Europe has made slow progress in diversifying away from Russian gas, despite agreeing that a new pipeline from the South Caucasus region should become a priority after the last damaging row between Moscow and Kiev three years ago.

The 3,300km (2,050-mile) Nabucco pipeline will link the gasfields of Azerbaijan to Western Europe without passing through either Russia or Ukraine, once the first stage from Austria to Turkey is completed in 2013.

Uncertainty about supplies from further afield such as Iraq, Turkmenistan and even Iran mean that the proposed pipeline may not be running at full capacity until 2020. Even then it will still be providing less than 10 per cent of Europe’s needs.

The doubts about Nabucco’s viability, given its enormous construction costs, mean that it might also have to rely on some Russian gas to help to pay its way, some experts believe, partly undermining the concept of an alternative supply route.

Not only that, but Europe faces stiff competition for Azerbaijan’s gas reserves after Gazprom made a full market price offer for the country’s reserves last year. Azerbaijan is thought to want to diversify its customer base but remains under the influence of Moscow and might find it hard to resist selling some of its gas to Gazprom, possibly cutting the amount available to Europe as an alternative to Russia.

Construction work on Nabucco is due to begin next year, if all the legal, environmental and political approvals have been ironed out. Negiotations over the exact terms of transit through Turkey are on a knife-edge, with Ankara understood to be demanding higher transit fees and the right to use some of the gas rather than simply sending it all to Western Europe.

Nabucco’s shareholders are OMV of Austria, the Hungarian MOL, Romania's Transgaz, Bulgargaz of Bulgaria, theTurkish Botas and Germany's RWE.

They face a rival project in the proposed Gazprom South Stream pipeline which is also due to take gas from the Caucasus region through Bulgaria and into the EU. South Stream was due to start pumping in 2013 but recent reports suggest that it is running a couple of years behind schedule, which could give the EU a vital edge if it can keep to its timetable.

Europe’s own plan to diversify away from Russia has triggered a race to buy and import gas in overland pipes from the unpredictable Caspian and Middle East regions, as both Moscow and the EU compete for the world’s remaining gas resources. But they are not the only competitors. Turkmenistan signed an agreement recently to supply China though another new pipeline project facing east.

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