Gazprom tends to come in for harsh criticism from equity analysts for extravagant and inefficient capital expenditure. So when the Russian gas monopoly pledged to invest $40bn in a project to produce and export east Siberian gas to the Asia-Pacific region this week, there was the usual chorus of complaint.

But investment bank Renaissance Capital has jumped to Gazprom's defense, saying the high cost Eastern project makes sense.

Gazprom has been planning to develop east Siberian gas reserves for export to the Asia Pacific for some time but only this week revealed the cost of the huge scheme that will help diversify Russia's foreign gas trade away from Europe.

All told the eastern project will cost Rbs1.2tn ($40bn) including Rbs430bn to be spent on the development of the vast Chayandinskoye gas field in remote Yakutia and Rbs770bn on a 3,200km pipeline to link the field with a new 10m tonnes-a-year gas liquefaction plant at the port of Vladivostok on the Russian Pacific.

As usually happens when big Russian energy ventures get underway, Vladimir Putin gave his blessing for the eastern project after a meeting with Alexei Miller, Gazprom's chief executive, on Monday.

Gazprom should launch the development of Chayandinskoye and begin building the export pipeline as soon as possible, the Russian president said. The Eastern project would allow Russia to diversify its foreign gas trade away from Europe to the more buoyant energy markets of the Asia Pacific.

Putin's approval for the eastern project suggests that Russia and Gazprom have given up hope that long-debated plans to build two pipelines to carry up to 68bn cubic metres a year of Siberian gas direct to China are going to materializs any time soon. China has contracted to buy gas from Middle East, Australian and central Asian producers and is insisting that Gazprom lowers the price before committing to Russian gas supplies.

However, some analysts poured cold water on the eastern project this week saying Gazprom would do better to pursue the Chinese pipeline option rather than embark on a costly LNG venture.

"It seems rather hard to justify a project that would develop a completely new field in Yakutia (the middle of nowhere), ship it 3,200km across the Russian hinterland shadowing the border with China, then liquefy it only to sell the bulk of it, let's face it, most likely to China,"said Sberbank Investment Research.

Otkritie, the Moscow based investment bank, questioned the high cost of the 3,200km pipeline and said Gazprom should nail down gas sales agreements in the Asia Pacific before rushing to launch the Eastern project. It said:

The 3,200km pipeline will come at a cost of 7.6m/km, almost twice the cost of the $4.2m/km Transneft spent on the similarly challenging East Siberia Pacific Ocean oil export pipeline.

But Renaissance Capital came to Gazprom's defence applauding the eastern project and accusing the company's critics of "Moscow myopia."

The eastern project "is a sound solution to expanding into new markets that involve investment in greenfield upstream projects."

RenCap gave its reasons:

*If Gazprom is to fulfill its goal to become a global gas company it is critical that the company pushes ahead rapidly with plans to export gas to the Asia Pacific.

*Gas prices in the Asia Pacific are as much as three times higher in Europe where Gazprom, delivering gas by pipeline, is facing increased competition from LNG suppliers.

*Gas demand is growing in the Asia Pacific, but marketing will get more difficult in the next decade as Australia brings new LNG projects on line.

*Russia and Gazprom's plan to build gas export pipelines to China are unlikely to materialise in the short to medium term. Producing LNG in Vladivostok is a way out of the quandary that will provide Gazprom will have the flexibility to supply not only China, but other eastern markets as well .

*Japan and Korea aim to invest in gas projects from the start and are likely to help fund part of the eastern project and commit to long term Russian gas imports. Japanese companies are already involved in the Gazprom-led Sakhalin-2 LNG venture and have shown interest in supporting the Vladivostok liquefaction plant.

"We do have the same capex and management concerns as the investment community, but we believe a measure of Moscow myopia has made (Gazprom's) stock trade in the wrong direction, on the back of what we view as a positive development," it said.