The companies behind the Nabucco pipeline have agreed to give Azerbaijan's Shah Deniz gas group a stake in the project to pipe the country's gas to Europe, boosting its prospects against the rival TAP project.

The Shah Deniz II consortium, which has already signed a funding deal with the rival Trans-Adriatic pipeline (TAP), has said its acquisition of a stake would be critical for the Nabucco project to go ahead.

TAP plans to pipe Azeri gas to Italy while Nabucco will transport Caspian supplies to Europe.

Under the deal, announced on 10 January in Sofia and to be finalised in Vienna, the Shah Deniz group can take a 50% stake if it chooses the pipeline as its European export route, Nabucco executives said.

"With real upstream people as partners, we move in the direction of developing more than just something on a paper, but into direction of a real pipeline," said Gerhard Roiss, Chief Executive of Austria's OMV, a shareholder in Nabucco.

The Shah Deniz II group, which is developing the biggest gas field in the Caspian Sea region, will choose either the scaled down Nabucco project, known as Nabucco West, or the TAP project to carry its gas to Europe.

The EU supports developing gas imports from Azerbaijan as it wants to reduce its dependency on Russia, which currently supplies around a third of its gas.

Downsized Nabucco

The Nabucco gas pipeline project was initially designed to transport an annual capacity of 32 billion cubic metres of Azeri and other central Asian gas through Turkey and southeastern Europe into Austria.

But high costs and a lack of gas suppliers beyond the 16 billions of cubic metres (bcm) Shah Deniz II consortium led to the project being downsized last year.

The new Nabucco West project aims to ship 16 bcm of gas from the Turkish border to Austria, leaving the transit through Turkey to the joint Azeri-Turkish TANAP pipeline.

Brussels supports the delivery of Azeri gas to the region, which is expected to start in 2018 regardless of which pipeline is chosen.

The deal, announced in Sofia, also envisages joint funding of development costs for the Nabucco West project.

Other Nabucco shareholders include Hungary's MOL through its gas pipeline operator FGSZ, Turkey's Botas, Romania's Transgaz, Bulgaria's BEH and Germany's RWE , all holding 16.7% stakes.

RWE said late last year it would sell its stake, and Roiss said that OMV would buy RWE's share in Nabucco to safeguard the project.

BP holds a 25.5% stake in the Shah Deniz consortium, as does Norway's Statoil. Other shareholders include Azerbaijan's state energy firm SOCAR as well as France's Total.

The group had already signed a funding deal with Nabucco's rival, TAP, which is being developed by Statoil, Swiss EGL and Germany's E.ON.