Gazprom makes commercial offer for Azeri gas

MOSCOW (Reuters) - Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) said on Monday it had made a proposal to buy Azeri gas, a step that would directly rival a European Union project known as Nabucco.

"Yes, we have made a proposal not only at the political level but at the corporate level," Gazprom Deputy CEO Alexander Medvedev told Reuters on Monday.

Medvedev said the gas could flow through an existing pipeline that connects Russia and Azerbaijan and that the gas could come from the second stage of the Shakh Deniz field.

"The companies are in constant discussions on how to define the optimal price formula for the uptake of Azeri gas," Medvedev said.

"We believe that this is the easiest way for delivery of Azeri gas for export because we have a pipeline connection between Russia and Azerbaijan which could be easily expanded depending on the volumes available," he said.

If realized, the plan would rival EU efforts to secure gas supplies from the Caspian Sea.

The Nabucco Gas Pipeline is operated by a consortium led by Austrian group OMV (OMVV.VI: Quote, Profile, Research, Stock Buzz), which was proposed partly as a way to reduce reliance on Gazprom.

"Russia offers the most competitive conditions for the uptake of Azeri gas because of the simple fact that there is no need to invest additional money in a transport system," Medvedev said.

Russian media have reported that Russia may try to import gas through a pipeline which used to export gas to Azerbaijan. That pipeline has a capacity of 5 billion cubic meters and could be increased to 10 bcm.

Until 2007, Azerbaijan bought gas from Russia, which is trying to secure as much supply as possible to satisfy soaring foreign and domestic natural gas demand.

Shakh Deniz is co-led by BP (BP.L: Quote, Profile, Research, Stock Buzz) and StatoilHydro (STL.OL: Quote, Profile, Research, Stock Buzz) and has been producing around 10 bcm over the past year for exports to Turkey and sales inside Azerbaijan. The second phase could produce as much as 15 bcm a year.

(Reporting by Guy Faulconbridge; Editing by Jason Neely)