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Wrap: Putin discusses 'gas OPEC' idea, lower energy transit dependence

MOSCOW, February 1 (RIA Novosti) - A proposal to set up an international gas alliance along the lines of OPEC is worth considering, and dependence on fuel transit countries should be reduced, the Russian president said Thursday.

Speaking at an annual news conference in the Kremlin, President Vladimir Putin pledged to consider Iran's proposal to set up a cooperation organization in the gas sector similar to the Organization for Petroleum Exporting Countries.

"A 'gas OPEC' is an interesting idea. We will think about it," Putin said.

"At the first stage, we agree with Iranian experts, partners and some other countries which produce and supply hydrocarbons to world markets in large volumes. We are already trying to coordinate our actions on developing markets and we intend to do so in the future," Putin said, adding that the goals of such an organization must not be those of a cartel.

OPEC, comprising the world's largest oil producers except Russia, was set up in 1960 to coordinate supply policies. It is widely seen as a cartel that aims to control the world oil price. As well as original members Venezuela, Iraq, Iran, Kuwait and Saudi Arabia, the organization now also includes Algeria, Angola, Indonesia, Libya, Nigeria, Qatar and the United Arab Emirates.

As well as being the world's second largest oil producer, close behind Saudi Arabia, Russia also has the world's largest natural gas reserves.

A dispute with Belarus last month caused a three-day suspension of Russian crude piped via Belarus to Germany and several Central European countries. A similar spat with Ukraine a year ago left several EU states, including Italy, with a shortfall in natural gas supplies. Both incidents provoked concerns in Europe over Russia's reliability as an energy supplier, and accusations that Moscow is using its energy resources as a tool for political pressure.

But the president dismissed the accusations: "We are always told that Russia is using economic levers to attain its ends in international politics. This is not true," he said.

Putin added that Moscow will continue meeting its obligations in full, but without subsidizing other countries.

He said national interests are a priority in Moscow's relations with the Commonwealth of Independent States, a loose alliance of former Soviet republics.

"It is very simple to enjoy praise when you are betraying national interests, but building pragmatic relations and defending one's interests is not always possible without tensions," he said in an apparent reference to pro-Western leaders that have come into power in recent years in Georgia and Ukraine, and pushed for EU and NATO membership and a reduced influence from Russia.

In view of tensions with such countries, the president said Moscow would look for ways to reduce its dependence on transit nations in oil and gas exports to Europe.

Putin said he had given instructions for the country's state-run pipeline monopoly Transneft [RTS: TRNF] to increase the capacity of oil terminals at the Baltic port of Primorsk, near St. Petersburg, by 50 million metric tons.

Russia, which supplies more than 25% of Europe's oil and gas, mostly via Belarusian and Ukrainian pipelines, is also leading a project to build the Nord Stream pipeline, expected to come online in 2010, under the Baltic Sea as a direct link to Germany.

The president told reporters that, in a bid to avoid interruptions in energy exports, Russia would build new pipelines leading directly to Asia.

"We will accelerate the construction of pipeline grids leading to the Pacific Coast in an effort to directly enter Asian markets," Putin said, adding that he understood European consumers' attempts to diversify energy supplies.

"We are not worried about this because we are in turn diversifying means of piping energy to end consumers in various markets," he said.

Putin said Russia was building a pipeline to the Far East, was planning an oil pipeline to China, and had laid down a gas branch across the Black Sea to Turkey. Russia is also considering the construction of a new pipeline - Blue Stream 2 - that will use Turkey as a transit point for exports to the EU.

"We are also thinking about building a second branch, probably either to Southern Europe or Central Europe," Putin said, adding that the pipe could lead to Hungary, Austria, Italy or even Israel.

The president also urged Bulgaria and Greece to overcome difference on the construction of a $1 billion oil pipeline in the Balkans.

The 280-kilometer (175-mile) pipeline will pump Russian oil to Europe via the Bulgarian Black Sea port of Burgas and Greece's Alexandroupolis, on the Aegean, bypassing the often-crowded Bosporus Strait in Turkey and enhancing the Balkan states' role as important energy transportation hubs.

"If the dispute, which meets neither Bulgarian nor Greek economic interests, does not end, the [Burgas-Alexandroupolis] pipeline... will never be built," Vladimir Putin told a news conference in the Kremlin.

In this case "Bulgaria and Greece will lose an opportunity to become transit countries of hydrocarbons from Russia and the Caspian Sea regions to Europe," he added.

The project, expected to be launched in 2009, has been on the agenda for more than 10 years, but progress has been slow, reportedly over differences on who will build the pipeline, tariffs and the ownership of terminals.

Gazprom Neft [RTS: SIBN], an oil producing asset of Russian energy giant Gazprom [GAZP], announced Thursday that it had set up Pipeline Consortium Burgas-Alexandroupolis Limited along with Transneft and state-controlled Rosneft [ROSN] to build the pipeline, in which Russia will hold 51%.

Russia, Bulgaria, and Greece signed a memorandum on the pipeline in April 2005, which will pump 35 million metric tons of oil a year (257.25 million bbl), a volume that could eventually be increased to 50 million metric tons (367.5 million bbl).

At the same time, Putin did not rule out that Ukraine, which suffered a shortfall in gas deliveries from Russia amid Arctic temperatures last winter, could gain access to Russian gas fields if a joint gas transportation consortium was established.

Concerned over energy security, Ukraine is exploring the possibility of linking its pipeline system to the 3,400-kilometer (2,113-mile) Nabucco route, to run through Turkey, Bulgaria, Romania, Hungary and Austria. The construction of the pipeline will begin in 2008, so that it could go on stream in 2011.

Both Ukraine and the European Union hope the alternative pipeline will help them diversify supply routes away from Russia and thus boost their energy security.

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