* Western partners dropped applications, Gazprom alone
* New corporate structures, loans among plan B options
* Proponents cite long-term demand, risks of Ukraine route
By Vera Eckert and Oleg Vukmanovic
FRANKFURT/MILAN, Aug 25 (Reuters) - Western partners inRussia's Gazprom-led gas pipeline extension to Europeare examining alternative ways to fund it after Poland's carteloffice blocked its clearance last month, company and legalsources say.
Poland's rejection was based on concerns that Gazprom andits partners could bolster their market power, for example bydictating flows and prices to Poland once the Siberian gasreaches Germany via the Baltic Sea.
Gazprom's five Western joint venture partners withdrew toavoid a drawn-out battle, but vowed to help keep the projectalive saying Europe's gas production was declining and theywanted to secure a share of future business.
"We haven't closed the door on Nord Stream 2," said KlausSchaefer, chief executive of Uniper, one of the five, this week.
"We'll think of something intelligent."
Gazprom's partners are Uniper, Wintershall, Shell, OMV and Engie.
While details are under wraps, sources within the group saythat most likely options now could be to dilute current rightsas equity participants to put the joint venture out of thePolish agency's reach, raising bank debt, or issuing loans toGazprom with higher interest, reflecting the higher risk.
"They (the five companies) will focus on providing equity orother shareholder finance to the project in a way that does nottrigger a requirement for Polish competition approval," saidCharles Bankes, partner at law firm Simmons & Simmons.
"Changing the rights attached to their shares may helpachieve this. They may look at providing subordinated loanfinance rather than equity."
The Western firms would have had 10 percent each and Gazprom50 percent of the 8 billion euro ($9 billion) venture for the 55billion cubic metre pipeline to start operations in 2019.
While Gazprom now carries the full burden of financing andcarrying the project through, it can still look to the utilitiesfor help in exploration, transport and marketing.
To help with cash, partners could commit to volumes and payupfront when the gas is put into the pipeline, possibly alreadysecuring buyers at that stage at the other end.
Thierry Bros, analyst at French bank Societe Generale, saidequity ownership might be split between two Russian companiessuch as Gazprom and oil company Rosneft.
The 1,225 km (760 mile) pipeline will run alongside theexisting Nord Stream 1 of the same volume that began in 2011 andties four Western parties to Gazprom. It will run from near St.Petersburg and enter Germany near Nord Stream 1's landing point.
Opponents say Nord Stream 2 could tie Europe indefinitely toGazprom at a time when gas sources are plentiful and more choicewould help cut prices for consumers. U.S. Vice President JoeBiden on Thursday called it a "bad deal" for Europe.
Peter Hughes, an adviser at Global Gas Partners, saidGazprom had wanted to use the original Western participation toshow consumer interests were on board, which now "is clearly farmore difficult."
Nord Stream 2 could also cause geopolitical problems due toRussia's tensions with Ukraine.
Pursuing the project alone comes with a high price tag.
The joint company would have sought external capital for 70percent of the costs and provided 30 percent, or 2.4 billioneuros, of equity on a 50/50 percent basis.
Without the 1.2 billion from the Western firms, Gazprom maystruggle as it is also looking to revive a Turkish pipeline planand work on another to China.
A Gazprom spokesman declined to comment. ($1 = 0.8878 euros) (Additonal reporting by Vladimir Soldatkin in Moscow, editingby Nina Chestney and David Evans)
