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Newsletter July 2013

SPEAK OUT

Rikard Scoufias, TAP Country Manager for Greece

The TAP pipeline, bringing Caspian gas to Europe, is to traverse Greece, carrying a host of economic benefits.

Please tell us about the TAP pipeline project.
TAP is a major European pipeline project that will bring Caspian gas into European gas markets. Bringing new diversified sources of gas into the European markets is an important strategic objective for Europe’s energy supply, so TAP is a very important project for the EU as a whole. In this broader context, TAP constitutes one of the major components of what is normally referred to as the Southern Gas Corridor, running from Azerbaijan to Italy. Realizing this Southern Gas Corridor is the world’s largest energy development and in its totality represents an investment of approx. 45 billion dollars with many international and national companies involved.

“If we look at Greece specifically, this translates into direct investment in excess of €1.5bn, making TAP one of the largest Foreign Direct Investments in the country.”

Looking at the specifics of TAP, the pipeline will start in Greece, cross Albania and the Adriatic Sea and come ashore in Southern Italy. The totality of TAP is around 870km, and 550km will run through Greece, so Greece of course plays an important role in this – both for TAP as well as for the EU. The actual construction will be initiated late 2014/early 2015, and first gas will come on-stream at the beginning of 2019, but as you know TAP has already been very active in all our host countries for many years, conducting environmental and socio-economic assessments together with local experts and communities to ensure that we maximize the potential benefits and minimize environmental impact and inconvenience for the communities that live alongside the route.

Why is the TAP route, which traverses Greece, optimal?
In simple terms, TAP’s route is a straight line from the Greek-Turkish border to the landing in Italy. This means that it is the most direct and cost-effective solution for the opening of the Southern Gas Corridor. This, combined with the world-class expertise of the companies involved, is the reason why it was selected as the winner at the end of June 2013, in what has been a very long competition for the transfer of Shah Deniz II gas into Europe. That competition was based on eight selection criteria that were set-out early on by the Shah Deniz consortium, and on which TAP’s proposal was judged following a very intense assessment period. These criteria included safety, commerciality, project deliverability, financial deliverability, engineering design, and transparency. Transparency in particular has been a very important component, and both the Shah Deniz consortium and the Azerbaijani Government have put immense emphasis on this to ensure that the competition was fair and transparent and that all parties involved knew what had to be done and on what basis the Greek route and TAP was finally selected as the winner.

Another important aspect to this was scalability. Whilst TAP has initially been designed to transit the 10bcm gas initially available from Shah Deniz, it can easily be expanded to double that capacity (up to 20bcm), as and when more gas becomes available. I guess you can say that this also makes TAP future-proof.

What are the overall economics of the TAP project?
Since TAP has been designed as the shortest gas transportation route in the Southern Gas Corridor, it can offer the most competitive transportation tariff. It’s also worth noting that TAP will be project financed, so it does not rely on public subsidies or any state financial support. Of course we are getting strong support from our host Governments in Greece, Albania and Italy, but not in the form of taxpayers’ money. Instead, the project financing will be raised from a number of multilateral and bilateral institutions, such as the European Bank for Reconstruction and Development, the European Investment Bank and the Export Credit Agencies of a number of OECD countries. Funding will also be provided by the commercial banking sector.

Please detail the benefits that will accrue to Greece.
TAP’s selection means it will be in a position to deliver substantial and tangible investment, employment and strategic benefits for our host countries. If we look at Greece specifically, this translates into:
• Direct investment in excess of €1.5bn making TAP one of the largest Foreign Direct Investments in the country
• Approximately 2,000 new jobs in Greece during TAP’s construction, giving a substantial boost especially to Northern Greece. In addition, a national study conducted by the Greek Foundation for Economic & Industrial Research (IOBE) has indicated that TAP could contribute indirectly to the creation of approximately 10,000 new jobs. Because of this, that study concluded, almost €400 million of gross added value can be created on average per annum over the lifespan of the project.

We are already working with a significant number of Greek companies and have also conducted hundreds of meetings with local communities to understand their questions and potential concerns, and what we can do to further bring benefits and positive prospects for Greek industry and the local communities.

How do you believe the TAP project will positively impact Greece as an investment destination?
Business generally abhors uncertainty, and in that respect the economic difficulties that Greece has gone through has been detrimental to investment. But I believe that the emphasis that Greece has put on creating and facilitating a positive investment climate has been successful. Our shareholders, Statoil, Axpo and EON have always been very clear about their confidence in investing in Greece, and I believe that the Greek Route and TAP now being selected for the Southern Gas Corridor also constitute a vote of confidence in Greece.  It demonstrates that whilst Greece may still be facing economic challenges, it has gained a tangible endorsement by international investors. It has positive demographics of highly educated young people and many excellent companies that can provide local partnerships, so if the selection of TAP for the Southern Gas Corridor can serve as an example of this in a way that unlocks the Greek potential and pave the way for further large-scale investments finding their way into the country I will of course be doubly pleased with the selection of TAP.