UPDATE 1-Putin warns oil firms: cut flaring or pay fines

* Associated gas utilisation target 95 pct by 2012

* "Huge fines" for firms who don't meet target

* Priority grid access for electricity from associated gas

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By Gleb Bryanski and Vladimir Soldatkin

MOSCOW, Nov 10 (Reuters) - Russian oil companies will face heavy fines for missing targets to reduce gas flaring by 2012, Prime Minister Vladimir Putin said at a meeting on Tuesday, reinforcing government plans to reduce the wasteful practice.

Russia, the world's largest energy producer, flares more gas than most other countries, sending the greenhouse gas carbon dioxide into the atmosphere after burning gas from oilfields that is deemed too difficult or expensive to move to market.

Oil firms, including market leaders Rosneft (ROSN.MM), LUKOIL (LKOH.MM) and TNK-BP (TNBPI.RTS), are investing hundreds of millions of dollars to meet the government's target of increasing associated gas utilisation to 95 percent by 2012.