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EU must avoid TAP versus Nabucco squabble - energy chief

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(Globalpost/GlobalPost)

By Barbara Lewis and Justyna Pawlak

BRUSSELS (Reuters) - EU ministers must avoid fruitless debate over which of two rival pipeline projects is the way to cut reliance on Russian gas and both pipelines could be built one day, EU Energy Commissioner Guenther Oettinger said in a letter seen by Reuters.

The EU executive is anxious to present a united front, while dominant supplier Russia attempts a divide-and-rule strategy by negotiating gas supplies with individual EU member states with conflicting interests.

The bloc has been seeking to bring in non-Russian gas to improve energy security after pricing spats between Russia and the Ukraine disrupted some exports to the European Union.

It is looking to the giant Shah Deniz gas field in Azerbaijan as a near-term solution and in June, the Shah Deniz consortium is expected to choose one of the two pipelines vying to ship its gas -- Nabucco West or the Trans Adriatic Pipeline (TAP).

"What we most need to avoid is a discussion on the relative merits of Nabucco West and TAP," Oettinger wrote in a letter to EU foreign affairs chief Catherine Ashton, warning that could lead to "a needless split in European solidarity".

"Current independent forecasts suggest that additional import capacities will be needed, so that both projects could eventually be realised."

The European Commission, the EU executive, was long regarded as pro-Nabucco, but its official stance is that it favours neither project and aims only to diversify supplies to improve energy security.

EU foreign ministers will debate the issue along with other aspects of energy security at a meeting in Luxembourg on Monday.

A briefing note to ministers points, for example, to the need to use energy cooperation to forge closer political ties in the volatile areas of the Caucasus, central Asia and the Middle East.

SHAH DENIZ DECISION

Russia, angry over Europe's efforts to diversify, supplies around 30 percent of all EU gas imports, including nearly 100 percent in some EU states.

Relations have been further soured by EU efforts to enforce a law that obliges Russia to sell off infrastructure and an EU competition case against Russia's gas export monopoly Gazprom.

The briefing note for Monday's meeting, also seen by Reuters, says it is up to the "commercial actors" in the Shah Deniz consortium to decide.

But, it says, "one of the criteria for that decision is the extent to which a pipeline contributes to European Union policy objectives".

The Nabucco West project slices through the most Russian-reliant regions of central and Eastern Europe.

It would ship gas from Turkey's western border via Bulgaria, Romania, Hungary and into the Baumgarten hub in Austria.

Analysts say the advantages of TAP, which would run through Albania and Greece into Italy, include a less state-dominated shareholder structure and it has appeal in debt-ridden Greece as a private sector injection of capital and jobs.

TAP's shareholders are Swiss energy company Axpo <AXPOH.UL>, Norway's Statoil <STL.OL> and Germany's E.ON Ruhrgas <E.ONGn.DE>. Its rival Nabucco West includes Austria's OMV <OMVV.VI>, Hungary's MOL <MOLB.BU>, Turkey's Botas and Romania's Transgaz <ROTGN.BX>. RWE <RWEG.DE> sold its stake to OMV.

Shareholders in Nabucco West are in talks to add at least one other European company to the project.

The Shah Deniz consortium, which comprises BP <BP.L>, Statoil, Azeri energy company SOCAR and Total <TOTF.PA>, has a 50-percent equity option in both TAP and Nabucco.

Production from the second phase of the giant Shah Deniz gas field is expected to begin in 2018 or 2019 and rise to 16 billion cubic metres (bcm) per year, with 10 bcm earmarked for Europe and 6 bcm for Turkey.

Russia's response to Nabucco and TAP is the massive South Stream project to bypass Ukraine and carry around 60 bcm.

The note to EU foreign ministers says that should this project eventually go ahead, the aim would be for it to be "in full compliance with European Union law."

(Editing by Keiron Henderson)

http://www.globalpost.com/dispatch/news/thomson-reuters/130418/eu-must-avoid-tap-versus-nabucco-squabble-energy-chief