The approval of the European Investment Bank (EIB) financing for the Trans Adriatic Pipeline (TAP) will contribute positively to the construction of the pipeline and the realization of the Southern Gas Corridor (SGC), Massimo d’Eufemia, head of the EIB Representation for Turkey, told Anadolu Agency (AA) on Monday.
EIB approved €1.5 billion in financing for TAP on Feb. 6, which will transport natural gas from the giant Shah Deniz II field in Azerbaijan to Europe, while the necessary investment required to realize the TAP project is estimated to be around €4.5 billion.
Speaking exclusively to AA, d’Eufemia said that the TAP is one of the largest single capital investment projects currently being undertaken in Europe, however the financing approval of the EIB Board of Directors remains subject to a series of conditions. These are specifically in connection with the outcome of an extensive ongoing environmental and social due diligence process, fiscal transparency, and compliance issues as well as EIB’s wider standard conditionality, he asserted.
"In addition to the EIB contribution, other multilateral development banks and public institutions are expected to approve loans for TAP," d’Eufemia said, adding the TAP consortium will seek to finance the remainder of its funding requirement through the involvement of commercial banks.
He also underlined that the TAP project is a part of the SGC, which is a "key project" for the EU's energy security policy.
"The SGC offers a new source of competitively priced gas for the EU market and increases supply diversity and security of supply. This is necessary in an environment where the dependency of the EU on gas imports is growing," he said.
Gas demand in the EU is projected to decline over the coming decades. Domestic gas resources, however, are projected to decline even faster, according to d’Eufemia.
"Accordingly, the EU is committed to secure energy supply through diversification projects, such as the SGC, he added.
Underlining that the EIB has assessed the economic viability of the full SGC with positive results, d’Eufemia said that all projects are progressing on schedule and the entire SGC is expected for completion by 2020.
The corridor includes three major pipeline projects: the expansion of the South Caucasus Pipeline through Azerbaijan and Georgia, the construction of the Trans-Anatolian Natural Gas Pipeline (TANAP) across Turkey and the construction of the TAP through Greece, Albania and into Italy.
Recently, there has been some opposition to the TAP project due to its possible environmental impact. Opponents argue that the project is not in line with the Paris agreement. However, there are also those who believe that thanks to TAP project, coal will be replaced by natural gas and will help Europe to decarbonize.
"Decarbonization scenarios presented by authoritative bodies such as the International Energy Agency show that coal cannot be replaced fully by renewable energy in the near future; thus gas is needed for phasing out coal, immediate reduction of carbon emissions, and to back up intermittent renewables," d’Eufemia argued.
He also noted that this view is shared by a majority of energy experts who assert that the SGC will not have any direct effect on climate change because it is an alternative source of gas that does not intend to cover any new demand.
- "Bringing gas into main European gas grid via Italy is more economic"
Christian Egenhofer, director of Brussels-based Centre for European Policy Studies Energy Climate House, said that the importance of SGC is more strategic as opposed to offering high volumes.
"The initial volume of 10 billion cubic meters is about 2.5 percent of total EU consumption or 5 percent of total EU imports. What it does, however, is to open a new import route to the Caspian bypassing Russia," he noted.
The gas from the SGC is competing with Russian gas causing greater market competition. Consequently, possibly lower prices will follow, especially since demand in the EU is shrinking and supply increasing, according to Egenhofer.
"Moreover, it brings non-Russian gas to southeast Europe, i.e. challenges the de facto Russian supply monopoly in the region. It holds prospects - yet uncertain- to bring additional volumes from Turkmenistan, and it supports a certain autonomy of Azerbaijan from Russia," he added.
He said that the TAP connection would ensure that competitively priced gas comes into the European main gas system, which Italy needs and can afford.
"Bringing the gas into the main European gas grid via Italy is more economic than via Baumgarten [gas hub] in Austria as the pipeline is shorter and more direct than routing it through the western Balkans with all its problems," he asserted.
By Ebru Sengul