Interview with Kjetil Tungland, Managing Director of the Trans Adriatic Pipeline

It is time to "close the circle"

TAP is ready… Now sellers and buyers of Caspian gas need to enter sales contracts as soon as possible.

• The Trans Adriatic Pipeline (TAP) project seems to be progressing well, especially considering the tripartite memorandum of understanding TAP signed recently with the governments of Greece, Italy and Albania. Is there anything else you need to achieve in terms of political support?

You are right, our pipeline project has received a strong political boost in September this year, when the governments of transit countries agreed in New York to show their support for TAP with a Memorandum of Understanding. This signing had kicked-off the negotiations between the governments on a full scale intergovernmental agreement (IGA) on TAP. This is our next highest political goal to conclude the process by signing of the document in early 2013. Shah Deniz would like to see this happening before they make final selection of the pipeline for transporting Caspian gas to Europe.

• What are the next key milestones for the Southern Gas Corridor in general? Do other pipeline projects such as TANAP, Nabucco West and South Stream interfere with TAP's plans?

 The most important milestone for the Southern Gas Corridor in the near future is of course the establishing of the access route to Caspian gas. Shah Deniz is expected to make a final selection between Nabucco West and TAP in early 2013. So, in the context of the race for Caspian gas, Nabucco West is our one and only remaining competitor.

As far as TANAP is concerned, we are very much positively influenced by the successful development of this pipeline project. With TANAP Shah Deniz has finally received a suitable solution for transportation of their gas all the way from Azerbaijan through the territory of Turkey. We enjoy close cooperation with the developers of TANAP and regularly discuss our interconnection plans with them.  Overall, TANAP is very important for the success of TAP as we are pieces in the same value chain.

South Stream development does not interfere with our plans at all. Recently Gazprom announced their decision to exclude the southern leg option of the South Stream, which originally passed through Greece to southern Italy, similarly to our route. Gazprom representatives explained they are doing this because of TAP, as we already plan to bring gas to this area. So, in this sense we are not competing and there is no negative influence on our development plans from South Stream.

• How do you assess the current position of the EU towards TAP? Has TAP been recognized as project crucial for European energy security?

We receive strong political support from the EU Commission and recognition at all levels in Brussels. Recently, TAP has been added to the list of projects aiming to receive a so-called project of common interest (PCI) status, we are a part of all relevant working groups, so this is a positive progress.

This week, for example. Günther Oettinger, EU’s Energy Commissioner,  speaking at the Frankfurt Gas Forum reiterated Commission’s full support for both TAP and Nabucco, emphasizing that both projects could and should be realized.

• Do you think that the markets which TAP is targeting, such as the Greece, Albania, Italy have high potential for future growth? Will they be able to consume the full quantity of gas transported by TAP?

I am absolutely convinced that the growth potential of the markets we cross is substantial. Albania is extremely interested in developing its own gas market from scratch, and the government is fully behind this idea.  Although Greece has economic difficulties at the moment, I am sure as it begins to recover, it will feel the need for an increased supply of energy and for more gas.

Italy as the second biggest economy in Europe, certainly will need to secure large amounts of gas imports in the long-term. Besides, the gas can flow through Italy further to Western Europe and countries like Germany and France.

On top of this, it is important to add that TAP’s concept allows for interconnections with other pipeline projects like Ionian Adriatic Pipeline, for example. It means valuable options exist to supply gas to new energy-hungry markets in South Eastern Europe.

As you can see, the sellers of gas have many great possibilities in terms of markets. I’d like to stress however, that TAP’s job is only to transport the gas, but we do not own it or sell it! The developers of  TAP do not decide how much gas to sell to consumers in all of these countries.

As a mere gas transportation solution, TAP is ready from technical and operational points of view.  We will do the outmost to deliver a long-term secure and reliable infrastructure from producers to consumers. Now it is high time for gas buyers and sellers to finally conclude gas sales agreements. They need to determine the quantities of gas which sellers can offer and the price buyers are willing to pay. This needs to be done very soon to “close the circle”, so to say.

• Greek natural gas company DEPA is about to be privatized. Does this have any effect on TAP’s development plans?

Our pipeline’s development is not dependent on DEPA’s privatization; we are not influenced by it. We realize that the privatization of DEPA is certainly important for the country and further growth of its natural gas sector. On another side, the Greek government also has great interest that our project succeeds and Caspian gas flows to Europe via Greece’s territory. All these are complimentary developments aimed at achieving economic growth and promoting Greece as international gas hub, and they are not in conflict with each other.

• What is TAP's current schedule?  When would you be able to start operations, if selected by Shah Deniz?

Currently, we are awaiting the intergovernmental agreement to be signed by the governments of the transit countries. Soon thereafter, Shah Deniz consortium will make the final selection on gas transportation solution to Europe. We, of course, hope they will select TAP recognizing our strength and advantages, as we believe TAP offers the best solution for their needs. Once TAP is selected by summer of 2013, we will be able to make our formal “Resolution to Construct”, or in other words the final investment decision. Construction will begin by late 2014, and finally by the fourth quarter of 2018 TAP would  be ready to receive Shah Deniz gas coming through Turkey.

The main point here is to highlight TAP’s maturity in engineering, environmental and social impact assessment process and on commercial and financing issues. We are aligning ourselves with Shah Deniz development, so whenever they are ready to produce we will definitely be ready to transport.