The TAP pipeline, or how Mr Šefčovič liberalized himself from the Third Liberalisation Package

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The TAP pipeline, or how Mr Šefčovič liberalized himself from the Third Liberalisation Package

Originally appeared at A-specto, translated by Borislav exclusively for SouthFront

On May 17, 2016 Greek Prime Minister Alexis Tsipras launched the construction of the Trans-Adriatic Pipeline (TAP), in which Azerbaijan will deliver 10 billion. cubic meters of natural gas through Greece and toward Italy. Maroš Šefčovič, Vice-President of the European Commission, called the day the construction was launched, historical. Šefčovič said: “We expect gas from the Caspian Sea to come to Europe in 2020. But the Southern Gas Corridor could be expanded to transport more than 10 billion cubic meters of gas per year, as originally planned. In the future we can get more gas from both the Caspian and Central Asia, and more precisely from such countries as Turkmenistan”. Here Šefčovič began daydreaming and decided that there is no obstacle to increase deliveries to 20 billion cubic meters of gas.

The pipeline will benefit Greece, Bulgaria, Albania and Italy. The greatest benefit will be for Greece, on the territory of which will be built 540 km of the 840 km long pipeline. Prime Minister Tsipras did not lag behind his European chief in his dreams, and now sees € 1.5 billion investment coming to his country to build the pipe. Then, when Greece begin transit a deep river of money will flow and the country will become the energy hub for the region. Finally Tsipras decided to delight the Greek citizens, and promising that in the construction of the tube will be involved 8,000 people. No less joyful is Bulgaria, which has already built the first phase of the interconnector “Greece-Bulgaria”. Energy Minister Mrs. Temenuzhka Petkova said: “One of the main priorities for the Bulgarian government is the diversification of sources and routes of natural gas supply. For Bulgaria, the construction of the interconnector with Greece is a priority.”

The transmission capacity for the interconnector with Greece (IGB) is 3-5 billion cubic meters of natural gas annually. But the Bulgarian government is also daydreaming and already sees opportunity to increase capacity up to 10 billion cubic meters of gas annually, after the launch of the interconnector commissioned for 2018. Ms. Petkova and her Greek counterpart Panos Skurletis went even further in their dreams. They discussed Bulgaria’s intention to join in the construction of a LNG terminal near Alexandroupolis. Supposedly after its construction Bulgaria will be almost flooded with cheap LNG. Perhaps Ms. Petkova has not noticed that the gas that Bulgaria receives by contracts from the Russian provider currently, is about 170 leva per 1,000 cu. meters cheaper than the LNG supplied in Greece and this proportion is unlikely to change . But anyway, all were very happy with the brilliant prospects that lie ahead. In the euphoria nobody thought to ask the opinion of Azerbaijan on this issue.

And things there do not look so optimistic as it seems to Mr Šefčovič. Let’s start with the official announcement from BP-Azerbaijan, made ​​on March 1, 2016, stating that: “Only 66% of the work on the project has been completed”. Shortly before that, on February 19, 2016, the Vice President of the Azerbaijan oil and gas company SOCAR reported that construction of the refinery and petrochemical complex in Baku is frozen (part of the complex is the project TAP) and the government in Baku has begun to discuss the possibilities of importing Russian gas. According to the experts, there is a large backlog of deadlines and the likely completion of the project will be postponed indefinitely to after 2020. According to them, most likely, Azeri gas can get to Europe no earlier than 2022, and they have not yet solved the problems with transit. Iran and Russia will hardly agree for the pipeline to pass under the Caspian Sea, and passing overland through Georgia and Turkey is very problematic because of the serious threat of terrorist acts.

Moreover, the passage of the pipeline through the territory of Turkey is located in a place, populated mainly by Kurds, where there is currently civil war. Last year the existing pipeline between Georgia and Turkey was blasted twice. The other important point is that the planned supply of natural gas for the pipeline TAP has a total of 10 billion cubic meters. Of these 8 billion cubic meters have already been contracted for use in Italy and Greece insists to get at least 1.5 billion cubic meters. What remains for Bulgaria and Albania is 0.5 billion cubic meters. In this case, the investment of hundreds of millions of euros for the construction of the interconnector between Greece and Bulgaria will hardly makes economic sense if it will transit between 200 and 500 million. cu. meters of natural gas.

Even more questionable is the payment of the investment, if the commissioning of TAP is delayed until after 2022. The fact that Azerbaijani gas will be more expensive than Russian gas is also significant. Last year “Gazprom” supplied Europe with 160 billion cubic meters of natural gas. So the talk of diversification with the problematic amount of 10 billion cubic meters, at a higher price seems purely political. The real reason for the false optimism of European officials regarding this compromised project became clear at the opening ceremony of the pipeline. Between officials of the European Union and dignitaries from Italy, Greece, Bulgaria and Albania, who attended the opening, there was also the special representative of US State Department on international energy issues, Amos Hochstein.

The same, who a week ago was persuading European bureaucrats as to how big a threat is the implementation of the “Nord Stream-2” is to the EU. But the ceremony will be remembered for something much more important. With how European officials under the paternal gaze of US Representative crudely steeped on the Third Liberalisation Package. It has long been known that with European leaders double standards are an established practice. But on 17th of May, the Commission itself fell into the trap that it had once set for “Gazprom”. Violation of the provisions of the Third Package were sufficient grounds to stop the implementation of “South Stream”, but the violation of those provisions now for pipeline TAP is no longer an infringement, but the exception. It is true that with TAP they have tried to veil things, but that does not substantially alter the offense.

Formally, the participants in the company’s development of the gas field and shareholders in the company to build TAP, are different companies. But the practical development of the gas field is carried out by a consortium led by BP-Azerbaijan and the State gas company of Azerbaijan SOCAR. And in parallel, the largest shareholder in the transit of natural gas are still the same two companies. That is, control over the production and transit of natural gas is concentrated in the hands of the same companies, which is unacceptable according to the requirements of the Third Liberalisation package. For the second time, the application of double standards by the European Commission has given exclusive rights to the Azeri company SOCAR to supply gas only from its own production, which automatically precludes the pipeline to be used by other suppliers.

The situation in this case is analogous to that with pipeline OPAL (sequel to “Nord Stream-1”). Then, according to the Third Energy Package, “Gazprom” was allowed to use only 50% of the capacity of the pipe and the remaining 50% of capacity are available to other suppliers. The TAP pipeline is an exception from the rules. There is also an oddity. There is no one wishing to supply gas, through the OPAL pipeline, except “Gazprom”. But there are many who want to use the TAP pipeline. Even “Gazprom” could without any problem supply gas to Greece using TAP. “Gazprom” will hardly overlook these violations by the European Commission. Already there are rumors that the Russians are preparing a lawsuit against the European Commission in which one of the demands is freezing the construction of TAP to eliminate the admitted violations.

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