ItalyAnd Greece Take Decisive Step Towards Backing TAP

Five months after the rejection of the Interconnector Turkey-Greece-Italy (ITGI) pipeline project by Azerbaijan�s Deniz consortium (MEES, 27 February) and less than six weeks after its decision (MEES, 9 July) to drop the South East European Pipeline (SEEP) project in favor of Nabucco West, the Greek and Italian governments have taken a decisive step towards support of the competing Trans Adriatic Pipeline (TAP) project. Theodoros Tsakiris writes.

Following a recent visit by a senior Italian delegation to Baku and a round of meetings led by BP Vice-President for Shah Deniz Development Al Cook in Athens last month (MEES, 23 July), Athens and Rome understood that their only chance of participating in Europe�s Southern Gas Corridor policy is to get behind TAP and remove any politically driven obstacles remaining to the project. The European Commission�s endorsement of Nabucco is the principal reason why the continued absence of an intergovernmental agreement between TAP�s �host governments� may prove to be detrimental to the project�s chances, despite the fact that it is viewed as more attractive than Nabucco West from the financial and commercial viewpoint.

The absence of an intergovernmental agreement between Italy, Albania and Greece is also a major regulatory impediment for TAP�s partners in obtaining environmental and third-party access exemption permits in time to meet the Shah Deniz Stage 2 timetable. Italy and Greece were staunch supporters of the ITGI project right up until the beginning of June, when the Shah Deniz consortium denied even considering a revised proposal on ITGI submitted by Edison and DEPA. On 8 August Italy�s Deputy Minister for Economic Development Claudio de Vincenti,who is responsible for Energy, and his Greek counterpart Makis Papageorgiou, signed an agreement to �fully promote Europe�s Southern Gas Corridor policy,� a senior diplomatic source told MEES.

Long Process

Greece�s new Foreign Minister Demetrios Avramopoulos, whom Mr Papageorgiou accompanied to Italy, noted after the agreement was signed that the two governments �agreed to promote the necessary political initiatives so that Italy, Greece and Albania cooperate in order to create the necessary political framework through which specific steps can be made.� In essence this means that Rome and Athens have agreed to cooperate with Albania on the signing of an intergovernmental agreement so as to enable the overcoming of TAP�s permitting problems. A statement released later that day said that �Greece and Italy are engaged in a process of negotiations with the Albanian government regarding the materialization of a project that will contribute decisively to Europe�s energy independence.�

In reality the Rome meeting is just the beginning of a long process leading to the signing of an intergovernmental agreement, which is not likely to come in the immediate future despite TAP�s wishes. The process is unlikely to move faster than the ongoing backstage negotiations between TAP�s partners and several companies from Italy and Greece that are potential candidates for joining the 10 bcm/year project. BP�s announcement in June (MEES, 2 July) that it had struck an agreement regarding its own participation in TAP acted as a catalyst for the diplomatic progress currently unfolding between Rome, Tirana and Athens but there is still a long way to go. MEES understands that more than one company from both the Italian and Greek sides have joined the potential participants, which complicates TAP�s internal decision making further, especially since BP�s participation is not yet a legal fait accompli.

Mr Papageorgiou observed that �what happened here today is that we agreed to a closer cooperation with Italy in the Southern Corridor�to advance in support of this project [TAP] so as to secure the diversification of supply sources.� But the former boss of Greek gas utility DEPA added: �In the next stages we [Greece and Italy] will discuss the details, because the next step includes negotiations between Greece, Albania and Italy on this project and its transit route.�

Michal Hoffman, TAP�s External Affairs Director, welcomed the development with a statement to Azerbaijan�s Trend News Agency saying that �the Greek-Italian agreement confirms the progress we have been making in discussions with the Italian and Greek authorities.� And now negotiations are expected to move faster after September, even though their success is far from certain. Apart from the question of which company will join TAP from Greece and Italy, and there can be only one company from each state, Greece may also raise a bilateral issue with Albania that apparently has no relation with the routing of TAP across the Straits of Otranto linking Albania with Italy. This issue led to Albania�s failure to ratify a 2009 agreement on the delimitation of its EEZ (Exclusive Economic Zone), following a decision from Albania�s Supreme Court. Greece has judged the Supreme Court�s decision as politically motivated and may also link its support for TAP with the final ratification of the EEZ agreement.

Whatever the issues between Greece and Albania, it is clear that there is very limited time for TAP�s supporters to persuade the Shah Deniz partners that there is enough political support for the project from the Italian and Greek governments. �It is a matter of couple of months� a senior Azeri source told MEES.

The Italian-Greek agreement was welcomed by TAP�s existing shareholders EGL, Statoil and E.ON Ruhrgas. On 9 August the TAP partners and the Shah Deniz consortium signed an agreement �to secure funding for the TAP project. These funds will contribute towards continued work in several important areas during the period up to the final routing decision, expected in 2013�, a TAP press release said. The agreement also includes an option for the Shah Deniz shareholders to take up to 50% equity in TAP.

TAP�s CEO Kjetil Tungland also noted that �the signing of this agreement is a significant vote of confidence in the quality of TAP�s technical and commercial solutions from key industry players, and underpins the cooperation agreement that was signed between TAP and Shah Deniz in June. Our cooperation with Shah Deniz is now even closer and more far-reaching than before. This agreement will strengthen our continued working relationship in the run-up to the final routing decision. We remain confident of a positive outcome.�

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