TAP Emerges a Winner: Preliminary Implications

The Trans-Adriatic Pipeline (TAP) has emerged as a winner in a long race, primarily against the Nabucco project, in a June 28th decision by the Shah Deniz Consortium. The result surprised at least a few as numerous off-the-record estimations by stakeholders concluded that both projects would be selected, or that an eventual delay on the decision was to be expected.

At a first glance, Russia, and more specifically Gazprom, seems content with the decision as it will retain its tight grip in high-gas consuming regions ranging from Bulgaria to Germany, which houses around 130 million consumers, plus the Northern Italian and Southern German market that are targeted by the South Stream project.

TAP's selection certainly relieves pressure on Gazprom as it can now proceed sans adversary. TAP moreover is directed in the short and mid-term, up to 2023, to the Greek, Albanian and Southern Italy markets, characterized by economic recession and rather low consumption. Albania presently lacks natural gas infrastructure.  In the long-term it is envisaged that Montenegro, Bosnia and Herzegovina and Croatia will be included, but it likely that at that stage South Stream will be fully operational and will have the capacity of supplying these markets as well, at competitive prices, although again they are of low consumption due to their size and economic structure.

Austria, which as a country and through its main company, OMV, wagered much on the Nabucco in its quest to be the natural gas hub of Europe, and effectively loses that chance and may have to rush to join the South Stream which aims to terminate its route in Italy.

Azerbaijan and Turkey can be said to be also content. The former has managed to open the Southern Corridor and will in the future export (initially) 16 billion bcm of gas westward, whilst Turkey through TANAP has already managed to secure considerable amounts by Baku. Azerbaijan seems to be driven in its energy politics by a careful observation of the balance of power in the region between Russia, Turkey, and the US but also with neighbouring Iran, striving to please everyone while extracting as much advantages and investments as possible.

In Greece and Albania, the 28th of June was a day of joy at the political and business level, as they bet on the winner and are expecting large payoffs from that investment. An internal Greek Ministry of Foreign affairs report that was recently leaked to local press points out to the Greek administration the advantages of TAP for the country. 

First the geostrategic importance of the country as a link point between Caucasus and the EU is becoming a reality. Secondly the importance of Greece vis-a-vis Albania and the Western Balkans is being upgraded, at the moment where these countries are about to begin their accession agreements with the EU, thus Greece can emerge a "pilot" country for them. Thirdly the psychological boost in the depression ridden Greek economy is important. And fourth, Greece can diversify its gas imports and achieve a large decrease in imports from its traditional supplier, Gazprom. Furthermore TAP brings  €1.5 billion investment and 12,000 direct and indirect job vacancies.

The alternate minister of energy in Greece, Makis Papageorgiou also stated that Greece will procure at least 1 bcm from SOCAR as soon as possible while he referred to the EU stance for TAP revealing that Brussels were keen to support the project because it opened up the Ionian interconnector.

Additionally it was made known that Shah Deniz partners Total SA, BP and SOCAR will also have a stake in TAP, while the Greek government is pursuing a 5% stake in the project through DEPA. In Albania as well, TAP's win was well-received and it is seen as a milestone for the economic development of the country. In Italy, reactions have not been made known yet, and the whole issue was met with rather indifference by the local media.