Trans Adriatic Pipeline opens, NS2 stalls

After four and a half years in construction, the Trans Adriatic Pipeline (TAP) last week began pumping gas from Azerbaijan’s giant offshore Shah Deniz field to Europe. The pipeline starts at the Turkish-Greek border and runs overground for 773km across Greece and Albania before transporting the gas another 105 km along the bed of the Adriatic to Italy. 80% of its annual 10 billion cubic meter (bcm) capacity is currently earmarked for Italian consumption, with the remainder destined for Greece and Bulgaria. It has been partly funded by $8.1bn in long-term loans from five development banks and partly by investment from its shareholders – BP, SOCAR and Snam, each with 20;%; Fluxys (19%); Enagas (16%); and Axpo (5%).

TAP is the final segment of the larger Southern Gas Corridor (SGC), whose three pipelines traverse seven countries and six regulatory systems and which run from Azerbaijan’s section of the Caspian sea to Southern Europe via the South Caucasus Pipeline, the Trans-Anatolian Pipeline, (TANAP) and the Trans Adriatic Pipeline itself itself. The SGC is an EC initiative designed to reduce European dependency on Russian gas by creating a natural gas supply route from the Caspian Sea and the Middle East to Europe.

Russia currently accounts for about one third of the region’s total estimated gas consumption which annually hovers around 500bcm, so the SGC has the potential to make a dent of about 10% in Russia’s market share. Until recently, the EU’s ambitions to wean its member-states off Russian gas looked about to be  undermined by European corporate backing for Nord Stream 2, the new export gas pipeline that was supposed to run from Russia to Europe across the Baltic Sea, and to establish a direct link between Gazprom and its European consumers.

Although construction of the planned 1,230 km pipeline is just 120 km from completion, that completion is now in serious doubt after the US Senate began the new year by passing the National Defense Authorization Act (NDAA). The new legislation tasks the US State and Treasury departments with immediately identifying ‘vessels that are engaged in pipe-laying at depths of 100 feet or more below sea level for the construction of the Nord Stream 2 pipeline project,’ and to impose sanctions on the companies responsible.

The project’s major European protagonists are Wintershall, PEG Infrastrukture, NV Nederlandse Gasunie and Engie. So far, there  has been no official reaction to the passing of the NDAA from any of them – but GNV GL, the Norwegian company in charge of verification procedures, yesterday confirmed that it had stopped work on the project. Is it going to be a case of so close but yet so far for Nord Stream 2 just as its Trans adriatic counterpart moves ahead?