E.ON Ruhrgas, Germany 's largest importer of natural gas, in a bid to strengthen its position in the Italian market said Thursday it will join a consortium that is developing a pipeline project to bring natural gas to Europe from the Caspian region via Greece and Italy .

In a joint statement with its consortium partners, E.ON AG's (EOAN.XE) core gas unit said it will take a 15% stake in the Trans Adriatic Pipeline, or TAP, confirming information Dow Jones Newswires obtained from industry sources earlier Thursday.

The existing partners--Norwegian oil and gas company Statoil ASA (STL.OS, STO) and Swiss energy-trading company Elektrizitats-Gesellschaft Laufenburg AG (EGL.EB), or EGL--will reduce their stakes to 42.5% each.

"TAP is the most promising project for moving gas to Southern and Central Europe ," said Jochen Weise, E.ON Ruhrgas executive board member responsible for gas supply and trading, during a press conference in Brussels . He explained that the move will strengthen E.ON's offer in Italy , where the company is the fourth largest power producer and third largest gas supplier to end customers. Weise declined to say how much E.ON paid for the stake.

The pipeline--with an initial capacity of 10 billion cubic meters of natural gas a year and expandable to 20 bcm a year--would transport gas from the Caspian basin and the Middle East to Italy . Starting in Greece , the pipeline would make its way through Albania before crossing the Adriatic --the shortest physical route and the one with the smallest portion offshore.

According to the TAP's website, the project is still in the planning and engineering stage. A final investment decision for TAP hasn't been made, yet.

The European Union is seeking to increase its energy security by diversifying its sources of gas imports. Opening a pathway--which it calls Southern Corridor--to the Caspian and Central Asian regions is a key strategy.

E.ON is also a shareholder in the Gazprom OAO (GAZP.RS)-led Nord Stream pipeline project, which is slated to transport Russian gas to Germany via the Baltic Sea .

E.ON's addition "provides a significant step to realize this project," said Statoil's Executive President for Natural Gas Rune Bjornson during the press conference, adding that this also adds to TAP's competitiveness in bidding for Azerbaijani gas volumes.

TAP aims at supplying Europe with gas from the second development phase of the offshore Azerbaijani field of Shah Deniz, expected to be operational in six or seven years, producing about 16 bcm a year.

Off the Azerbaijani coast in the Caspian Sea , the Shah Deniz II field is being developed by a consortium of energy companies, in which Statoil holds a 25.5% stake, a plus for E.ON's decision to join TAP, Weise explained. TAP is competing for that gas with two other projects.

ITGI, or Interconnector Turkey Greece Italy, is being developed by Italian utility Edison SpA (EDN.MI) and Greek monopoly gas company DEPA. ITGI would carry up to 10 bcm of gas to southern Italy from Greece through a slightly longer route than TAP, bypassing Albania .

The European Commission has long favored a third project, Nabucco, a 3,300-kilometer pipeline that would bring the gas straight to Central Europe , where it is most needed.

European markets are however currently oversupplied with natural gas due to the recession-related drop in demand in 2009 and increasing amounts of new unconventional sources of gas--such as shale gas and LNG--entering markets around the world.

Asked whether demand for gas will be high enough to justify additional supplies via TAP, Weise said he is "very confident gas demand in Europe will increase."

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