TAP pipeline meets 12% of Italy’s gas demand

Piping at the Kipoi compressor station, on the Greek side of the Turkey-Greece border, October 2019. [TAP webiste]

This article is part of our special report Pipeline gas diversification becomes reality.

Before the Trans-Adriatic pipeline (TAP) was built, Italian businesses were paying a higher price for energy compared to their European peers, says Vugar Veysalov, head of external affairs at TAP. The new pipeline, which will also supply Greece and Bulgaria, will bring greater flexibility of prices, he told EURACTIV in an exclusive interview.

Vugar Veysalov held several managerial positions in the oil and gas industry before he was appointed TAP’s head of external affairs in September 2018. He holds an MBA from the Vlerick Leuven Gent Management School and a BA Honours from the Azerbaijani University of Foreign Languages.

He spoke to Antoinette Nikolova, correspondent of EURACTIV Bulgaria, in Italy.

The TAP pipeline, bringing Azeri gas to Italy across Greece and Albania, has become reality. Can you sum up – what is the benefit of TAP for Italy?

As the European leg of the Southern Gas Corridor, TAP will bring natural gas to Europe from a new source and through a new route, thus reinforcing the continent’s security and diversification of supplies. Volumes heading to Italy (approximately 8.5 bcm/y) will represent around 12% of the national demand for gas; in South Eastern Europe, with volumes of lesser magnitude, the gas flowing through TAP will supply between the 20% and the 30% of the yearly gas demand of Greece and Bulgaria, respectively. Depending on market conditions we are thoroughly and constantly assessing, TAP could double its capacity to 20 bcm/y with minor modifications to the system.

How will TAP possibly contribute for lower prices for end consumers?

Natural gas flowing through TAP is priced without fixed link to the oil price as is usually the case with ‘take-or-pay’ contracts. In Italy for example, this could bring greater flexibility and a faster response to changes in market fundamentals with respect to current contracts feeding the Italian gas system, thus enabling a quicker recovery of businesses which still pay a higher cost of energy than their European peers.

Can the pipeline be used by other potential suppliers?

TAP’s initial capacity – approximately 10bcm/a – has already been allocated to the Shah Deniz shippers, in line with the gas transportation contracts signed in 2013 and under the provisions of the TPA (Third Party Access) exemption granted by the relevant regulatory Authorities.

TAP has set aside approximately 5% of the initial capacity for short-term booking. This is in addition to the already booked capacity. Short term capacity is set aside for the 25-year operating period. TAP will offer available short-term capacity to the market, as well as commercial reverse flow capacity, according to the ENTSOG Auction Calendar and the TAP Network Code, coordinated with the date for start of operations.

That said, TAP has been designed to expand to up to 20bcm/a, as and when our Market Test process concludes with binding commitments from shippers for further long- term capacity. In line with national (Italian, Albanian and Greek) and  EU regulation (TAP is an Independent Transmission Operator and complies with the Third Energy Directive), any shipper who wishes to take part in TAP’s open seasons may do so, as long as they comply with the requirements for participation. All interested parties can bid for available capacity in accordance with the rules set out in these guidelines.

How does TAP see the ‘Green Energy’ policies and how does it manage to stay in line with these EU priorities?

Fighting climate change is the most pressing challenge of our time that requires a well-coordinated response and inclusive approach that could utilize all available technologies and solutions. TAP has a pivotal role to play in the energy transition, especially in the Western Balkans, who are heavily reliant on coal and lignite for power generation. Taking a broader look at the Europe energy landscape, where energy demand is expected to recover after the COVID-19 crisis, natural gas will continue to be a key-part of Europe’s energy mix in the years to come and, in partnership with renewables and innovative technologies, TAP will guarantee an uninterrupted energy supply to warm homes and feed businesses.

Talking about innovative technologies, hydrogen is an important element in achieving a carbon neutral future and this is something that TAP is actively monitoring. We are in the process of assessing the degree to which TAP can technically accommodate transporting a blend of natural gas and hydrogen. Especially in the case of an expansion (up to 20bcm/a), it would be important to take into account potential future demand and requirements in the design of any new equipment.

[Edited by Zoran Radosavljevic]

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