REV IT UP!

In July, the shareholders of the Trans-Adriatic Gas Pipeline (TAP) announced the launch of market research to double the throughput capacity of the pipeline. The purpose is to learn about the interest in the new long-term facilities along the TAP and to provide the shareholders with access to them at a later stage.

Undoubtedly, the test results will be positive, given the intention of the EU member states to reduce the dependence on a single gas supplier. For example, Bulgaria alone will be able to improve the safety of supplies by satisfying 33% of its natural demand for gas through TAP.

Given the plans of Russia for the commissioning of a new infrastructure for gas supplies to Europe (Nord Stream-2) and even more consolidating its position in the market, the interest of Europeans to alternative sources will only grow.

Testing TAP-2

Currently, it is planned that TAP will deliver to Europe 10 billion cubic meters of Azerbaijani natural gas annually, including to Italy (8), Greece (1), and Albania (1). TAP commercial deliveries began on December 31, 2020. During the first half of 2021, European consumers received over 3 billion cubic meters of gas from Azerbaijan. The International Energy Agency forecasts the export of Azerbaijani gas to Europe on TAP in the current year at the level of 5-5.5 billion cubic meters.

In turn, the Azerbaijani authorities believe that in the future the volume of these deliveries will increase.

"From January 1 till present, Azerbaijan exported more than 3 billion cubic meters of natural gas to the EU member states, in particular Italy, Greece and Bulgaria. Of course, the volume of supplies to the European market will grow," Azerbaijani President Ilham Aliyev said at a joint press conference with the President of the European Council Charles Mishel. He underlined that for 15 years Azerbaijan "has been a reliable supplier of crude oil to European consumers."

"Our potential as a gas supplier will definitely grow, which will create more opportunities for us - exporters, transit countries and consumers. Because Azerbaijani gas is not only transported to a new route, but is also produced from a new source, which makes the Southern Gas Corridor (SGC) a project of energy security, " Mr. Aliyev added.

Now that all the components of the SGC are studied, it's time to think about the future and to study in detail the potential for increasing the capacity of this gas transmission infrastructure.

TRANS ADRIATIC PIPELINE AG (TAP AG) Consortium started the optional market testing phase to double the capacity of the gas pipeline from the current 10 billion cubic meters of gas annually. "The market test of 2021 gives freight forwarders an opportunity to show their interest in future facilities within the TAP expansion. We also offer an opportunity to request new output points along the TAP route," explained the Commercial Director of TAP AG Maria Savova.

There are three main scenarios for expanding the annual throughput capacity of the pipeline: limited (up to 14.4 bcm), partial (max. 17.1 bcm), and full (max. 20 bcm).

"TAP can gradually expand to doubling the initial power. This means that additional gas resources can flow into European markets, supporting the transition to a cleaner energy, especially in Southeast Europe," Managing Director of TAP Luca Schieppati said.

Towards diversification

While TAP shareholders probed the possibilities of expanding the pipeline, there are active works ongoing in Europe regarding the construction of interconnectors, which will make it possible for other EU countries to gain access to Azerbaijani gas supplied by TAP. Therefore, one of the priorities is the construction of the InterConnector Greece-Bulgaria, IGB, which is one of the seven priority projects to ensure the safety and competitiveness of the energy market in the EU. The project is important in terms of diversifying the sources and supply of gas to Bulgaria and the South-Eastern Europe. Through this gas pipeline, Bulgaria will receive 1bcm of Azerbaijani gas from TAP and through the connecting link – the terminal in Alexandroupolis – the liquefied natural gas (LNG) from the USA, Qatar, Algeria, Israel, Egypt and other countries.

Project manager for Bulgaria Teodor Georgiev said that the construction of the pipeline is on schedule, in accordance with the agreed terms. It is expected that the infrastructure will be ready by the end of 2021.

Romania is eagerly awaiting the completion of the construction of the IGB. According to the Romanian Minister of Energy, Virgil Daniel Popescu, as soon as the construction of the IGB is over by July 2022, Romania will be ready to receive Azerbaijani gas from TAP. According to him, IGB will make it possible to launch the vertical corridor (main gas pipeline from Greece through Bulgaria to Romania), as well as to ensure the supply of Azerbaijani gas and LNG from Greek ports to BRUA (Bulgaria-Romania-Hungary-Austria gas pipeline).

