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. Last Updated: 07/27/2016

Miller Courts EU on $6Bln Pipeline

Interest in Europe is growing for Gazprom's ambitious $5.7 billion project to build a pipeline to Britain under the Baltic Sea, Gazprom CEO Alexei Miller said Tuesday.

Miller, fresh off a trip to Britain, the Netherlands and Finland to rally support for the 3,000 kilometer pipeline, said the European Union is already behind the deal politically and is now looking at ways to help financially.

"This is a priority project in Brussels," Miller told reporters.

EU officials will meet with senior Gazprom executives in February to work out ways to fund the project, which will eventually be able to carry 30 billion cubic meters of gas per year directly to Kaliningrad, Finland, Sweden, Denmark and Britain.

Miller said he expects the project, dubbed the North European Gas Pipeline, to be completed by 2007 and reach full capacity two years later.

It has been in the works since 1997, but cost concerns have kept the project from getting off the ground. In the meantime, Gazprom has been busy building a web of other pipelines to Europe, including the Blue Stream under the Black Sea to Turkey and the Yamal Europe from the arctic Yamal Peninsula through Poland to Germany, on which it has already spent $12 billion.

But with forecasts for European gas demand soaring and problems over debts and transit prices for other routes into Europe through Ukraine and Belarus rising, Miller said North European was now Gazprom's top investment priority for the next decade.

He said that within eight years annual gas demand in Europe would exceed Gazprom's current long-term contracts with the EU by 100 bcm.

"We expect a [financing] proposal from Brussels very soon," he said, noting likely investors would be the European Bank for Reconstruction and Development and the European Investment Bank. Miller met with EBRD first vice president Noreen Doyle in London on Friday.

The EBRD has held off funding Gazprom over the past few years because of concerns over financial shenanigans at the company and its role in taking over independent television channel NTV under former CEO Rem Vyakhirev. But in a sign the bank is considering reopening credit lines, it noted improved transparency at the company in its annual transition report published last week.

Miller said he was also seeking investment from global energy multinationals and met last week with top executives from British Petroleum, Fortum, Gasunie, Royal Dutch Shell and Centrica.

"They all expressed a serious interest," he said.

It is still not clear what the ownership structure of the pipeline might look like, but Miller made clear he hoped Gazprom would take the leading role. "Gazprom is the No. 1 gas company in the world. There are few international companies that can compete on an equal basis with Gazprom," he said.

But analysts Tuesday cast doubt on the ability of the cash-strapped company, which has debts of some $15 billion, to juggle this new project at the same time as a multitude of other investment projects to develop new fields and other pipelines.

"Gazprom is talking about a new project every couple of hours," said Paul Collison, oil and gas analyst at Brunswick UBS Warburg.

Gazprom has yet to begin developing a new field to feed the $16 billion Yamal Europe and would have to invest billions more in developing other fields to fill capacity for North European, as current fields are in steep decline, Collison said.

Miller said North European would not replace other pipeline projects.

Capacity for the pipeline would depend on demand from Britain, which is set to become a net importer of gas by 2010 as its North Sea supplies are diminishing, he said.