Baku, December 24, AZERTAC

The Trans Adriatic Pipeline (TAP) pipeline is designed to transport gas to Europe from the Shah Deniz field in the Azerbaijani sector of the Caspian Sea as part of the second stage of its development. Commercial gas transportation via TAP began in December 2020. TAP connects to the TANAP pipeline on the Turkish-Greek border, passes through Greece, Albania and the Adriatic Sea and reaches the southern shores of Italy. By 2026, the pipeline, which supports Europe's energy security and resilience, is planned to be expanded, making it possible to transport an additional 1.2 billion cubic meters of gas per year. TAP currently makes an important contribution to meeting Italy's energy needs. Over the past four years, a total of 40 billion cubic meters of gas have been transported via the TAP pipeline.

AZERTAC's exclusive interview with Luca Schieppati, Managing Director of the Trans Adriatic Pipeline AG (TAP AG) Consortium.

-What is the Southern Gas Corridor (SDG) and what is its strategic importance for Azerbaijan?

- TAP is the European section of the Southern Gas Corridor (SGC). The SGC is one of the most complex gas value chains ever developed, crossing seven countries and stretching across 3,500 kilometres. Involving over a dozen major energy companies, it is made up of several separate energy projects:

• the Shah Deniz 2 development – drilling wells and producing gas offshore in the Azerbaijani sector of the Caspian Sea.

• expansion of the natural gas processing plant at Sangachal Terminal on the Caspian Sea.

• expansion of the Italian gas transmission network.

• possibilities for further connection to the gas networks of South Eastern, Central and Western European countries.

• Four pipelines:

o South Caucasus Pipeline (SCPX) – Azerbaijan, Georgia

o Trans Anatolian Pipeline (TANAP) – Türkiye

o Trans Adriatic Pipeline (TAP) – Greece, Albania, Italy

o Gas Interconnector Greece-Bulgaria (IGB) - Greece, Bulgaria.

-How would you assess the role of Azerbaijan and the TAP in gas supplies to Europe?

-Since we embarked on our journey as a TSO four years ago, TAP has been recognised as an integral energy infrastructure for Europe bringing gas from a new source and an alternative route in a period when the continent has faced significant energy supply challenges.

TAP has operated with full reliability of the infrastructure that transports the gas, which has also been continuously supplied from Azerbaijan, ensuring uninterrupted service for our customers since the beginning of commercial operations.

These excellent results are linked to our ongoing commitment to ensuring service continuity and our decision to offer the market the maximum available technical capacity each day under current operational conditions, addressing Europe’s increased energy security needs since early 2022.

We have also developed commercial products that have been very well received by our customers, the shippers, who are increasingly using our infrastructure as a network to transport gas both physically from east to west and virtually in the opposite direction, serving the various connected markets.

- What volume of Azerbaijani gas has been transported via the TAP today?

- In fact, since the start of our commercial operations, we have delivered approximately 42 billion cubic meters (bcm) of natural gas to Europe, including around 35 bcm to Italy, over 4 bcm to Greece, and more than 2.5 bcm to Bulgaria. In 2023 alone, gas delivered by TAP accounted for 16% of Italy’s total gas imports and over 18% of Greece’s gas imports.

This substantial contribution has bolstered the region’s energy security, establishing our host countries as energy hubs. By diversifying Europe’s energy sources, TAP has been instrumental in reducing reliance on single suppliers.

-Is there any plan to expand the TAP in the future?

-TAP’s initial forward firm long-term capacity, approximately 10 bcm per year (bcm/a), has been allocated to shippers based on long-term gas transportation contracts signed in 2013 for 25 years, which were necessary to underpin the investment. However, TAP can further contribute to Europe’s security of energy supply and decarbonisation objectives, if we progressively double the pipeline’s current capacity.

TAP’s expansion capacity is offered to the market through regular Market Tests organised every odd year, provided there is interest from the market. The 2021 Market Test, which was completed in January 2024, resulted in binding commitments which will add an extra 1.2 bcm/a to the pipeline capacity by January 2026. The works necessary for achieving the first level of expansion are progressing smoothly.

- What scenarios for TAP expansion are being considered?

