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2011 will be a decisive year for the Southern Gas Corridor

26 gennaio 2011

Message from Kjetil Tungland, Managing Director of TAP. "It will be a momentous year, with critically important decisions due to be made that will not only determine the future of TAP and other pipeline projects in the Southern Gas Corridor, but will also have a profound and lasting impact on Europe’s energy security."

Last year saw encouraging progress for TAP as we reached a number of significant milestones, from several agreements on key stages of our pipeline route to welcoming a new shareholder.

An important decision ahead

2011 looks like it will be an even more momentous year, with critically important decisions due to be made that will not only determine the future of TAP and other pipeline projects in the Southern Gas Corridor, but will also have a profound and lasting impact on Europe’s energy security.

In April 2011 we expect to hear which companies have been successful in procuring gas from the Shah Deniz II consortium. This will then lead directly to a decision on which transportation solution becomes the cornerstone in the Southern Gas Corridor for bringing Caspian gas to European markets.

Well placed for success

TAP is in a strong position at this critically important stage and we remain optimistic of the outcome. In addition to being technically viable, safe and offering the most commercially attractive transportation route for shippers, TAP has the enormous advantage of being the shortest new-build pipeline and the most cost-effective route for delivering Shah Deniz II gas into Europe.

Our project enjoys the support of the European Union and is regarded as integral to the EU’s energy policy. TAP has several features that enhance Europe’s energy security. These include the possibility to physically reverse gas flow in the event of an emergency, develop storage opportunities in Albania, and a commitment to include several tie-in points along the pipeline for other spur lines into South Eastern Europe. Furthermore, TAP is a large pipeline with a capacity of 20 bcm. It is designed to effectively transport the 10 bcm of Shah Deniz II gas from Azerbaijan during the first phase, while accommodating additional supplies as they come on stream.

Financial confidence

Europe’s energy security does not simply require political will and consensus. In these challenging economic times, when decisions are subject to unprecedented public scrutiny, it is even more essential to choose the most efficient and cost-effective solutions that do not require massive subsidies from the public sector in order to be physically realised or made commercially viable. To do otherwise risks failure and renewed uncertainty over Europe’s energy future. TAP brings confidence as it is supported by financially robust and technically strong shareholders without any need for public funds.

Level playing field for all projects

It is absolutely essential that the official support and decision-making process is transparent and takes place on a level playing field, without fear or favour, based on clear criteria understood by everyone. There is so much more at stake than just the fate of any one particular pipeline. Political decisions regarding the Southern Gas Corridor, and indeed all similar projects and initiatives, must be based on sound commercial and technical principles.

What has TAP achieved so far?

As I mentioned earlier, TAP reached some important milestones during 2010. In May we welcomed E.ON Ruhrgas as a new shareholder, joining EGL and Statoil.  E.ON Ruhrgas has a strong track record in the successful development of international gas projects, and their knowledge and expertise has made a significant addition to the project.

At the start of 2010, we completed the registration of TAP’s permanent country offices in Greece, Albania and Italy. These offices support TAP in liaising with the authorities in the host countries, preparing and submitting all necessary applications as well as providing information about the project to the local public and media.

During the year, we continued our positive dialogue with the governments of Greece, Italy and Albania, as well as senior representatives of the EU. Following the signing of a Memorandum of Understanding and Cooperation with the Albanian government, seven key ministries validated the results of TAP’s route refinement process in Albania and endorsed the proposed new pipeline route. Routing optimisation for the pipeline continues in Greece and Italy. In this issue of the newsletter, we invite you to take a look at how a typical pipeline route refinement survey is conducted by TAP in Greece.

In June, the governments of Turkey and Azerbaijan reached an important agreement on gas transportation that will regulate the sale of Azerbaijan gas to Turkey and its transportation to European markets through Turkey. In particular, the agreement covers the price and quantity of gas to be exported from Shah Deniz II.

Where will we go in 2011?

In 2011, we will see a significant increase  in activity, as our country presence grows substantially and we see Statoil and E.ON taking on direct project implementation activities in Italy, Albania and Greece as Technical Service Providers to TAP.

Our continued adherence to the highest environmental, social and technical standards will ensure that TAP continues to be a robust project that will meet the requirements as set out by the gas vendors, the host governments as well as the International Financing Institutions (IFIs) and bank financiers.

As we enter a new year and a new decade, we look forward to making yet further progress. These are exciting times indeed, and I would like to take this opportunity to thank all of TAP’s partners and friends for their enthusiastic support over the previous 12 months and our sincere best wishes for 2011.

Kjetil Tungland
Managing Director
Trans Adriatic Pipeline