July 13 (Bloomberg) -- European countries planning a pipeline to reduce reliance on Russian natural gas today sealed an agreement that may help companies led by OMV AG find customers for the 7.9 billion-euro ($11 billion) project.

Officials from Turkey, Bulgaria, Romania, Hungary and Austria signed an accord in the Turkish capital Ankara for the Nabucco project, which has been in planning since at least 2004. The U.S.-backed venture has been delayed by a lack of commitments from customers, transit nations and gas suppliers.

“The Nabucco project is being labeled a pipe dream,” Turkish Prime Minister Recep Erdogan said in a speech at the signing ceremony today. “This project will be a success story that will prove the doubters wrong.”

Nabucco is intended to cut Europe’s dependence on Russian gas, helping to avoid a repeat of the cutoffs that reduced supplies to the region twice in the last three years. The link, due to send as much as 31 billion cubic meters of Caspian-region fuel a year via Turkey to Austria starting in 2014, still faces competition for gas. A further “project support” agreement will be signed within six months, Erdogan said today.

The project’s partners will now try to conclude “capacity contracts” by the end of the year, European Commission President Jose Barroso said as Iran and Iraq offered supplies.

Nabucco would bypass Russia and Ukraine, helping Europe find an alternative to Moscow-based OAO Gazprom, which supplies about 25 percent of the region’s gas. It would increase the importance of Turkey as a transit country to the European Union.

‘Structural Links’

“Energy can help to establish new structural links between the EU, Turkey and the Caspian Sea states,” Barroso said at today’s ceremony.

Gas would flow into Turkey from three of four possible competing entry points: Georgia, Iran, Iraq and Syria, according to the EU, which helped broker the accord.

Nabucco has been negotiating for supplies with Caspian countries including Azerbaijan, as well as Iraq and Turkmenistan, the Central Asian nation whose gas reserves tripled last year to make it the fourth-largest holder of the fuel. Gazprom is meanwhile signing supply contracts with Caspian producers, maintaining its monopoly on exports from former Soviet republics to Europe.

“There’s no available gas,” Pavel Kushnir, director of oil and gas research at Deutsche Bank AG in Moscow, said in a telephone interview. “Nabucco continues to hope that at some point Turkmenistan will join and supply gas to the project.”

Turkmen Explosion

Turkmen President Gurbanguly Berdymukhammedov said at a July 10 cabinet meeting that his country may participate in Nabucco as a supplier, according to his Web site. Turkmen gas exports via Russia have been halted since an April explosion on the main pipeline. Territorial disputes with its Caspian Sea neighbors mean supplies to Nabucco may have to be shipped overland via Iran.

The status of the Caspian is crucial for Turkmen gas supply, Richard Morningstar, U.S. President Barack Obama’s envoy for Caspian energy matters, said in Ankara today.

Turkey wants Iran to join Nabucco, Erdogan said at the signing ceremony. Iran is able to supply Europe with 31 billion cubic meters of natural gas a year via the link, the Oil Ministry’s Shana news agency said today.

“We don’t believe today that Iran should be a part” of Nabucco, Morningstar said.

Iraq will aim to supply 15 billion cubic meters of gas to the pipe, Iraqi Prime Minister Nuri al-Maliki said at today’s ceremony, according to an aide.

Construction Tenders

The Nabucco venture said in January it expects to tender construction orders for the pipeline at the end of this year or early next year and to receive commitments from customers, suppliers and bankers by the end of 2010.

“There has to be a determination on how it will be financed, clarification on where the gas will come from and we look forward to agreement between Turkey and Azerbaijan on pricing and transit,” Morningstar said.

Turkey had held off signing a transit accord as it sought approval to take 15 percent of the gas passing through the pipe at discounted prices for its own use.

The EU on May 6 approved 200 million euros in investment for the Nabucco pipe, after the European Investment Bank said in January it may finance as much as 25 percent of the project.

Aside from Nabucco, proposed pipelines in the region include South Stream and Blue Stream, both Gazprom and Eni SpA joint projects, as well White Stream, the Trans Adriatic Pipeline and the Interconnector Turkey-Greece-Italy, or ITGI.

Officials from Germany, Georgia, Azerbaijan, Syria and Egypt, the EIB and the European Bank for Reconstruction and Development also attended today’s ceremony.

To contact the reporter on this story: Rob Verdonck in London at rverdonck@bloomberg.netSteve Bryant in Ankara at sbryant5@bloomberg.net.

Last Updated: July 13, 2009 07:44 EDT