In addition, in the first half of July, Greece and Northern Macedonia governments agreed to build a new gas pipeline, which will enable the Macedonians to connect to TAP.

The gas pipeline will go from Nea Mesimvria in Greece to Gevgelia, a border city in the north of Macedonia. The cost of the project is estimated at $130.6 million. Thanks to this pipeline, Northern Macedonia will receive Azerbaijani gas through TAP, and maybe gas through the Greek LNG terminal in Revitussa.

Serbia is also looking forward to diversify sources of supplies. Currently, it gets gas from Russia. "Serbia is interested in importing Azerbaijani gas through the South Gas Corridor, and therefore it is very important to build an interconnector with Bulgaria as soon as possible, which will even more diversify gas supply routes and suppliers. After the construction of the interconnector between Greece and Bulgaria, the natural gas from the LNG terminal in Greece will enter Serbia, as well as through TAP," said Vice Prime Minister, Minister of Mining and Energy of Serbia Zoran Mikhailovic.

Construction of the Nis-Dimitrovgrad gas pipeline between Bulgaria and Serbia, which provides for the transportation of Azerbaijani gas, will begin in the fourth quarter of 2021. It is planned to put it into operation in the middle of 2023. "Thanks to this pipeline, we will be able to connect to other potential suppliers, including TANAP and TAP. In this context, there are many opportunities to enhance cooperation between the two countries in the field of energy, with a possibility of extending our cooperation in the future," Mikhailovic said.

According to her, the construction of the interconnectator between Turkey and Bulgaria will allow gas supplies to Serbia through TANAP.

In mid-May, the Serbian government concluded a loan agreement with the European Investment Bank for the construction of the Nis-Dimitrovgrad gas pipeline. In addition to the loan (25 million euros), almost 50 million euros were previously provided under the EU IPA program. The remaining funds will be allocated by the state.

Hungary is also expecting to receive Azerbaijani gas. According to the Minister of Foreign Affairs and Trade of Hungary Peter Siarto, access to the SGC will become possible through IGB, as well as through the interconnector between Hungary and Serbia, the construction of which will be completed by the end of 2021.

To finish without obstacles

The diversification of gas supplies remains key for EU countries, which is why Europe is planning to reduce dependence on the Russian gas. Certainly, the SGC contributes to the structure of gas supplies to the EU market market, but let us not forget that even the doubted capacity of transmission infrastructure will not be enough to create a serious competition to Gazprom.

In this regard, EU hopes for the gas from the Central Asian region, e.g. from Turkmenistan, but negotiations with Ashgabat have not yet led to the desired result. Perhaps the question is shifted from the dead point in August. Currently, Turkmenistan is just being prepared for a trilateral summit with the participation of leaders of Turkmenistan, Azerbaijan and Turkey, which will be held in the national tourist zone Avaza on the Caspian coast.

It is expected that one of the central topics of negotiations will be the discussion of the possibility of the supply of Turkmen gas to Europe based on the MOU signed on January 21, 2021 in Ashgabat between Turkmenistan and Azerbaijan on the joint exploration, development and production of the Dostlug hydrocarbon field in the Caspian.

Meanwhile, Russia is preparing to complete the construction of the second line of the Nord Stream-2 gas pipeline at the end of August and introduce both lines into operation until the end of this year. US sanctions against the project introduced back in 2019 did not give the expected effect, nor did Washington's pressure on Berlin to abandon the construction of the Russian gas pipeline. As a result of the meeting between the German Chancellor Angela Merkel with the US President Joe Biden, the parties reached an agreement that the US would not impede the completion of the construction in the territorial waters of Germany. Instead, Germany will undertake obligations to extend the current contract for the transit of Russian gas through the territory of Ukraine for another ten years after 2024 - after the corresponding five-year contract expires.

Nord Stream-2 includes two gas pipeline lines with a total throughput capacity of 55 billion cubic meters of gas annually from Russia through the Baltic Sea to Germany. The construction of the first line ended on June 4th.

Project supporters believe that the launch of the Nord Stream-2 gas pipeline will allow Russia to increase the supplies of gas to Europe along the shortest route from new fields. In the future, hydrogen supplies can be carried out through these lines. Critics believe that this gas pipeline is designed to strengthen Europe's dependence on Russian gas. If so, then this will only boost European consumers to increase the capacity of the gas transmission infrastructure for the export of the Caspian gas to Europe.