnia with capacity of up to 1.5 billion cubic metres and link it to the South Stream pipeline.

"I may surely say now that we will become part of the global South Stream project," Milorad Dodik told reporters after a three-day visit to Russia, where he met officials of its pipeline gas export monopoly Gazprom GAZP.MM.

“Gazprom has demanded that we produce a feasibility study for the project in a few weeks or months and agree it with other countries in the region.”

The Bosnian pipeline is planned to go along the Sava River to Banja Luka to link the Serb Republic with a section of the South Stream pipeline in neighbouring Serbia.

The 1992-95 war left Bosnia divided in two -- the Serb Republic and the Muslim-Croat federation, linked by a weak central government. Dodik said his republic was willing to build a pipeline arm to the Muslim-Croat federation, as well as to connect to Croatia’s gas network.

Gazprom and the Italian energy group ENI ENI.MI are key partners in the project to build the pipline under the Black Sea to supply gas to southern Europe.

The project is seen as strategically important by European countries keen to safeguard their supplies of Russian gas by using pipelines that bypass former Soviet satellite states, notably Ukraine, which have had troubled relations with Moscow.

A pricing row between Moscow and Kiev last year disrupted gas supplies to a number of European countries, including Bosnia which has no gas reserves and uses around 350 million cubic metres of gas a year imported from Russia via Ukraine, Hungary and Serbia.

The South Stream pipeline faces competition from the EU-backed Nabucco project, which aims to transport up to 31 billion cubic metres of gas a year from the Caspian region to Western Europe, skirting Russia.

Russia has already signed a deal on the South Stream pipeline pipline with six countries -- Bulgaria, Hungary, Greece, Serbia, Croatia and Slovenia. (Writing by Maja Zuvela, Editing by Michael Kahn and Anthony Barker)