ALICANTE - The hydrogen pipeline linking eastern Spain and southern France will cost about 2.5 billion euros ($2.64 billion), be half- financed by EU funds and carry 2 million tonnes of the fuel a year, Spanish Prime Minister Pedro Sanchez said on Friday.

Speaking at a summit in Alicante, he added that the pipeline, which should start operating by the end of the decade, will strengthen the European Union's strategic autonomy in energy.

A Spanish government document on the project said European Union funds from the bloc's Connecting Europe facility should account for up to half the financing. There will be a new link built between Portugal and Spain, worth 350 million euros, it showed.

The undersea pipeline section will be known as BarMar, while the entire hydrogen corridor connecting Spain and Portugal to France will be called H2MED, Spanish officials said.

European Commission President Ursula von der Leyen said the project dedicated to green hydrogen is eligible for the financing.

Green hydrogen, produced using solar and wind electricity, could be a key power source that can reduce pollution from long-haul heavy transport, and steel and chemical industries. ($1 = 0.9471 euros)

(Reporting by Belen Carreno and Inti Landauro)