Turkey is likely to give up problematic claims on gas in a trans-continental pipeline project, the only way forward for the European Union-backed plan trying to push ahead of a rival Russian project, Reuters reported.
Turkey has sought to use 15 percent of all natural gas to flow through the nearly $11 billion Nabucco Pipeline, seen coming on line as early as 2014, in exchange for letting nearly half the pipeline pass through Turkish territory.
Nabucco, conceived as a way to lessen Europe's dependence on Russian gas, which accounts for a quarter of the continent's consumption, received crucial support from gas producers in northern Iraq earlier this month in the form of an $8 billion supply plan that would get the pipeline started.
But Turkey's transit demand has come to be seen as a deal breaker for the Nabucco consortium, also made up of Austria, Germany, Bulgaria, Romania and Hungary.
"The 15 percent has to be off the table. It's not only something that we cannot accept; it's something the producing countries cannot accept," said European Commission energy spokesman Ferran Tarradellas Espuny.
If Turkey drops its demand, final transit agreements can be signed between the EU's five Nabucco consortium members and its sixth non-EU member, Turkey, which is keen to use its clout to become a regional energy hub.
"We are working on the intergovernmental agreements for the consortium members, which includes Turkey. We are confident that we will be signing the (agreements) by June, maybe in Turkey, in Ankara," Espuny said.
Not only would that help boost investor sentiment towards Nabucco, which has yet to see the necessary financing commitments, but it would also help the project, seen as crucial for European energy security, move ahead of competing Russian-backed pipeline South Stream, which Moscow intends to finish before Nabucco.
"If this (the resolution of Turkey's demand) happens, it means Nabucco will be a few steps -- not one, but a few -- ahead of alternative pipelines," said Fatih Birol, chief economist for the International Energy Agency.
"That's the important difference for investors who will be looking at the overall conditions," he said.
With the resolution of Nabucco transit agreements, the consortium could start work on the open-season agreements, when firms buy up portions of the capacity of the 31 billion cubic metre pipeline.
Moscow has yet to iron out transit details with Italy, Hungary, Bulgaria, Greece and Serbia, members of its competing pipeline plan, but it has also emphasized that it plans to speed up the project, which will have a final capacity of 63 billion cubic metres.
Russia has created joint ventures with several of the pipeline signatories and has the gas to send to Europe, not a small detail that Nabucco has yet to work.
Nabucco rests on securing gas supplies in Azerbaijan and Turkmenistan and, possibly, Iraq and Egypt but no contracts have yet been signed.
Some analysts say Turkey may use the issue of the 15 percent transit share to strengthen its hand at the bargaining table with Europe on other issues, including Ankara's protracted EU accession talks.
There have been signs, however, that the government may relinquish the demand.
"Turkey is demanding 15 percent from the pipeline, but this is not an essential demand. Our talks with the European Union on this subject are continuing," said a high-level Turkish official who is close to the project.
Both Europe and potential pipeline supplier countries have tried to soften Turkey's stance, saying they would pay attention to Turkey's fast rising gas needs.
A bloc of European and Arab energy firms said their plans to pump gas from Iraq's Kurdish north would take into account Turkey's needs. Details on the northern Iraqi deal, including permission from Baghdad, are yet to be defined.
But analysts say that Turkey's 15 percent is less about meeting its domestic market and more about becoming a gas-trading country through the Nabucco pipeline.
"Domestic consumption is irrelevant, because what is at stake is whether Turkey wants to become a transit country or an energy hub," said Wolfango Piccoli, analyst at Eurasia Group.
"The main issue for Turkey is not that it meets its rising domestic demand, but what it can become vis-a-vis Nabucco," he said.
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