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Azerbaijan's state oil company is close to agreeing a deal to buy Greek gas distributor DESFA. The deal raises speculation that the Trans-Adriatic Pipeline holds the lead over Nabucco West in the race to carry gas from Azerbaijan's giant Shah Deniz field to Europe.

The State Oil Company of the Republic of Azerbaijan (Socar) was the sole bidder for DESFA, a subsidiary of state gas company DEPA, in an auction on June 10. Athens attempted to privatise DEPA in early June, but no bidders came forward. The Greek government had been hoping to raise up to €900m from the sale, which would have gone a long way to reaching its target of raising €1.8bn from asset sales by the end of September.

Socar, however, bid in the separate auction for the distribution unit - which fits with its recent strategy of buying up assets in the neighbourhood: Turkey, Georgia and Romania for instance - The Azeri company was left as the only bidder after two potential rivals - Russian power company Sintez and a Czech-Greek team up featuring PPF and Terna Group - dropped out just ahead of the company going on the block.

An unnamed official told Reuters that Greece may agree the sale to Socar, which bid €400m for 66% of the company, as early as June 20. "The privatisation agency is very pleased, it's basically a done deal," the official said.

There is speculation that the link between Socar and the Greek company increases the likelihood that the Trans-Adriatic Pipeline (TAP) may be selected to transport gas from the offshore Shah Deniz to Europe. TAP - which would run through Greece, across Albania, and under the Adriatic to Italy - is competing with the EU-backed Nabucco West to collect the gas at the Turkish border to carry it to European hubs. The Shah Deniz consortium is due to make a final decision on the route imminently.