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Putin wins Austrian gas deal, scorns EU pipeline

By Darya Korsunskaya and Sylvia Westall

VIENNA (Reuters) - Austria signed up to build part of Russia's South Stream gas pipeline on Saturday, and visiting Prime Minister Vladimir Putin scorned the EU's rival Nabucco project as futile.

Politically neutral Austria has become a key battleground for the competing pipelines, both of which are expected to cross the alpine state before delivering gas to other European Union members.

The 7.9 billion euro ($10.62 billion) Nabucco pipeline is part of the EU's long-term effort to diversify its natural gas supplies and reduce dependence on Russia by bringing up to 31 billion cubic meters (bcm) of gas annually from the Caspian regioregion tonto an Austrian hub via Turkey and the Balkans.

But it has no confirmed suppliers and has been hit by numerous delays.

"Building a pipeline without supply contracts is pointless and extremely dangerous," Putin said in the Austrian capital. "Name me one contract that has been signed for Nabucco."

He was speaking after Austrian Chancellor Werner Faymann's government provided a key signature needed to launch South Stream, Russia's second post-Soviet gas pipeline project.

It will run under the Black Sea to the Balkans, with one of its branches passing through Austrian oil and gas company OMV's <OMVV.VI> hub in Baumgarten, also Nabucco's final destination.

Putin stressed that Russia's abundant natural gas reserves allowed it to ensure South Stream's viability.

"We can guarantee Russia's growing demand and that of essentially all our clients in Europe for the next 100 years," the prime minister said.

He said South Stream would allow Austria to increase Russian gas imports by 2 bcm per year.

DOWNPLAYING CONFLICT

Faymann sought to play down the conflict, stressing that Austria would benefit from both systems.

"We do not know at all how and where exactly the gas supplies for Nabucco will come from," he said. "This is a further proof that we are indeed interested in several pipelines, several possibilities and a diversification. But this does not at all mean that they are judged as being against one another."

Russia's Gazprom <GAZP.MM>, which would be the major supplier to South Stream, is battling to maintain market share in Europe as liquefied natural gas ports go on line and potential shale gas projects take shape.

Despite these threats, energy firms are eager to participate in the new pipelines, with some, such as OMV, joining both.

The Vienna-based firm on Saturday signed a cooperation agreement to build a section of the South Stream pipeline through Austria despite the fact that it is already a shareholder in Nabucco.

"The final investment decision should take place within the next 18 months, the pipeline should start operating by the end of 2015," the Vienna-based group said in a statement.

French utility EDF <EDF.PA> is also expected to join South Stream, with Gazprom chief executive Alexei Miller saying in Vienna that it could become a stakeholder within the next two months. EDF officials in February said they expect to take a 10 percent share in the project.

South Stream is expected to go online in 2015, one year after Nabucco currently plans to start operations.

(Writing by Alfred Kueppers, editing by Mark Trevelyan)

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