Caspian Sea gas pipeline to go through Greece

BAKU, Azerbaijan (AP) -- A new pipeline to bring gas to Europe from the Caspian Sea will go through Greece and then under the sea to Italy, it was confirmed Friday, a defeat for a rival project to bring gas through Bulgaria and into Austria.

BP, the main developer of the huge Shah Deniz gas field in the Caspian Sea, said Friday that the project was awarded to the Trans-Adriatic Pipeline, or TAP. The other option, the Nabucco West, would have run across Bulgaria, Romania, Hungary and Austria.

The Greek prime minister hailed the decision as the most significant boost for his country's economy in the past decade.

TAP is led by Norway's Statoil, Axpo of Switzerland and the German firm E.ON. Its pipeline will run nearly 800 kilometers (500 miles) across Turkey, northern Greece and into southern Albania before traveling under the sea to Italy.

BP holds 25.5 percent of the Shah Deniz project, while Statoil holds another 25.5 percent. Azerbaijan's state oil and gas company, Socar, holds 10 percent, as do Russia's Lukoil, Iran's Nico and France's Total. The remaining 9 percent is held by Trao.

Regional BP president Gordon Birell said at an official ceremony in Baku, Azerbaijan's capital, that the consortium spent two years determining the best route for the pipeline. The gas from Shah Deniz is to go into production in 2018, with the first supplies to be transported to Europe in 2019. Birell said 10 billion cubic meters of gas will be exported annually.

The choice of TAP was expected after Austrian power utility OMV said Wednesday that the Nabucco venture it was backing had not been selected.

Socar's president, Rovnaq Abdullayev, said at Friday's ceremony that Azerbaijan and the European Commission, the EU's executive branch, are still discussing other possible routes for an additional pipeline to carry Azerbaijan's considerable gas supplies to Europe. The Shah Deniz reserves are estimated at 1.2 trillion cubic meters.

The EU and the United States both enthusiastically support building connections to Azerbaijan's gas as a way to reduce Europe's dependence on Russian gas.

EU Commission President Jose Manuel Barroso called Friday's deal "a milestone in strengthening the energy security of our union." He said Europe's links to the Caspian Sea gas fields should be strengthened.

Greek Prime Minister Antonis Samaras said the decision was a vote of confidence in his financially troubled country. Greece has been struggling through more than three years of a deep financial crisis, and has been desperate for foreign investment to inject cash into the economy and generate jobs at a time when unemployment is above 27 percent.

The TAP represents an investment of more than 1.5 billion euros ($2 billion) in Greece alone, Samaras said in a statement.

"The creation of such an important project puts Greece steadily on the map of pipelines and of the energy supply of the whole of Europe," the prime minister said. "This constitutes a significant 'vote of confidence' in Greece and our country's prospects in Europe. After the TAP announcement, the 'disaster scenarios' for Greece and its exit from the euro definitively stop."

The project will generate 2,000 direct jobs and 10,000 more in companies that will be supporting the project, he said.

Samaras noted that the pipeline will also generate tax revenue and pave the way for a cheaper supply of energy as well as turning Greece into "an energy hub, in other words a source of attraction for new investments and new businesses."

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AP writer Elena Becatoros in Athens contributed to this report.