Budapest  - The gas crisis in January caused by a row between Russia and Ukraine over pricing has focused interest on the planned 3,300-kilometre Nabucco pipeline that would cut both countries out of the supply chain.

"We must not allow ourselves to be placed in this position in future," European Commission President Jose Manuel Barroso said on Wednesday.

"The message I will take to the March European Council is that now we have to be serious about diversifying and investing in Europe's energy security future."

A quarter of the gas burnt in the EU comes from Russia, and 80 per cent of that comes via Ukraine. The Nabucco pipeline could bring up to 31 billion cubic metres of gas a year from the Caspian Sea region across Turkey into the EU.

Nabucco was first mooted back in 2002 following talks between Austria's OMV and Turkish Botas. The consortium behind the project now comprises six national energy companies: Botas (Turkey), Bulgargaz (Bulgaria), Transgaz (Romania), MOL (Hungary), OMV (Austria), and RWE (Germany).

In 2007, Hungarian Prime Minister Ferenc Gyurcsany ruffled feathers in Brussels by signing up for a rival Russian gas pipeline project called South Stream. He described the EU's own pipeline project, Nabucco, as a dream. "You cannot heat homes with dreams," he said.

Now Hungary is about to host a summit on January 26 and 27 aimed at getting Nabucco on stream as quickly as possible.

The Austrian project company Nabucco Gas Pipeline International GmbH, in which all six partners have an equal stake, faces daunting challenges.

Against the backdrop of a global economic crisis, the Nabucco consortium must raise, by its own estimate, 7.9 billion euros (10.3 billion dollars) to build the pipeline.

"We need more political figures to stand up for the project, and the EU must get involved in the financing," the head of Hungary's parliamentary Nabucco committee, Janos Koka, said in a statement last week.

However, unlike Russia's planned South Stream pipeline, the Nabucco consortium does not have gas of its own to fill its pipeline.

The South Stream pipeline was announced in June 2007 by Gazprom and the Italian company ENI, and would bring Russian gas under the Black Sea and through the Balkans to Italy. It is seen by the EU and the US as a direct rival to Nabucco and a way for Russia to consolidate its grip on the European energy market.

Dr Gerhard Mangott, a professor of political science at the University of Innsbruck in Austria and an expert on regional energy policy, told Deutsche Presse-Agentur dpa that although the Nabucco consortium plans to have the pipeline in operation by 2013, it would be running at less than half capacity.

"There are strong doubts about sufficient volumes of gas for the pipeline's full capacity of 31 billion cubic metres by 2019," he said.

Besides Azerbaijan, the Nabucco consortium is also looking towards Turkmenistan, Iraq, Egypt and even Iran as sources of gas, setting the stage for a huge geopolitical chess game between Russia and Europe.

Russia has been actively courting suppliers in the gas-rich Caspian Sea region. In December, Gazprom and Turkmenistan agreed the basis of a pipeline to transport Turkmen gas to Russia. It could then be exported by Russia to Europe through the South Stream pipeline.

At the Hungarian summit next week, backers of the Nabucco pipeline must dispel doubts over supply.

"Even institutional investors like the EBRD and the EIB will have to base their decisions on contracted gas; so far, the Nabucco consortium does not have any contracted gas," said Dr Mangott.

The Nabucco project has also been hampered by Turkish demands for 15 per cent of the gas flowing through Nabucco for domestic consumption, according to recent reports.

At a meeting in Brussels on Monday, Turkish Prime Minister Tayyip Erdogan hinted that his country might be prepared to use Nabucco as a bargaining chip for EU membership.

All these issues will be on the agenda when the heads of the EIB and the EBRD sit down next week with Hungarian Prime Minister Ferenc Gyurcsany, Azerbaijani President Ilham Aliyev, Bulgarian Prime Minister Sergei Stanishev and ministers from other countries with a stake in Nabucco.

As Hungary's appointed Nabucco envoy Mihaly Bayer pointed out on Monday: the Nabucco summit will only be successful if dialogue between gas producers, transmission companies, consumers and financiers is productive. (dpa)