(Adds details, Bulgarian minister)
By Tsvetelia Tsolova
SOFIA, Oct 31 (Reuters) - Gazprom began work on the Bulgarian segment of a new gas pipeline on Thursday, furthering a key project aimed at ensuring Russia keeps its place as main supplier to Europe.
The South Stream pipeline, the Bulgarian section of which will cost 3.5 billion euros ($4.82 billion), avoids the current main route via Ukraine, with which Russia has in the past clashed, prompting worries about European energy security.
"The South Stream pipeline is the key element for energy security in Europe," Gazprom chief executive Alexei Miller told reporters as the work got underway. "The risks arising from transit will disappear," he said.
The planned pipeline will transport some 63 billion cubic metres of gas a year through the Black Sea, Bulgaria, Serbia, Hungary and Slovenia into Italy.
Bowing to European Union rules on competition, Bulgarian Energy Minister Dragomir Stoynev said state-owned domestic energy company BEH and Gazprom had agreed on possible access to the pipeline for third parties.
A first phase of the project will be ready to pump 15.75 billion cubic metres of gas to European Union member Bulgaria by the end of 2015, officials have said.
The 540-kilometre long Bulgarian stretch will be 50-50 owned by Gazprom and BEH, which launched a maiden Eurobond on Thursday, seeking to raise 500 million euros.
The 2,380-long kilometre pipeline, which aims to open by the end of 2017, is expected to cost 17 billion euros.
Shareholders in the offshore section of South Stream, which runs under the Black Sea between Russia and Bulgaria, are Gazprom, Italy's Eni, France's EDF and Germany's Wintershall.
Stoynev said the pipeline should be completed within two years. A video link showed a man welding a pipe, reporting that work on Bulgarian territory had started.
Under the financial terms of the deal, the companies will borrow 70 percent of the funding and provide 30 percent from their own funds, Stoynev added.
That would translate into a 22-year loan of 620 million euros for BEH, which will be extended by Russia at a 4.25 percent interest rate, Stoynev said. Sofia would not extend state guarantees, he added. ($1 = 0.7262 euros) (Writing by Radu Marinas, Editing by Patrick Lannin)