Austria, in a step towards greater energy sector competition, wants to develop a gas trading hub on the Slovak border but analysts say the country's dependence on imported Russian gas may thwart its plans.

Austria's biggest oil and gas firm OMV is backing the spot-trading hub at the border town of Baumgarten in return for competition watchdogs' approval of a joint venture with local utilities to sell gas to industrial consumers.

But Russian energy giant Gazprom, the world biggest producer, which pipes in about about 80 per cent of Austria's gas, is reluctant to throw its weight behind spot trading as it looks to safeguard long-term supply contracts.

"The government says OMV must facilitate this (the hub) but I'm not sure how much use this will be unless the Russians want to play ball," said Jonathan Stern, a London-based expert on Russian gas.

"The combination of chaotic rules (for third party access to pipelines) and the fact the Russians don't want to sell spot gas are likely to prove a killer," he added.

Gazprom supplies gas to OMV, Germany's Ruhrgas, Gaz de France and Italy's Eni at Baumgarten, which has storage sites and pipeline links to Italy, Hungary and southern Germany.

Analysts say these utilities are reluctant to trade gas there for fear of angering Gazprom which has a clause in its contracts forbidding purchasers from selling on its gas to other suppliers.

"The real scandal is these companies have decided not to upset Gazprom," said Patrick Heren, publisher of the London-based Heren gas report.

He said the firms will face legal challenges as the European Union has ruled the clause preventing reselling is anti-competitive and is in talks with Gazprom about changing existing contracts.

Gazprom has agreed to exclude the clause from future contracts.

As a first step towards th creation of the Baumgarten hub, the firms in the Econgas joint venture - OMV and five local gas companies which it supplies - have agreed to auction 250 million cubic metres (mcm) of gas a year at Baumgarten until a trading hub is established.

Volumes could be higher than this as other local companies can cut the amount of gas they have agreed to buy from OMV under long-term contracts by 20 per cent until 2008.

OMV will sell this surplus gas in the auctions which start in July. OMV agreed with competition authorities that a hub will be considered properly established if it has at least seven active counterparties, traded volumes of at least 350 mcm a year and a basic service to track ownership of gas.

Similar systems already operate at gas trading hubs at Zeebrugge in Belgium and on Germany's border with the Netherlands.

A small amount of over-the-counter trading already takes place at Baumgarten with gas coming from Austrian, Hungarian and Slovakian suppliers.

"There is a little bit of gas produced in Austria and a little gas that appears to come from Hungary," said Heren, adding Slovakian suppliers sell some gas they buy from Russia.

Trade at Baumgarten could pick up this year on the back of growing Italian gas demand, though companies face problems getting access capacity in the Trans-Austria Gasleitung (TAG) pipeline which runs to Italy and Slovenia, analysts say.

The Austrian regulator recently ordered the pipeline's owners, OMV and ENI Gas and Power, to offer capacity in the 26.5 billion-cubic-metres-a-year link to third parties.

But only about two-thirds of the capacity was taken up as buyers found it difficult to get gas at Baumgarten due to western companies' reluctance to resell Russian gas, said Heren.