UPDATE 2-Algeria says Transmed gas line capacity to increase

* Capacity to increase by 7 bcm/yr by end of 09: Khelil

* Khelil says will try to speed up Galsi completion

* Italy's Scajola says Galsi a priority for Europe

By Hamid Ould Ahmed

ALGIERS, May 31 (Reuters) - Algeria will increase the capacity of its main gas export pipeline to Italy by 7 billion cubic metres (bcm) a year and try to speed up work on a new route, Algeria's energy minister said on Sunday.

European Union states are hoping to increase gas supplies from Algeria to reduce their reliance on Russia, especially after Moscow's standoff with Ukraine earlier this year disrupted supplies across Europe.

Algeria is the EU's third biggest foreign gas supplier. The Transmed pipeline, which runs from Algeria via Tunisia to the Italian island of Sicily, has a capacity at the moment of 27 bcm/yr.

"We talked about the expansion of the Transmed pipeline. Its capacity will increase by 7 billion cubic metres by the end of this year," Khelil said after talks with Italian Economic Development Minister Claudio Scajola.