The official ceremony that took place in Thessaloniki to mark the launch of the construction of the Trans Adriatic Pipeline (TAP) that is intended to deliver Azerbaijani gas to Italy via Greece and Albania brought to mind the events of June 2013, when the European Commission officially announced the termination of the Nabucco gas pipeline project – its most ambitious – and suggested that priorities now shifted to the TAP.
The problem of how to fill the pipeline had been cited as one of the reasons for halting the construction of Nabucco, since the reserves in the Shah Deniz gas field in Azerbaijan, coupled with Azerbaijan’s contracts with Russia, had made it impossible to ensure a supply of 30 billion cubic meters of natural gas per year.
Since then of course the picture has changed for Europe’s gas markets. The current shareholders in the TAP project are BP (UK), SOCAR (Azerbaijan), Snam (Italy), Fluxys (Belgium), Enagás (Spain), and Axpo (Switzerland). However, these changes are not a favorable indication that the TAP will be either efficient or even cost-effective as a successor to Nabucco, although the new pipeline is only designed to have a capacity of 10 billion cubic meters per year, not 30.
First of all, Russian gas deliveries to the European market have increased significantly. In 2014, Gazprom sold 159.4 billion cubic meters of natural gas to countries outside the borders of the former Soviet Union. Traditionally its biggest customers are Germany, Turkey, and Italy. Specifically, 21.7 billion cubic meters of gas were shipped to Italy – over twice as much as the Italians are scheduled to receive through the TAP pipeline by 2020.
Second of all, this spring LNG began to make its way into the European market from the US. And although in terms of quantity and price it will not pose a serious challenge – in the next few years at least – to the Russian gas already contracted, American LNG is quite capable of undercutting the financial and economic viability of new projects (such as TAP).
Third, Nabucco’s successor is directly up against regional competitors for pipeline projects. These include the revived ITGI Poseidon project designed to once again bring natural gas to Italy. A Memorandum of Understanding on natural gas deliveries across the Black Sea from Russia via third countries to Greece and from Greece to Italy was signed in February by Alexey Miller, the chairman of the Gazprom Management Committee; Marc Benayoun, the CEO of Edison SpA; and Theodoros Kitsakos, the CEO of DEPA SA. «The potential development of a new supply route, that is planned to be implemented in full compliance with EU laws, will strengthen Italy’s gas supply security as well as its role as an important natural gas supply hub in Southern Europe, which is in line with the objectives of the National Energy Strategy», emphasized Marc Benayoun. At the same time both ITGI Poseidon and TAP can be seen as components of what is known as the Southern Gas Corridor that travels from Turkey to Italy via Greece.
In this regard the Italian newspaper Il Foglio rightly notes that the ITGI Poseidon project is «a blow for Snam, which, as a shareholder in TAP, will be subjected to direct pressure from competing gas carriers».
And finally – and possibly most importantly – although construction has not yet begun, the TAP project has already taken on geopolitical connotations. The European Commission continues to see gas pipeline routes as a way to elbow Russia out of Europe’s energy markets. However, Turkey is using TAP to put equally heavy pressure on the Europeans themselves. Erdogan is trying to exploit this current opportunity so that Turkey can call the shots on all of Europe’s energy projects, using them to squeeze Europe even harder than it did during the refugee crisis. Back in late 2015 Ankara announced its intention to merge TAP and TANAP (the Trans-Anatolian gas pipeline) into a single unit of infrastructure. Should that happen, the combined system would have a total capacity of 26 billion cubic meters of gas per year – all traveling within a closed loop from gas fields in Azerbaijan into pipelines across Turkey. Ankara and Baku signed specific agreements concerning TANAP in December 2015 – at the height of the crisis in Russian-Turkish relations and several months before Ankara’s migrant agreements with the European Union and the supposedly spontaneous escalation of the conflict in Nagorno-Karabakh.
So what are the power dynamics? On one hand we have Russia, which supplies about one-third of the gas Europe buys. And on the other hand we have Turkey and Azerbaijan, which are having some success in trying to force the European Commission to support and finance projects that are advantageous to them. Plus the US is playing on the tensions between Russia and Europe in order to get its LNG into the European markets. Another ongoing bone of contention concerns the geopolitical animosities between Greece and Turkey, a confrontation that gas projects are unlikely to iron out.
The magazine The National Interest comments that «the pipeline games in Europe never end», concluding that «[p]ipelines are no longer about steel and gas molecules but about pride, security and dependence – in short, they become embroiled in intangibles that are often impossible to manage or resolve».
And you won’t find a better description of the TAP project.