The election of the new government in Greece which took place last month created concern about European energy security. However, the meeting between the Greek energy minister, Panagiotis Lafazanis, and the Ambassador of Azerbaijan in Athens generated relief for the whole Europe. Tsipras’s government declared it will support the Trans Adriatic Pipeline (TAP) and renewed the attention on this great project, highlighting its importance.
TAP is a pipeline project designed for natural gas transportation from Azerbaijan, specifically from the area of Shah Deniz in the Caspian Sea, going through Greece and Albania up to Europe.
EGL, a Swiss energy company now named Axpo, proposed the pipeline construction in the early 2000s and in 2006 it established, with the Norwegian company Statoil, the TAP AG joint venture. In 2010 also the German E.ON joined the project, which would provide South-East Europe and Italy with new gas flows. The agreement from Shah Deniz arrived in 2013. From that moment on, more companies entered into TAP AG’s shares like the Azer SOCAR, the BP and Statoil (20% each), the Belgian Fluxys (19%), the Spanish Energas (16%), while Axpo remained with a small 5%.
The project will start taking form in 2016 and construction is expected to end by 2018.
TAP will contribute to the realization of the “Southern Gas Corridor” (SGC), an expression coined by the European Commission to indicate all those infrastructural projects aiming to increase security in gas supplies and to boost diversification of energy resources through the provision of new gas flows. Once completed, the Southern Gas Corridor will drive for 4.000km and will involve numerous energy companies and USD 45 billion in investments.
The Trans Adriatic Pipeline will represent the final part of this system, which also includes the already existent Southern Caucasus Pipeline (SCP), running for 700km from Azer territory to Turkish boarder, and the Trans Anatolian Pipeline (TANAP), which will transport gas across Turkey up to Greece boarder (1700km). Greece, and specifically the city of Kipoi, will be the starting point for TAP, that will proceed through Greek territory for 545km to Ieropi, close to the Albanian boarder. After that, the pipeline will cross Albania for 211km up to the city of Fier and it will continue underwater for 105km to reach its final destination, San Foca, on the coast of Puglia in Italy.
The latter country will be the greater beneficiary of Trans Adriatic Pipeline. Already considered the European second gas market after Germany, Italy will become the most important gas network stocked by pipelines, both for its size and for its strategic weight. TAP impact on Italy would sure enough be positive from various points of view.
Of the 8 billion cubic metres (bcm) of natural gas Tap will provide per year, Italy will consume for domestic needs only the 10 percent. This means an increase in energy security not only for Italy but also for Europe as a whole.
The possibility of having an additional route for gas supply acquires a major importance for Italy and consequently for Europe if we consider the international scenario, which has recently demonstrated to be unpredictable and to jeopardize the reliability of gas flows. Italy has two main energy resources: Russia and Algeria. These countries are both facing a period of instability nowadays. Gas coming from Russia represents one third of Italian consumption and in order to reach Italy it must travel through Ukraine. The latter is currently affected by political crisis originating from the declaration of independence of Donetsk, Luhansk e Kharkiv regions, which merged into New Russia, and self-proclaimed as Union of Federal People’s Republics on the 24th May 2014. Despite the current truce, the clash between Russia, supporting the separatists, and the Ukraine government, who decided not to follow the European Union, the United States and the Organization for Security and Cooperation in Europe (OCSE) in recognizing New Russia, poses serious concerns on a possible interruption of gas flows.
The same dread lies on North Africa. Algerian gas, one quarter of Italian consumption, arrives in Italy through Tunisia. In both countries political tensions as well as terrorism threat generate instability. In this context, it is impossible not to think about Libya. Gas flowing from this country via the Greenstream pipeline has already been interrupted in the past due to internal political tensions. Today the situation is even more alarming due to ISIS offensive in Libya, which represents a serious threat for Mediterranean countries, especially for Italy.
Energy security is not the only sector that will take advantage from the Trans Adriatic Pipeline, but also Italian economy will benefit from the pipeline construction. Firstly, TAP will contribute to foster competition in the Italian market. Trans Adriatic Pipeline will reduce ENI (the main energy operator in Italy) market power, since it does not take part in TAP project, and more competitiveness would favour a decrease in wholesale prices with benefits for families and companies.
Nomisma Energia, a company specialized in energy and environment research, affirms that in Puglia (Italy), where the pipeline will land, the value of those activities directly connected with the pipeline realization will be €80 million per years during the building process and €4 million per year once completed, while the indirect gains will amount to €8 million per year.
Moreover, TAP construction will create an average of 150 jobs at the local level: 30 permanent positions and an additional 200 for connected activities. Around 80 experts and 200 consultants from different countries are currently employed in TAP headquarter in Switzerland and in the other branches in Greece, Albania and Italy. These data are expected to increase during the coming years and contribute to the decrease of the unemployment rate.
With an investment of €100 billion and no expenses for the Italian state, the Trans Adriatic Pipeline will certainly favour the development of the Salento area in Puglia, where the pipeline will land. Local companies will have the possibility of to participate to TAP realization by providing products and services. Other local enterprises and organizations could use this circumstances to enhance relations with the State of Azerbaijan, establishing collaborations and looking for opportunities to introduce themselves into a rich and booming country. ReStart association in Mesagne could be taken as an example. Sponsored by TAP AG Italia, ReStart aims at the internationalization of Puglia agro-industrial companies in Azerbaijan. Its project “Puglia, you are welcome…Destination BAKU” could represent an important step to ensure Italian companies future, and to turn Puglia region into an essential economic partner for Azerbaijan, as stated by the president of the association Regina Cesta.
Local development favoured by TAP will not cause significant environmental damages. Despite a series of controversies, Trans Adriatic Pipeline respects the international standards defined by the European Bank for Reconstruction and Development (EBRD) as well as the International Finance Corporations requirements related to the project social impact.
Finally, being Puglia the final recipient of new gas flows from Azerbaijan, Italy will have the great opportunity of gaining an essential and strategic role in Europe as a hub of gas. This prospect, strongly supported by the Italian Government and argued in the National Energy Strategy, would favour the situation of Northern Europe, especially of those countries like Germany and Belgium, which are facing serious problems related to a decline in gas production in the North Sea. In this case, a new pipeline connecting Sulmona (Abruzzo) and Minerbio (Romagna) would be a necessary passage towards North. Alike, a link to the Ionian Adriatic Pipeline (IAP) and to the Interconnector Greece-Bulgaria (IGB) would allow gas export also in minor markets of the Balkans, namely Bulgaria, Montenegro, Bosnia and Croatia. Italy would gain an exporting and importing capacity which is expected to reach 8 bcm by 2023 and to amount for €150 million per year.
Trans Adriatic Pipeline is an all-important infrastructure which, both during its construction and once completed, will represent a valuable resource for Italy and for Europe as a whole. It has been estimated that TAP will be in function for 40-50 years until gas supply in Azerbaijan will be exhausted. The hope for the future would be to replace Shah Deniz with new supply areas so as to continue benefit from TAP.
Master’s degree in International Relations (LUISS Guido Carli)
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