TAP to Start up Early 2020: President
The TransAdriatic Pipeline (TAP) project is now on schedule for early 2020 start up, according to its president, Walter Peeraer. "We are confident we can overcome the technical issues along the pipeline. We have the support of the central governments of Greece and Italy," he told NGW in an interview on the sidelines of the European Gas Conference held in Vienna late January.
The biggest problem facing the line has been in Italy, where the mayor of the relatively impoverished region where the pipeline will make its landfall has managed to turn the construction work surrounding the pipeline into an environmental dispute, defying Rome which has approved the line on economic grounds. This has led to delays and the previously vaguer commitment to start up at some point in the year.
Peeraer said that 65% of the work is done on average, with a total project cost of €4.5bn ($5.6bn), implying about €3bn spent so far. "We are in talks with a range of banks and credit export agencies to cover the project financing, with different term sheets and so on in each case."
Among the lenders is the European Investment Bank, which no longer specifies the size of what was a €1.5bn loan. It told NGW February 2 that the loan could be of any size from zero upwards; and that it was following the guidance of the European Commission regarding loans made to projects that involved gas transport, gas still being necessary for the market. It said therefore that if it did decide not to lend money, it would not be owing to demands by EC-funded Bankwatch that it should not do so on environmental grounds. A decision is expected this week.
Peeraer said: "It will displace a lot of coal and help Europe to decarbonise. As [the European Commission's internal market director] Klaus-Dieter Borchert said [at the European Gas Conference], gas is the easiest way for that. It is cheap relative to other fuels, and it is easier to build gas grids than to build power grids. Gas will improve the competitiveness of European Union industry and it will be part of the energy mix for the future."
Second phase unknown
TAP is to carry up to 10bn m³/yr in phase 1, and may double if more gas reserves can be found that can be economically brought to market. This could include Russian gas, as well as more gas from the Caspian.
The first phase "sounds relatively modest," Peeraer said, "until you consider it from the perspective of the regional market. And security of supply is important, as the incident at Baumgarten showed last year." The one-day closure of flows from Russia into Baumgarten caused prices briefly to rise from €20/MWh to €80/MWh, as southern Europe has little resilience relative to the central and north of Europe. They settled back quickly afterwards.
The second phase of TAP will mean a market test in late 2019, to double the capacity. If there are enough binding bids to justify the economics, he said: "We are committed to expand the pipeline by building compressors. This will be an open process, subject to the joint approval of the three countries’ energy regulators. An open season will be organised every two years.
Also he said, the Interconnector Greece-Bulgaria (IGB) is much needed and so is the Ionian Adriatic Pipeline, which will bring gas up the eastern Adriatic coast, now served by gas from Russia. Both of those will stem from TAP, with Bulgaria taking 1bn m³ and looking for more from Socar, the state producer in Azerbaijan.
Partners in IGB include Greek Depa and French EDF-owned Italian energy group Edison, which have been jointly in talks with Gazprom regarding gas transportation in southern Europe, once TurkStream 2 is built. Edison has described IGB as an essential part of the Southern Gas Corridor and it is partly funded by the European Union. Edison's midstream gas manager, Pierre Vergerio, said he expected gas demand in Europe to remain stable or possibly increase in the coming decades and southern Europe needs more capacity. TurkStream 2 could to to Italy, he said, while east Mediterranean gas is not "economically feasible."
Gazprom has also said it is interested in the possibility of using TAP to deliver its gas: "The time is coming when letters of intent will become commitments," the Russian giant's deputy CEO Alexander Medvedev told the same event.
Tradeable capacity
TAP will resemble other flexible pipelines such as the UK-Belgium Interconnector, with which Peeraer was involved some decades ago while at Belgian integrated monopoly Distrigaz, a company subsequently split into infrastructure operator Fluxys and a marketing arm later subsumed into Eni. He told NGW: "TAP will offer physical reverse flow along its length, with nominations in opposite directions netting off to determine the actual flow direction and volume. The Swiss Transgas system is also reversible so gas could flow into southern Germany, France and so on.
"The network code (NWC) that will govern TAP is being negotiated so it is too early to talk about the balancing regime although the move is towards daily balancing in Europe, and daily balancing means that there will be access to linepack [the natural storage capacity of a gas pipeline]. The NWC will be based on the EU Network codes, that cover the allocation of capacity and the physical despatching of gas across borders. When the NWC is ready it will be open for consultation on the site with final approval due at the end of the year," he said.