The Trans Adriatic Pipeline project is an initiative to develop the European natural gas system. The pipeline comprises the final step of the Southern Gas Corridor project, starting at the Turkey-Greece border, running through Greece and Albania beneath the Adriatic Sea, and ending in the southern part of Italy. The total length of the pipeline is 870 km with a diameter of 48 inches for the onshore and 36 inches for the offshore section, of which 545 km will run in Greece, 211 km in Albania, 105 km offshore in the Adriatic Sea and 8 km in Italy. [1]
The total cost of the pipeline is estimated at €5.7bn ($6.3bn). Construction of the pipeline will be mainly concentrated in Greece and in the offshore section between Albania and Italy. The initial capacity of the pipeline is envisioned to be 10bn m³/year, which will be expanded to 20bn m³/yr with additional compressor stations.[2] Shah Deniz consortium has signed 25-year sales agreement with eight European companies for 10bn m³/yr, of which 8bn m³/yr will be transported to Italy, and the remaining 2bn m³/yr will be delivered to Greece and Bulgaria, respectively 1bn m³/yr each.
The construction of the pipeline started in 2015 and is planned to be operational by 2020. The lifespan of the pipeline is expected to be at least fifty years which is estimated to create several opportunities for Greece, Albania and Italy.
Benefits of TAP for Greece
The gas market gradually developed in Greece in the last decade as the gas consumption increased by 50% between 2003 and 2013 from 2.4bn m³/yr to 3.6bn m³/yr.[3] According to the European Commission, the gas demand of the country will increase to 5.8bn m³/yr by 2020.[4] However, the country does not have rich energy resources and meets 100% of its total gas consumption by imports. In comparison to other southeast European countries, it is well-diversified. In addition to Russia, Greece imports gas from Algeria, Qatar, Nigeria and Turkey. Nevertheless the country is still 60% dependent on Russian gas.[5]
Taking into account that the country is 60% dependent on Russia, it needs alternative supplies in order to decrease its import dependency on a single supplier. Importing 1bn m³/yr of gas through TAP as of 2020, the country will be able to reduce its reliance on Russia. In addition, Greece is experiencing a severe economic crisis. The unemployment ratio in the country increased to 26%, and the country’s debt is €320bn which comprises 177% of the country’s GDP.[6] Under this circumstance, the economic benefits of TAP are crucial for Greece.
According to the report of the Foundation for Economic and Industrial Research, the construction and operation of TAP during its 50-year lifetime is estimated to generate €33-36b for the Greek economy. Moreover, the impact from the investment is predicted to be €18bn, over €5bn of value added such as taxes, depreciation expenses and net operating surplus will be created through the operation of the project. In addition, the project will create almost 8 – 10,000 jobs in total during the construction period.[7]
On the other hand, Greece has an ambition of becoming an energy hub which is strategically important for the country’s economic development.[8] In this context, the country aims to export gas up to Hungary via the vertical pipeline, namely Greece-Bulgaria-Romania Interconnector which is envisioned to be linked with the TAP pipeline.
Taking into account that there is an existing pipeline between Romania and Hungary, Greece will be able to transport gas up to the Hungarian market.[9] Thus, TAP pipeline has a strategic importance for Greece as it will both bring additional gas supplies to the Greek market and will enable Greece to send gas to southeast Europe.[10]
Benefits of TAP for Albania
Energy security is one of the fundamental concerns of Albania which depends on hydropower for around 90% in its electricity generation. However the country’s hydro generation changes seasonally depending on the fluctuations in the country’s rainfall.[11] For example, due to the power shortages, the country’s GDP growth decreased 1% in 2008.[12]
Thus there is a need to provide an alternative energy source for the country. Taking into account that natural gas is a clean energy fuel, the country aims to use natural gas in order to avoid supply shortages. According to the Energy Ministry of Albania, natural gas demand will be 1.8bn m³/yr by 2020 in the country.[13] However, currently the country does not have a natural gas market as indigenous gas fields are depleted and annual gas production reduced from 1bn m³ in 1992 to 0.01bn m³ in 2010.[14] In this context, constitution of a well-developed natural gas market in Albania will contribute to the energy supply security of the country in the long-run. In this case, bringing natural gas from the Caspian region through TAP, Albania will be introduced with the natural gas, and this will trigger the country to establish a well-developed natural gas market.
