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Oil Report

UPDATE 1-EU energy funding seeks to kickstart Nabucco link

(Adds reaction, background)

BRUSSELS, Jan 28 (Reuters) - The European Commission proposed putting 3.5 billion euros ($4.6 billion) behind projects to bolster Europe’s energy supplies after this winter’s gas dispute, including funds for the Nabucco pipeline project.

Gas and power connections topped the Commission’s shopping list, as part of a 5 billion euro package of unspent EU budget which the bloc’s executive arm wants to divert to stimulate the economy and create jobs in the face of recession.

Several member states including Italy and Bulgaria questioned the allocation of funding under the plan, which still needs the approval of EU governments.

“When it comes to the strategic response to the gas crisis, this is one piece of the puzzle,” Commission spokesman Johannes Laitenberger said. “It is not an extravagant amount, but it is large enough to have an impact.”

Shoring up the reliability of energy supplies has jumpd to the top of the European Union’s agenda since Russia invaded Georgia last summer, coming close to a key gas supply route.

The EU was also rattled this month when a gas dispute between Russia and transit country Ukraine cut supplies to Europe during freezing weather, forcing factories to close and leaving thousands of households shivering.

The Commission said 250 million euros would be contributed to the European Investment Bank towards funding the Nabucco pipeline.

The 10 billion euro project would carry Caspian gas 3,300 km across Turkey, Bulgaria, Romania and Hungary to an Austrian distribution hub. So far it has received scant financial commitment and it has only a fifth of the gas commitments needed to make it viable.

SUPERGRID

The plan also included 1.75 billion euros for low-carbon energy projects, but environmentalists were angered by plans to put 1.25 billion euros behind untested technology to clean up coal plants, over twice as much as the windpower allocation.

“It is less a shot in the arm for the EU recovery plan than a handout to outdated energy sources,” Luxembourg Green group member Claude Turmes said.

But the plan was welcomed by the European Wind Energy Association, which predicts employment in the sector will more than double in the EU to around 330,000 in 2020.

Much of the funding will back a North Sea supergrid linking thousands of giant offshore wind turbines.

Southeastern countries, which suffered most during this winter’s gas crisis, could receive 160 million euros towards building gas interconnections so they can turn to their western neighbours for help if Russian gas stops flowing again.

Several Bulgarian officials, who declined to be identified, said the money had been shared out unfairly. “Bulgaria was hoping to get much more, given that it was the most affected country in the gas row,” a spokeswoman for the economy and energy ministry said.

But Commission officials said Bulgaria would benefit from the 250 million euros it would contribute to the European Investment Bank for the Nabucco pipeline. (Additional reporting by Anna Mudeva; editing by Mark John and Sue Thomas)

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