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Gas heavyweights slug it out over rival pipeline projects

EUROPEAN countries and major gas producers taking part at a high-level energy meeting agreed on Saturday to establish diverse supply connections and guaranteed gas deliveries for their industries, which are already plagued by the global economic downturn.

The two-day meeting - dubbed "Natural Gas for Europe, Security and Partnership" - was attended by gas suppliers from the Caspian region, Central Asia and the Middle East, as well as importers from the Balkans and the European Union.

Discussions were dominated by Europe's heavy dependency on Russian gas and its attempt to diversify its supply sources through new pipeline projects.

Supporters of the South Stream pipeline, which will transport Russian natural gas under the Black Sea through Bulgaria to other European countries, also sought the endorsement of the EU.

But Europe, which has been increasingly nervous about its reliance on Russia for energy, is supporting another pipeline, called Nabucco, which would import gas from the Caspian region and bypass Russia entirely.

The rivalry between proponents of the two projects was highlighted by Russian Prime Minister Vladimir Putin's unexpected withdrawal from the meeting before it started, apparently because of differences with Bulgaria over the South Stream project.

Bulgaria had called the meeting to avert future energy crises, after it, along with many other European countries, saw their gas supplies cut in January amid a price row between Russia and Ukraine.

The final declaration from the meeting called for a rapid development of international gas infrastructure, pipelines, liquefied natural gas terminals and strategic reserves.

"In order to meet economic development and climate goals in the next 20 years, Europe's demand for natural gas will increase and will necessitate new projects offering diverse energy suppliers, sources and supply routes for gas delivery," the document said.

While both projects remain in the planning stage, South Stream definitely appears to have the edge.

Since its inception seven years ago, Nabucco has been mired in doubt about availability of non-Russian gas to supply it. That has dampened investor interest.

Russian Energy Minister Sergey Shmatko said that South Stream would guarantee lower prices for gas consumers than Nabucco.

Nabucco project leader Reinhard Mitschek said Europe's long-term gas demand growth was enough to justify several gas pipelines.

And Jeremy Ellis of RWE, a shareholder in Nabucco, said the project "is Europe's option for gas supply via the southern corridor." He urged quick action on moving the project from the planning to the construction stage.

The United States has long been a proponent of alternative gas supply routes to Europe that would bypass Russia. The US government's special envoy for Eurasian energy issues, Richard Morningstar, told the meeting natural gas will remain a critical part of the energy security question in Europe and Central Asia.

Morningstar said global gas demand in 2007 was about 3 trillion cubic meters, and is expected to rise to at least 3.5 trillion by 2015. He called for diversity of sources and routes "because there is not a single answer to energy security issues."


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