By Emre Peker

ISTANBUL--BP PLC (BP) and its partners in an Azeri natural gas field are seeking an equity stake of about 50% in the Nabucco pipeline that is competing to provide an alternative source of energy for Europe, a BP executive said Thursday.

The two sides have been in talks for three months and may reach an agreement by year-end, said Al Cook, BP's vice president of the $40 billion Shah Deniz development, in an interview at the Atlantic Council's energy conference in Istanbul.

BP and Socar, Azerbaijan's state-oil company, have been leading the three-month-old effort that mirrors an agreement struck earlier this year with the Trans-Adriatic Pipeline, or TAP, where members of the Shah Deniz consortium took an equity stake and started funding engineering costs, Mr. Cook said.

Companies are rushing to provide Azeri gas to the European market in an effort to wean the region off Russian gas. The consortium will decide by June next year whether to transport the gas to Europe via Nabucco Gas Pipeline International GmbH's western arm starting in Bulgaria or through TAP starting in Greece, Mr. Cook said. BP's preference is to carry the gas to Turkey's western border with the Trans Anatolian Natural Gas Pipeline Project, or TANAP, in which the London-based oil and gas firm holds a 12% stake.

One of the BP-led project's biggest competitors in supplying Europe with natural gas is Russian major OAO Gazprom (GAZP.RS), which finalized Thursday its last investment agreement to develop the South Stream pipeline that may provide 14% of Europe's gas consumption by 2015.

"We don't see the South Stream as a major threat," Mr. Cook said. "We're in competition with other sources of gas for the entire European market and when you look at South Stream to a large extent it's a redirection of Russian supply rather than brand new large volumes… From a European competition perspective, we expect to be producing gas into Europe alongside Russia, and whether that Russian gas comes into markets through existing pipelines--North Stream--or South Stream, that doesn't change the fundamentals of both sources of gas being required for the European markets."

Write to Emre Peker at Emre.Peker@dowjonews.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires