LEAD: Baltic pipeline begins supplying Russian gas to Europe

Nov 8, 2011, 14:44 GMT

Lubmin, Germany - German Chancellor Angela Merkel and Russian President Dmitry Medvedev on Tuesday inaugurated a pipeline that will initially supply the European Union with 27.5 billion cubic meters of Siberian gas a year, and later provide 10 per cent of the bloc's annual gas needs.

The 1,224-kilometre-long Nord Stream pipeline took 19 months to build under the Baltic Sea at a cost of 7.4 billion euros (10.1 billion dollars).

When a plan to lay a second pipe parallel to the existing one is completed, the twin pipes will supply the EU with 10 per cent of its annual gas needs, said EU commissioner Guenther Oettinger.

'When we talk of security of supply, we must think of diversification,' Merkel said at the inauguration ceremony in the Germany town of Lubmin, where the pipe comes ashore.

'We will be tied closely to one another for decades,' she said, referring to pipeline, which is built to last 50 years.

Russian gas giant Gazprom is eager to buy gas distribution businesses in western Europe and Medvedev said both sides could work together on 'many excellent projects' in the future.

'We hope that artificial barriers won't be put up,' he told an audience of politicians and business executives in Lubmin. Moscow has been angered by a current EU investigation into claims that Gazprom had abused its position as the EU's dominant gas supplier.

There has also been friction over EU plans for supply routes from other gas-exporting nations to avoid becoming too reliant on Russia.

'We have to work to improve energy security and the diversification of our supply routes in a more coordinated and more transparent way,' said French Prime Minister Francois Fillon, who was also attending the ceremony.

Oettinger said: 'We want to assure our Russian partners that we see opportunities for them in transparent competition.'

The new project bypasses an old pipeline network through Belarus and Ukraine. It taps into an estimated 1 trillion cubic metres of gas in the Yuzhno-Russkoye gas field in Siberia.

Leaders including Dutch Prime Minister Mark Rutte laid their hands on a large white wheel and turned it at the climax of the ceremony to start the gas flowing.

Advanced engineering techniques were needed to construct the pipeline, with elite, ex-military divers fitting the pipe sections together and welding the steel inside a pressurized diving bell.

'The construction work has proceeded astonishingly quickly,' said Merkel in praise of the engineers.

Russia began filling the first pipe with gas in September. About 800 kilometres of the second pipe have already been laid.

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