EU countries and Turkey on Monday signed a transit deal for the Nabucco gas pipeline, aimed at cutting Europe's energy dependence on Russia, a major political step backers say will boost the project.
Transit countries Turkey, Bulgaria, Romania, Hungary and Austria signed the accord for the 7.9 billion euro ($10.99 billion) European Union and United States-backed project, which aims to supply Europe with gas from the Caspian and Middle East.
The agreement irons out details over transit and tax issues for hosts of the pipeline.
"The Nabucco project is being labelled a pipe dream," Turkish Prime Minister Tayyip Erdogan said at the ceremony. "This project will be a success story that will prove the doubters wrong."
The signing of the long-delayed transit agreement is a major boost for a project that has been marred by political infighting and is still dogged by questions over supply and financing.
Progress of a rival Russian plan has also added doubts to the feasibility of Nabucco, which has been unable to find sufficient gas to put through the pipeline.
But on Monday, backers sought to dispel such doubts. "We are starting to confound the sceptics, 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.
"Politically it is all wrapped up. There is nothing more to be done because now we are at a totally commercial stage that hinges on the open season and the construction of the pipeline," EU Energy Commissioner Andris Piebalgs said.
The EU 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.
No concrete supply deals have yet been signed for Nabucco, which plans to pump 31 billion cubic metres of natural gas to Europe by 2014. But the Vienna-basd consortium is looking at Azerbaijan and maybe Russia and Turkmenistan as sources for gas.
Werner Auli, the head of Austrian firm OMV's gas and power division, said Azeri and Iraqi supplies looked good and tenders to buy capacity should start in the fourth quarter of 2009.
However analysts tempered official optimism saying major hurdles had still not been overcome.
"The agreement itself is nothing major, it doesn't really clarify the issues of supply, the different branches, the timing. The agreement also keeps away from some of the more politically sensitive points," said Ana Jelenkovic at Eurasia Group.
"As it currently stands we are no different than where we were yesterday. The kinds of things that are still blocking Nabucco have not been addressed," she added.
Besides Austria's OMV (OMVV.VI), Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE (RWEG.DE) , Hungary's MOL MOLB.BU and Romania's Transgaz (TGNM.BX) are partners in the pipeline project.
Industry and Oil Minister Natik Aliyev said Azerbaijan was interested in Nabucco and that his Caspian country wanted diversification of its energy export routes.
Erdogan also said he wanted Iranian gas to flow through the pipeline -- despite strong U.S. objections.
U.S special energy envoy Richard Morningstar on Sunday reiterated Washington's opposition to possible use of Iranian gas in Nabucco until Washington normalises relations with Tehran. The two are at odds over Iran's nuclear programme.
Iraq's Prime Minister Nuri al-Maliki said Europe could receive 15 billion cubic metres of Iraqi gas via Turkey, but it was not immediately clear if he was referring to Nabucco.
Erdogan also said he believed Russian gas could be transported to the European markets via Nabucco. Nabucco is competing with the rival Russian-backed South Stream project to feed growing European consumption.
Analysts say Russian gas export giant Gazprom's more practical strategy -- signing basic cooperation agreements with supplier countries -- gives South Stream pipeline a competitive edge by building relationships between companies.
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.
It has no hydrocarbon resources of its own and had held up progress on Nabucco by demanding 15 percent of the pipeline's capacity for domestic usage or re-export.
But Ankara dropped that demand after winnning a right to take a share from the gas flowing through Nabucco.