The Nabucco pipeline to carry Caspian gas to Europe and ease its reliance on Russian supplies will open in 2017, two years later than planned, and cost more than its target of 7.9 billion euro ($11.48 billion).

Its builders on Friday delayed their planned start-up, announced they will have to lay additional pipe and said for the first time that they were open to linking up with rival projects.

Nabucco intends to bring up to 31 billion cubic metres of gas annually from the Caspian region to an Austrian hub, bypassing Russia and altering the balance of regional power supplies.

Nabucco Managing Director Reinhard Mitschek announced that the pipeline would be 20 percent or 550 kilometres (342 miles) longer than first planned, though he declined to comment on how much higher that would send costs.

'That does not automatically mean that investment figures need to be increased in the same range,' he told reporters. 'To give any prices now would be premature.'

A spokesman said the extension resulted from changing a feeder line to Iraq from Iran.

Sources close to the long-delayed project had told Reuters on Thursday the projected costs could nearly double to between 12 billion and 15 billion euros.

Construction will kick off in 2013. Nabucco said its timeline changed to reflect the timing of potential supplies from the Caspian and Middle East regions.

It had earlier shunned merging with rivals, such as the Italy-Turkey-Greece Interconnector (ITGI) and Trans-Adriatic Pipeline (TAP) pipelines, to carry Caspian gas to Italy.

'If that can deliver added value, then we'll take all shippers on board,' said Mitschek. 'We see Nabucco as a backbone and frontrunner. We are open to links to branch lines.'

He said consortium managers had had no formal discussions with the ITGI or TAP groups.

Turkey's Energy Minister Taner Yildiz told Reuters that the Nabucco partners cannot afford a considerable rise in costs for the project and using the existing pipelines of Turkish state pipeline company Botas may reduce costs.

'This could be done by increasing the capacity of Botas' pipelines,' he said. 'It is clear that partners will not comfortably meet highly elevated cost estimates.'

Rising costs

Partners in Nabucco include Botas, Austria's OMV, Germany's RWE, Hungarian MOL, Romania's Transgaz and Bulgarian BEH.

The final investment decision is still pending and if they balk at covering higher costs the project could be in danger, but RWE and OMV quickly reffirmed their commitment. 'RWE is sticking to Nabucco: the project is an efficient and economic solution to develop new gas sources and gas routes for the European market,' a spokesman for RWE said.

He said negotiations to secure gas supply from Azerbaijan, Turkmenistan and northern Iraq were progressing well, adding: 'We are expecting supply commitments this year.'

In Vienna, a spokesman for OMV said: 'We are committed to the project.'

However, an official at one Nabucco shareholder said some partners were 'seriously worried' about costs that were sure to top 10 billion euros and about a lack of firm supplier pledges.

'Azerbaijan and Iraq have prominence among suppliers but considering production dates for these two countries, it does not seem likely they will be able to provide resources by 2017. ITGI is operational, TAP as well as South Stream are progressing. All these bode ill for Nabucco,' he said.

One Turkish source close to the process said there was no agreement so far on where the pipeline should start. Turkey was insisting on Ankara while the consortium wanted Baku.

'The increase in costs will at least delay the project. The problem of gas supplies, on the other hand, still looms as a very serious issue. The serious disagreements among the shareholders will enlarge these problems even more,' he said.

Necdet Pamir, of Ankara's Bilkent University, said: 'Considering the problem of resources on top of the cost issue, the realisation of this line now looks difficult.'     Shares in RWE and OMV gained in an easier energy sector by 1345 GMT despite the uncertainties that hung over the project.

'I would not necessarily think that (Nabucco) are in trouble, but a linkage to other pipeline systems would make sense because you have a couple of pipeline projects that will be running more or less next to each other,' said Erste Group analyst Thomas Unger.

'A delay is slightly negative...but I wouldn't say the project is dead because of that.'

Prospects for Nabucco have been helped by a move away from nuclear power in Europe, which will boost future gas demand. – Reuters