-This first level of expansion could pave the way for further expansions, which can be achieved in steps through participation in the next Market Tests, provided there is interest from the market. The 2023 Market Test is ongoing. The binding phase of this Market Test is expected to take place in 2025.

So, the potential for further expansion and the level of such an expansion will be determined by the Market Test results. To date, TAP has progressed and continues to develop work to prepare to meet the anticipated market demands. For instance, we are working on the conceptual design of Compressor Stations for various expansion scenarios. We are also working on the development of concepts for future expansion cases to be based on electrically driven compressors.

-How would you assess the possibility of hydrogen supplies via the TAP?

-As Europe moves to a climate neutrality, TAP is focused on making sure the transition happens in a sustainable manner. We see ourselves as an important contributor to the objectives of the European Green Deal and the Paris Agreement by potentially supplying the EU with carbon neutral energy sources, such as hydrogen and bio-methane in blend with natural gas.

TAP’s ambition is to develop the asset to allow transportation of hydrogen. We have outlined a roadmap to prepare for the medium/long-term transport of natural gas and hydrogen blends, as well as renewable gases. In 2021, an initial feasibility study confirmed TAP's potential to transport hydrogen blends. We are currently conducting tests on the materials of our offshore and onshore pipelines, exposing welded samples to hydrogen mixtures to confirm their resilience for transportation.

We are undertaking a gap analysis to assess the potential and compatibility of our equipment and facilities for transporting hydrogen in mixtures, as well as the necessary adjustments to be ready to transport increasing percentages of hydrogen, based on market demand. Moreover, TAP could transport biomethane within its existing infrastructure with only minor technical adjustments required.

-How does the TAP help Azerbaijan diversify its energy export routes?

-TAP, as part of the SGC, represents the unique direct route to transport safely and reliably Caspian gas to the liquid markets of Italy and beyond.

-What opportunities does the TAP open up for other energy projects in the region?

-TAP connects to key gas transportation infrastructures, such as the Interconnector Greece-Bulgaria (IGB), with future potential to link to the Ionian-Adriatic Pipeline (IAP). We have demonstrated our reliability as a route for Caspian gas to Southeastern Europe and the Balkans. TAP operates as a network, facilitating gas shipments not only westward to Greece, Bulgaria, and Italy, but also in reverse, from Italy to Greece and Bulgaria. Furthermore, trades on the TAP virtual trading point have extended gas deliveries through the IGB to markets in the Western Balkans and Moldova.

-How does the implementation of the TAP affect the economic development of the countries through which the gas pipelines pass?

-TAP is bringing multiple benefits to several countries and across different sectors. At macro-level, TAP helps Europe and its host countries transition to a low-carbon economy, diversify sources of supply, strengthen gas market competition and enhance Europe’s gas grid connectivity.

As we transition to a low carbon future, our markets still require a diverse, secure, reliable and affordable energy supply to help fuel its economies, warm its homes and remain competitive. TAP plays a vital role in advancing these objectives.

-How does TAP's Social and Environmental Investment (SEI) programme support the designated countries?

-TAP is aimed at improving quality of life through our Social & Environmental Investments (SEI) programme. In the context of this programme, we have collaborated with regional and local officials, as well as other stakeholders, to identify areas where we can most effectively benefit local communities. Over the lifetime of the pipeline, TAP has committed to investing €32 million in Greece, €14 million in Albania, and €12 million in Italy through our SEI projects. So far, we have implemented more than 300 SEI projects across these countries.

Additionally, during the construction phase, we created thousands of direct and indirect jobs in Greece, Italy in Albania. Now that we have entered the operations phase, since 2020 TAP employs a permanent workforce in Athens, Thessaloniki, Melendugno, Tirana, and across the pipeline route. Moreover, TAP directly contributes to the gross domestic products of Greece, Albania, and Italy through millions of euros in taxes. Finally, our success can also encourage other international investors to consider investing in these countries.

Finally, TAP has the potential to significantly contribute to its host countries’ decarbonisation targets by transporting carbon-neutral energy sources, such as hydrogen and bio-methane, thereby becoming a key enabler of the transition to a sustainable energy future.