* Decision crucial for Europe to cut dependence on Russia
* EU Commission says route could carry a fifth of EU needs
* Statoil reduces stake in Shah Deniz II to 15.5 pct
* Sells 10 percent to SOCAR and BP for $1.45 bln
* Shah Deniz consortium and SOCAR extend contract up to 2048
By Nailia Bagirova
BAKU, Dec 17 (Reuters) - Backers of Azerbaijan's Shah Deniz II gas project signed a final investment decision on Tuesday, scaling up its status as an alternative gas transit route to Europe as the continent tries to wean itself off Russian energy supplies.
Azeri President Ilham Aliyev told a ceremony in the capital Baku that the project extension "will change the energy map of our region and help the historical development of our country".
The European Commission said the decision to go ahead with enlargement of the scheme could see it supplying 20 percent of European Union needs in the long term.
Gas shipments via Ukraine have been a focus of EU and Russian anxiety for years and especially since 2009, when a pricing dispute with Russia led to a cut-off of gas supplies to EU customers.
Since then, Europe has sought new suppliers and to bring Ukraine into its orbit, while Russia has fought to retain its influence over Kiev and to build alternative supply routes to safeguard deliveries to its European customers.
Russian President Vladimir Putin on Tuesday threw Ukraine an economic lifeline, agreeing to buy $15 billion of Ukrainian debt and to reduce the price of Russian gas supplies to Ukraine by about a third.
The documents signed in Baku include an investment decision on Shah Deniz II, as well as the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) gas pipeline projects. Combined, the projects will cost $35 billion, Aliyev said.
The field's proven gas reserves are estimated at 1.2 trillion cubic meters of gas.
Project partner Statoil of Norway accompanied its announcement on the go-ahead with news it would reduce its stake in the consortium to 15.5 percent from 25.5 percent.
Statoil's move will increase the ownership proportions of the remaining players and fits a trend among top oil companies to rein in spending by focussing on fewer big projects.
Statoil will sell the 10 percent to operator BP and Azeri state energy firm SOCAR for $1.45 billion in cash.
"It's a very good price ... The price is three times book value while Statoil shares are traded at 1.3 times book value," said John Olaisen, an analyst at brokerage ABG Sundal Collier in Oslo. Other analysts said investors would welcome the move.
The Shah Deniz consortium, which includes Total, confirmed the sale that envisages BP buying 3.3 percent and SOCAR 6.7 percent.
"Both of these transactions are subject to conditions that are expected to be satisfied in 2014," the consortium said in a statement.
BP Azerbaijan and the consortium said SOCAR and its partners in Shah Deniz II had agreed to extend terms for the project by 12 years to 2048.
"The extension of the Shah Deniz production sharing agreement to 2048 ... means we can plan for the very long term and part of that planning means undertaking new exploration for the future of Azerbaijan and future of Shah Deniz beyond stage two," Al Cook, BP's vice-president, told reporters.
From around 2019, Shah Deniz II is expected to supply 16 billion cubic metres (bcm) per year to Europe, including 6 bcm for Turkey.
For graphics of gas pipelines to Europe use the link below:
ALTERNATIVE TO RUSSIA
European buyers have struggled to find alternatives to Russian gas producer Gazprom, whose contracts link prices to oil, generally making it expensive compared to the spot market.
Gazprom covers a quarter of Europe's gas needs, with more than 150 bcm of exports a year. In response to Europe's quest for Caspian supply, Gazprom proposed its $39 billion South Stream project, which would pipe gas to northeast Italy through the Black Sea starting at the end of 2015.
The European Commission has said it does not oppose Russia's plans to diversify supply routes, bypassing Ukraine, but says they have to conform with EU law and are far from doing so.
"Shah Deniz II and the Southern Corridor pipelines will not only change the energy map, but will give customers in Europe direct access to the gas resources of Azerbaijan for the first time," Bob Dudley, BP's group chief executive, said at the signing ceremony on Tuesday.
Earlier this year, SOCAR and partners including BP and Statoil selected the TAP for potential gas deliveries to Europe over its Austria-based rival Nabucco West.
TANAP will be built from the Turkish-Georgian border to Turkey's border with Europe, with its preliminary total cost estimated at $20 billion.
Buyers of Azeri gas from Shah Deniz II are Shell, Bulgargas, Gas Natural Fenosa, Greek DEPA, Germany's E.ON , France's GDF Suez, Italian regional utility Hera Trading, Switzerland's AXPO and Italy's Enel.