On the other hand, Shah Deniz consortium aims to send natural gas to Bosnia and Herzegovina, Serbia, Kosovo, Montenegro and Croatia by the Ionic Adriatic Pipeline which will connect to the TAP pipeline in the Albanian section.[15] This case will increase the geostrategic importance of Albania by contributing to the energy security of the Balkans.
From the economic point of view, TAP will contribute to the Albanian economy by providing employment, additional GDP and tax revenues. These effects will be direct, indirect and induced. Taking into account that pipeline construction will last four years and its lifetime will be 50 years; the pipeline will bring indirect and induced benefits to the country. According to estimates by Oxford Economics, the construction activities will provide €157mn to Albanian GDP and create 2,900 jobs each year. In addition to direct impacts, indirect effects will be particularly on the local companies, contributing €110mn to GDP and creating 3,100 jobs every year. On the other hand, induced effects will come from the spending of employees. Moreover, operational impacts are estimated to start in 2020 and continue for 50 years, bringing €780mn to the GDP of the country.[16]
Benefits of TAP for Italy
Natural gas is an important energy fuel in Italy along with the oil, comprising 34% of the total energy consumption. Even though natural gas is the second largest energy source in the total primary energy consumption of the country, it is 90% dependent on natural gas imports as the country consumed 61,4bn m³ of gas in 2015, of which 55.2bn m³ were imported.[17]
According to Snam Rete Gas, Italian natural gas consumption will increase to 73bn m³/yr in 2023, while domestic production will continue decreasing.[18] On such an occasion, the current import capacity will not be sufficient for the future demand of the Italian gas system. Thus, a new pipeline is needed to import additional gas supplies which can be imported through TAP pipeline.
Though the country is well-diversified in terms of natural gas imports in comparison to the other European countries, it is still 43% reliant on Russian gas. Moreover, the second largest gas supplier of Italy is Algeria which transports gas to the Italian market through Tunisia that both of them struggle with the instability. This is actually a serious challenge for the country’s gas supplies. In this case, TAP will make contribution to the supply security of the country by providing both route and supply diversification.
The natural gas market is dominated by Eni. However, Eni’s market share is estimated to decrease after the implementation of the TAP project. New and alternative sources will boost the competition in the market which will raise the market share of smaller operators and reduce the final prices. In this way, the country is calculated to save €300mn for each percentage of price reduction.[19]
Additionally, as part of the reduction of Greenhouse Gas Emission, European Commission aims to promote the usage of natural gas in transportation systems. In this context, natural gas-powered vehicles, especially Compressed Natural Gas (CNG) vehicles increased in Italy in recent years. Although the consumption of natural gas in vehicles comprises just 1.23% of the total consumption, the number of CNG stations increased by 37% in the last four years.[20] For example, three out of every four CNG vehicles are in Italy.
The country is at the crossroads of North-African, North-European and Russian streams, which can transform the country into the “Southern-Europe gas hub”. However, reaching out this goal, the country should provide a sufficient gas supply to the market. Taking into account that, 8bn m³/yr of gas will come initially to the Italian market, it will contribute reaching the country’s long standing ambition of becoming an energy hub. The implementation of the hub-strategy would also create added value for the state-owned Snam Rete Gas.
In conclusion, TAP will provide several advantages to the involved countries as it will bring alternative gas supplies to the Greek market and will allow Greece to deliver gas to South East European market. It will facilitate to establish a natural gas market in Albania and to contribute its energy security which confronts power shortages due to the seasonal changes. By bringing additional and alternative gas to the Italian market, TAP will cover additional gas demand of Italy and pave the way for becoming an energy hub.
