TAP Enters the Home Stretch Run: Interview with Kjetil Tungland

At last week's European Gas Conference in Vienna, Alasdair Cook, Shah Deniz Development, BP, said that both Trans Adriatic Pipeline (TAP) and Nabucco West had at this stage, an equal chance pipeline contest to move Azeri gas to Europe.

Natural Gas Europe recently had the opportunity to speak with Kjetil Tungland  Managing Director, TAP.

In his interview, Mr. Tungland provides insightful views regarding the expansion and development of the Trans-Adriatic Pipeline project, which gained pace in 2012 and looks ahead for a crucial year during which the Shah Deniz Consortium will decide on the preferred “Southern Corridor” route. 

“From the beginning we have been developing our project in a way to provide the most economically and technically sensible solution for Shah Deniz”

2012 been an eventful year for TAP. Which were the most important developments for your pipeline project?  How would you assess the cooperation so far between the TAP consortium and Shah Deniz?

Indeed, 2012 has seen huge progress for the Southern Gas Corridor as a whole and for the Trans Adriatic Pipeline in particular. 

Cooperation with the Shah Deniz Consortium has been excellent.  We enjoy a very open, trustful partnership. From the beginning we have been developing our project in a way to provide the most economically and technically sensible solution for Shah Deniz and today we find ourselves ahead of the game, signing all necessary agreements ahead of competition. Looking back over the past year, there have been many highlights.

In February, we were the first pipeline to be pre-selected by the Shah Deniz Consortium and entered into exclusive negotiations for the ‘southern’ route, to transport gas to Italy. In June, Shah Deniz partners BP, SOCAR and Total signed a Cooperation Agreement with TAP, followed in August by a Funding and Equity agreement to finance part of TAP and potentially to take a 50% equity stake in the project.  Finally, in November last year TAP and the Shah Deniz partners SOCAR, BP and Total concluded the Shareholder Agreement defining how the TAP Joint Venture would be governed once Shah Deniz joins the project. 

We are moving ahead fast gathering confirmation of political support, and recently at a meeting with the Swiss, Italian and Greek governments in Davos, Rovnag Abdulayev, President of SOCAR, said he was pleased to witness the strong commitment from all three governments to progress TAP.

In September 2012, the Governments of Italy, Greece and Albania confirmed their political support for the project by signing a Memorandum of Understanding (MoU) in New York. Finally, in December 2012, Albania granted TAP the status of a project of ‘national importance’.

As far as other important developments in 2012 are concerned, in June, Azerbaijan and Turkey signed the necessary Intergovernmental Agreement and Host Government Agreement to implement the Trans Anatolian Pipeline (TANAP), which will create a stable and secure transportation infrastructure for gas across Turkey to the border with Greece.  TAP has been designed to interconnect seamlessly with TANAP.

We understand that the success of TAP will to a big extent depend on the support of all stakeholders involved, especially of from transit countries? Have you managed to get everyone on board?

The MoU signed in New York by Italy, Greece and Albania last year was an expression of support at the highest political level. The next immediate milestone will be for the three Governments to sign a fully-fledged Intergovernmental Agreement.  This will provide a formal foundation for the co-operation between our host countries.  A great deal of effort has already gone into securing this agreement and we are confident that it will be finalised by February.Also, we had a great start to the year marked by the initialling of the Host Government Agreement with Albania.

Most recently, senior ministers from the Governments of Greece, Italy and Switzerland confirmed their countries’ strategic interest in the Trans Adriatic Pipeline (TAP) at the World Economic Forum in Davos, Switzerland. At a high level meeting with representatives of the pipeline in Davos, Italian Minister for Economic Development Corrado Passera, Greek Deputy Minister of Economic Development Notis Mitarachi and Director of Swiss Federal Office of Energy Walter Steinmann again reiterated their commitment to the realisation of the TAP.

In addition, Greek Prime Minister Antonis Samaras confirmed TAP as a key strategic project for the country on Monday this week and ensured the government’s continued support, which strengthens the Greek route’s chances as the date for a decision on the Southern Gas Corridor draws closer.

What is your overall assessment of the European natural gas market future and the role for TAP in it?

The world of energy is changing at an unprecedented pace.  As we look ahead to 2013, that change appears to be both fundamental and inexorable.  Many governments in Europe have stepped back from previous commitments to nuclear and realized that immediate prospects for renewables appear less encouraging.  By contrast, the outlook for the global gas industry in the long term is quite positive.  The shale gas boom in the US has brought down the price of energy for the first time in years, helping to stimulate economic recovery.  While shale may not have the same ‘game-changing’ impact in Europe, the continent is now closer than ever to diversifying its own sources of gas supply.

The development of the Southern Gas Corridor will be key to this transformation, delivering natural gas from the Caspian basin to western markets. TAP will bring energy security not only to the countries it directly crosses, but also to the Balkans, Bulgaria, as well as western Europe – Germany, France, Switzerland and even UK.

Once TAP is realised, then the connections to the South Eastern European markets - through the Ionian Adriatic Pipeline and other systems - can be implemented quickly. Connecting this region to Caspian gas supplies will diversify its energy sources and contribute to the creation of a truly pan-European gas market. Ultimately, ensuring gas supply in South Eastern Europe will promote economic development and political stability.

Besides, TAP’s realisation will stimulate economic growth and employment. For example, estimated direct foreign investment in Greece will be about 1.5 bln Euros and in Albania 1 bln.

What do you expect in 2013?

We are approaching the homestretch in the race for Caspian gas.  Only one more deadline remains, the final and most important one – the Shah Deniz Consortium’s decision over which pipeline will win the right to transport the gas in the Southern Gas Corridor. 

I remain confident that this decision will be in our favor.  And my reasons remain the same: the unmatched technical and commercial expertise of our shareholders; our position as the only pipeline that is not dependent on public money; the political support we enjoy; the early stage at which we have completed our agreements with the Shah Deniz consortium; the fact that our route is the shortest, most economical and most direct to the largest European markets; and the steady progress that we have continued to make over the last year.  Besides this, at 48“ in diameter, the TAP pipeline is now the largest and most strategic of the two proposed pipelines bringing Shah Deniz gas from TANAP to European markets.

TAP is a pioneering project, technically and economically robust, agile and adaptable, more than ready to meet the challenges of our past-paced and ever-changing energy world.  When the first Shah Deniz gas becomes available in 2018, we will be ready to receive it.