Central Asia to press ahead with Russia gas pipeline

ALMATY, March 12 (Reuters) - Central Asian gas producers Turkmenistan and Kazakhstan agreed to press ahead with a new Caspian Sea gas pipeline -- a Russia-backed project rivalling Europe-backed Nabucco, an official government report said.

Russia agreed with Central Asian gas producers in 2007 to construct the pipeline along the Caspian Sea coastal line that would allow Moscow to keep regional gas flows under its control.

But some analysts have speculated the project is slow to progress as Central Asia awaits a clearer message from the European Union on the details of the Nabucco gas pipeline.

Kazakh Prime Minister Karim Masimov and Turkmen President Kurbanguly Berdymukhamedov discussed the Russian project during a meeting in Tehran this week, Kazakhstan's government said in a statement posted on its website late on Wednesday.

"During their meeting they highlighted their common interest in regional and international matters as well as their readiness to fully cooperate in all spheres," said the Kazakh statement.

"The sides noted that 'everything is going according to plan and there should be no problems in implementing this project'," it added in reference to the Russian Caspian pipeline.

The Russian-backed Caspian Gas Pipeline is expected to take in up to 10 bcm of Turkmen gas and the same volume of Kazakh supplies. Officials say it would come on stream by March 2010 but its estimated cost remains unclear.

Russia buys about 50 billion cubic metres of gas from Turkmenistan, the region's biggest producer, a year -- the bulk of the country's output.

But, like other Central Asian nations including Uzbekistan, Turkmenistan is considering alternative export routes for its volumes as it seeks to boost output in the future.

Europe, for its part, depends on Russia for a quarter of its gas and is keen to nudge Central Asia towards diversification.

Anxiety over the reliability of Russian supplies rose dramatically at the start of the year due to a gas row between Russia and Ukraine which disrupted flows to the European Union.

As gas diplomacy gathered steam, Russia's Gazprom (GAZP.MM) signed a deal this week with Hungarian Development Bank to build part of the South Stream pipeline, another project that would bypass Ukraine in delivering gas to Europe.

Europe's hopes for diversifying its supplies rest largely on rival Nabucco, a plan to pump up to 31 bcm a year of gas from the Caspian Sea region to Europe while bypassing Russia.

But the project lacks enough committed sources of energy to give it a full go-ahead, and there are concerns whether Central Asia does indeed have enough gas to fill all the pipelines. Russia says the plan is impossible without Iran's participation. (Editing by Ben Tan)