Emin Akhundzada earned his master’s degree in 2007 from Ege University Department of International Relations and his PhD at Dokuz Eylul University, Department of International Relations. He has published many articles in Azerbaijan, Turkey, India and various European countries; and presented papers at national and international conferences.
[1] TAP, TAP ESIA Report for Greece, http://www.tap-ag.com/assets/07.reference_documents/english/esias/greece/ESIA_Greece_Non_Technical_Summary.pdf (25.10.2016), p.7.
[2] TAP, TAP at a Glance, http://www.tap-ag.com/the-pipeline (25.10.2016).
[3] BP, BP Statistical Review of World Energy, June 2014, p.23.
[4] Regulatory Authority for Energy, 2013 National Report to the European Commission, Athens, December 2013, p.86-87.
[5] IEA, Energy Supply Security 2015.
[6] BBC News, The Greek Debt Crisis Story in Numbers, 10.07.2015, http://www.bbc.com/news/world-europe-33407742 (25.10.2016).
[7] Svetoslav Danchev, Nikos Paratsiokas and Aggelos Tsakanikas, “Economic Impact From the Construction and Operation of the Trans Adriatic Pipeline on Greek Territory”, Foundation for Economic & Industrial Research, Athens, January 2013, p.8.
[8] Euractive, Greece stresses its Role as EU’s Energy Hub, 13.01.2014, http://www.euractiv.com/energy/greece-wants-eu-energy-hub-news-532712 (25.10.2016).
[9] Natural Gas Europe, Hungary-Romania Gas Interconnector, 16.10.2010, http://www.naturalgaseurope.com/hungaryromania-gas-interconnector-step-regionwide-network (25.10.2016).
[10] Edison Kurani, “TAP and Interconnector Greece-Bulgaria Sign Memorandum of Understanding on Technical Cooperation”, Independent Balkan News Agency, 07.01.2014, http://www.balkaneu.com/tap-interconnector-greece-bulgaria-sign-memorandum-understanding-technical-cooperation/ (25.10.2016).
[11] Energy Charter Secretariat, In Depth Review of the Energy Efficiency Policy of Albania, Belgium, 2013, p.24.
[12] Besar Likmeta, “Albania Facing Electricity Shortage Following Low Production”, Balkan Insight, 01.09.2011, http://www.balkaninsight.com/en/article/albania-doing-little-to-quell-growing-demand-for-electricity (25.10.2016)
[13] Anastasios Giamouridis and Spiros Paleoyannis, “Security of Gas Supply in South East Europe: Potential Contribution of Planned Pipelines, LNG and Storage”, The Oxford Institute for Energy Studies, July 2011, p.14.
[14] Likmeta, ibid.
[15] BP, “Shah Deniz Targets Italian and Southeastern European Gas Markets through Trans Adriatic Pipeline”, Press Release, 28.06.2013, http://www.bp.com/en/global/corporate/press/press-releases/shah-deniz-targets-italian-and-southeastern-european-gas-markets.html (25.10.2016) .
[16]Oxford Economics, The Economic Impact of Trans Adriatic Pipeline on Albania, http://www.oxfordeconomics.com/Media/Default/economic-impact/economic-impact-home/Economic-Impact-trans-Adriatic-Pipeline.pdf ( 25.10.2016), p.1.
[17] BP Statistical review of World Energy 2016, p.22-23.
[18] Matteo Verda, “Contribution of TAP for the Italian Economy”, ISPI, Analysis No.256, June 2014, p.4.
[19] Verda, TAP, p.9.
[20] Antonio Sileo andFilippo D'Arcangelo “The Importance of TAP for Italy: Some Scenarios”, Natural Gas Europe, 10.06.2014, http://www.naturalgaseurope.com/trans-adriatic-pipeline-italy (25.10.2016).
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