TAP: The Most Direct and Economical Route

“TAP proposes the most direct and economical route for transportation of natural gas from Azerbaijan into Europe”

Natural Gas Europe recently had the opportunity to interview Rikard Skoufias, Country Manager (Greece) for the Trans-Adriatic Pipeline

What are the most important advantages of Trans Adriatic Pipeline (TAP) compared to its competitors in the Southern Gas Corridor?

Competence on technical and financial terms is our clear advantage. We benefit enormously, from having leading energy companies as our shareholders. Norway’s Statoil is a world leader in offshore pipeline installations and development of natural gas infrastructure. At the same time, Germany’s E.ON, as one of Europe’s largest utilities, leads onshore, having constructed thousands of kilometers of pipelines that crisscross the continent. These two companies will be the technical service providers for our pipeline project, ensuring the highest quality and reliability of both construction and operation.

Our project is self-financed, our shareholders have excellent international credit ratings thus we do not require financial assistance or contributions from the governments or from the EU. We have a very strong business case that’s why we were selected by Shah Deniz Consortium in February this year as priority southern route for transportation of Caspian gas to Europe.

TAP proposes the most direct and economical route for transportation of natural gas from Azerbaijan into Europe. TAP crosses the Adriatic Sea at a shallow depth, which allows us to build a 10 bcm pipeline that can be doubled to 20 bcm on demand. This way we meet one of the key eight selection criteria of Shah Deniz on pipeline expandability. We can also physically reverse the gas flow. All this features from a commercial prospective make TAP the most attractive compared to competition.

What do you think about the latest developments in the Southern Gas Corridor, in particular, about the announcement of the South Eastern European Pipeline (SEEP) and the plans for a "Mini-Nabucco"? 

In comparison to SEEP and Mini-Nabucco, I believe we have the most competitive project and I am conscious that these are very strong consortiums. The competition is still going on. I am not underestimating the competition by other companies at all. The only thing we can do now is to continue developing our project the best way we can to be the winners.

Is it possible that mergers will take place between current pipeline projects and more specifically how do you view the role of DEPA in relation to TAP?

I believe other parties will be interested at some stage to join TAP. We are saying from the very beginning of the project development that we are open to new partners. However we would be particularly pleased to see a Greek or Italian partner since they are the host countries of the future pipeline and for them it would be a great opportunity to have their own players shaping the diversification policy of the EU and assuring their own energy security.

Could all pipelines be built at the same time or is there enough gas only for one project? DEPA’s President commented that Italian gas consumption is decreasing by 6 billion cbm in 2011, so it’s not a good market. Is this valid?

I don’t think all pipelines can be built at the same time. Today there is only10 bcm from Shah Deniz available for sale to Europe and for this amount of gas currently only one pipeline from the Caspian region is necessary

Generally, the importance of natural gas in Europe is growing since it is the cleanest fossil fuel. The EU has a priority goal of ensuring its security and diversity of energy supply and in this regard the role of Azeri gas is crucial .

I believe that Europe is looking to strengthen its position in the energy field and it is looking to include gas as major component in the future energy mix that will rely strongly on renewable energy. Italy’s recent decrease in energy demand has been caused by the mass introduction of photovoltaics. Future consumption depends on many things, such as the state of world economy, however gas will remain a fundamental source of energy worldwide. Renewable energy has still a long way to go before it can bring a radical change in the world’s energy consumption, and in particular to minimize the role of gas

I think that energy consumption in Europe will be dynamic for years to come, and many analysts believe that the gas demand will be on the rise in the long term. I feel confident that TAP is offering the most economically and technically attractive solution for the transfer of Azeri gas into Europe.

As far as the TAP’s business case is concerned I can say the following.

There are three main elements in the gas value chain - gas sellers in Baku, the gas buyers in EU and TAP linking them together by providing a gas transportation solution. In the end, the final commercial decision is up to the gas sellers on whether they find the buyers willing to pay an attractive price.

Has the Greek debt crisis affected TAP’s plans?

At this point I would like to stress that TAP is of particular importance for Greece as foreign investor. The Greek section of the TAP route will bring significant investments of more than 1.5 billion Euros. In real terms that means 2,000 jobs with positive spill-over effects to many other sectors. By attracting TAP as foreign investor, Greece can give a positive signal internationally and restore confidence of other potential investors. At the same time TAP allows Greece to play a crucial part in implementing the EU energy security policy. Regardless of assumed plans to transfer gas from Offshore Cyprus to Greece, the only tangible and economical route right now for the country is TAP beyond any doubt.

Greece should not lose this chance and fortify its position. The Greek debt crisis will not affect TAP financially.  To anyone assessing the political risk of working in Greece, I have to say that we have confidence in the country and we are committed to our investment, and that is something we are discussing with all our partners.