EU, Turkey sign Nabucco gas pipeline deal

ANKARA Mon Jul 13, 2009 7:31am EDT

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ANKARA (Reuters) - EU governments and Turkey on Monday signed a transit agreement for the EU and U.S.-backed Nabucco gas pipeline, which aims to reduce Europe's energy dependence on Russia.

Transit countries Turkey, Bulgaria, Romania, Hungary and Austria signed the accord in Ankara after years of delay, giving the 7.9 billion euro ($10.99 billion) project a major political boost.

"We are starting to confound the skeptics, negotiations once seemed irrevocably blocked, but now we have an agreement and I believe this pipeline is inevitable not impossible," European Commission President Jose Manuel Barroso said.

The pipeline aims to supply Europe with gas from the Caspian and Middle East, and Turkey's Prime Minister Tayyip Erdogan said he wanted Iranian gas to flow through the pipeline -- despite strong U.S. objections.

"We desire Iranian gas to be included in Nabucco when conditions allow," Erdogan told a gathering of Nabucco partner countries and regional countries including Iraq and Georgia.

U.S. special energy envoy Richard Morningstar on Sunday reiterated Washington's opposition to possible use of Iranian gas in Nabucco until Washington normalizes relations with Tehran. The two are at odds over Iran's nuclear program.

However, despite Monday's signature, questions over supply and financing still plague Nabucco's feasibility, even as progress of a rival Russian plan edges ahead.

NO CONCRETE DEALS ON SUPPLY

No concrete supply deals have yet been signed for Nabucco, which plans to pump 31 billion cubic meters of natural gas to Europe by 2014.

The Nabucco Consortium has mentioned Egypt, Azerbaijan and possibly Russia and Turkmenistan as sources for gas.

Azerbaijan's Industry and Oil Minister Natik Aliyev told the gathering that Azerbaijan was interested in Nabucco and that the gas-rich Caspian country wanted diversification of its energy export routes.

Iraq's Prime Minister Nuri al-Maliki said Europe could receive 15 billion cubic meters of Iraqi gas via Turkey, but it was not immediately clear if he was referring to Nabucco.

On Sunday, Iraqi government spokesman Ali al-Dabbagh said Iraq did not have any surplus gas to sell via U.S-backed Nabucco pipeline now.

Egypt's Oil Minister Sameh Fahmy also said a planned Arab gas pipeline could be a potential source of gas for Nabucco.

Erdogan also said he believed Russian gas could be transported to the European markets via Nabucco.

The Nabucco project has been unable to find sufficient throughput for the pipeline, which is competing with the rival Russian-backed South Stream project to feed growing European consumption.

Analysts say Russia's Gazprom more practical strategy -- signing basic cooperation agreements with supplier countries -- gives South Stream pipeline a competitive edge by building relationships between companies.

The European Union has supported the project as a way of reducing its reliance on Russian gas. A row over prices and debt between Moscow and Kiev last winter led to Russia cutting off supplies into Ukraine, including those destined for Europe.

Predominantly Muslim Turkey, which aspires to join the European Union, hopes Nabucco will strengthen its position as an energy hub for the West and advance its EU bid.

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