TAP Sees Commercial Launch: Update 2
(Adds comment by Wood Mackenzie at end)
The Trans-Adriatic Pipeline (TAP) has launched commercial operations, its operator announced on November 15, meaning it is now ready to flow gas from Azerbaijan to southern Europe.
"The start of commercial operations means that TAP is ready to transport gas," the operator told NGW in an email. "Any actual gas flows are up to the shippers' choices, which they exercise through the daily nomination of the capacity they have booked in TAP."
The 878-km TAP serves as the third and final section of the EU-backed Southern Gas Corridor, a $40bn chain of pipelines to carry gas from the BP-operated Shah Deniz field in Azerbaijan westwards. It connects with the Trans-Anatolian Pipeline, SGC's mid-section that was completed last year, near the Turkish-Greek border, and runs through Greece and Albania and under the Adriatic Sea to Italy. At peak capacity it will supply 10bn m3/year of gas.
"Today, a long-term vision has become a reality! I am extremely proud of this achievement, made possible-first and foremost-thanks to the dedication and commitment of our people and everyone involved, the solid trust and unwavering support of our shareholders, all governments in the value chain and the EU, as well as the suppliers and contractors that worked on the project," TAP's managing director Luca Schieppati commented in an online statement.
TAP provides a "new, reliable and sustainable energy route and source of gas reaching millions of European end-users, for decades to come," he said.
The pipeline is set to supply 8bn m3/year of gas to Italy along with 1bn m3/yr to Greece and 1bn m3/yr to Bulgaria, although the latter will not be able to access supplies until the launch of the Interconnector Greece-Bulgaria, expected in the second quarter of 2021 at the earliest. The biggest supplier to these markets is currently Russia.
"TAP's commissioning enhances Italy's supply options as it forges ahead with plans to decarbonise," Wood Mackenzie research director Murray Douglas commented in a statement. "It represents the first major pipeline project not underpinned by contracts with Eni. It will also improve the liquidity of Italy's PSV gas hub and open more opportunities for south-to-north flows in the country."
The pipeline was originally due operational in early 2020, but progress was slowed by permitting issues in Italy and later disruptions caused by the coronavirus pandemic. Its completion comes just days after Azerbaijan reached a peace deal with neighbouring Armenia, bringing an end to six weeks of intense fighting over the disputed Nagorno-Karabakh region. During the conflict, Azerbaijan accused Armenia of targeting its oil and gas pipelines with shells.
TAP's shareholders are BP, Azerbaijan's state-owned Socar and Italy's Snam, each with 20%, Belgium's Fluxys with 19%, Spain's Enagas with 16% and Switzerland's Axpo with 5%. The group is looking to double the pipeline's capacity to 20bn m3/yr eventually, but have had difficulty attracting interest from the market.
"For SGC and its many stakeholders, TAP's launch is just the end of the beginning, not the end itself," Douglas continued. "A scenario without TAP expansion to 20bn m3/yr would be a failure against the initial objectives, especially for European supply security. All eyes will be on the binding phase of TAP's market test in summer 2021. This could be a bellwether for the post-lockdown recovery of European gas fundamentals."
Despite the European Green Deal and current market uncertainty, WoodMac expects the expansion to go ahead. "However, regional gas dynamics have shifted since TAP construction started in 2016, especially thanks to Turkey's recent giant Black Sea gas discovery," Douglas said. "More Azeri gas had been the initial hope to fill TAP expansion, but this is looking increasingly unlikely because of challenging project economics and better-positioned supply alternatives, including Russian gas."