Turkey and Azerbaijan have signed an agreement to build the Trans-Anatolia Gas Pipeline (TANAP), a move welcomed by the European Commission as a major step towards completing the Southern Gas Corridor project.

Turkish Energy Minister Taner Yıldız and his Azeri counterpart Natiq Aliyev signed the deal yesterday (27 June) to build the €5.6-billion pipeline that will span 2,000km.

The project will link to the expanded Southern Caucasus pipeline corridor through Georgia to a variety of proposed links in the European Union.

The ceremony was attended by President Ilham Aliyev of Azerbaijan and Turkish Prime Minister Recep Tayyip Erdoğan, who said the two countries had taken an “historic step”.

The launch of TANAP has been coordinated with start of the Shah Deniz II gas drilling project in the Caspian Sea, with commercial production set to begin in 2017. TANAP could eventually carry as much as 31 bcm, equal to the planned capacity of the Nabucco gas pipeline.

Nabbuco was bidding for the same gas from Shah Deniz II, but industry experts have said two projects competing for the same gas would make no sense.

In the first period, 10 bcm of Azeri gas will be sold to Europe and 6 bcm to Turkey. Erdoğan noted that the volume of gas to be delivered to Turkey would rise depending on country’s need.

It remains unclear if the pipeline corridor to Europe would go through Bulgaria or Greece. The Azeri website ABC reported that the route chosen is through Bulgaria, which would eliminate the need for the Trans Adriatic Pipeline (TAP) and leave in the running ‘Nabucco West’ - a shorter version of the origial Nabucco pipeline - and the South-East European Gas Pipeline (SEEP).

Nabucco West would run from Turkey's western border through Bulgaria and Romania to Austria. The original Nabucco project called for connecting the Azerbaijan gas supplies to the Baumgarten hub near Vienna.

SEEP is a British Petroleum pipeline project from Turkey through Bulgaria to the Romanian-Hungarian border.

Energy Commissioner Günther Oettinger welcomed the signature of the TANAP deal, which would establish for the first time a direct pipeline link from the European Union to the Caspian Sea. The commission takes the position that the alternative – to use the existing pipeline network in Turkey - implies risks, as there are capacity constraints in central Anatolia.

"Europe is now a step closer to its aim to get gas directly from Azerbaijan and the other countries in the Caspian region," Oettinger said.

A Commission press release said three remaining projects are in competition to bring the gas from the Turkish-EU border deeper into the European Union: Nabucco West, SEEP and TAP.

A pre-selection of the two pipeline projects aiming to supply gas to Northern Europe - Nabucco West and SEEP – is due to take place by the end of the month. A final decision on the whole route will be taken in June 2013, according to Azeri sources.