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Commercial operations at the Medgaz natural-gas pipeline linking Algeria to Spain started Friday, opening up a key new transportation route to diversify European supply away from Russia.

A spokesman for the Medgaz consortium said Friday that commercial operations at the EUR900 million pipeline had started, confirming information from official media in Algeria.

Medgaz--which runs under the Mediterranean sea and is 210 kilometers long--was initially expected to start operations in late 2009.

However, it has faced a host of delays and problems. They include technical issues, a global gas glut and a long legal dispute over Algerian gas prices pitting state-owned Sonatrach and Spain's leading gas importer Gas Natural SA (GAS.MC), that is still unresolved.

The route has the capacity to transport 8 billion cubic meters a year, with a possible increase to 16 billion cubic meters in the medium term.

The Medgaz spokesman said he had no information on the gas volume currently transported.

State-oil giant Sonatrach owns 36% in the pipeline. Iberdrola SA (IBE.MC) and Cepsa (Espagne) each have 20% and Endesa SA (ELE.MC) and GDF Suez, 12% each.

Past natural-gas disputes between Russia and Ukraine have led European importers to increasingly rely on other sources such as Algeria, which is already the continent's third-largest supplier.

-By Benoit Faucon, David Roman and Geraldine Amiel, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com