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Is it viable to connect TAP to EastMed?

Oil&Gas Materials 22 May 2019 14:16 (UTC +04:00)

Baku, Azerbaijan, May 22

By Leman Zeynalova – Trend:

The viability of connecting the EastMed pipeline to the Trans Adriatic Pipeline (TAP) is at present highly doubtful, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

Italian Prime Minister Giuseppe Conte earlier said that EastMed pipeline, which envisages transportation of East Mediterranean resources to Greece via Cyprus and Crete, could join TAP.

Talking about the construction of Poseidon pipeline, the final leg of EastMed, he said that Italy is not prepared to allow the Poseidon pipeline landfall in the southern city of Otranto but the infrastructure to deliver East Mediterranean Sea gas could join the TAP pipeline.

“The viability of connecting the EastMed pipeline to TAP is at present highly doubtful,” he said, pointing to the ongoing discussions on the need of major investments to even conduct the overall feasibility study of such deepwater offshore pipeline.

“At the same time, without commitment of the other major offshore gas producers in the EastMed (Cyprus-Egypt-Israel) not enough volumes will be even theoretically available to reach a commercial status for such a pipeline,” noted the expert.

The other issue, according to Widdershoven, is that the commitment to an offshore pipeline into Greece/Balkans and Italy is not the most preferable option for all.

“The commercial viability of such as pipeline will depend on the markets that it can lock in, the overall investment costs needed and the political stability of the region. All three are doubtful, as with a pipeline you are locking in the market of your product for decades, without leaving room to enter new markets in full,” said the expert.

He believes that a much better option to have is to put all into LNG, using the Egyptian LNG liquefaction plants available, which will have severely less productions costs, so increase the margins.

“Additional capacity can be easily be build, if the total reserves found offshore are sufficient. With LNG you also are not blocking your potential markets, as you can transport it everywhere. Even for Italy LNG options will be much more interesting, looking at the spread demand for gas, which would otherwise necessitate heavy investments in setting up sufficient Italian gas transport infrastructure. With LNG this could be prevented. If EastMed would link up to TAP the competition would increase. For both parties this would not be the right option, as they both can target other customers and markets if not linked,” added Widdershoven.

The Eastern Mediterranean (EastMed) pipeline project relates to an offshore/onshore natural gas pipeline, directly connecting East Mediterranean resources to Greece via Cyprus and Crete.

The project is designed to transport up to 16 billion cubic meters of gas per year from the off-shore gas reserves in the Levantine Basin (Cyprus and Israel) as well as from the potential gas reserves in Greece.

TAP project, worth 4.5 billion euros, is one of the priority energy projects for the European Union (EU). The project envisages transportation of gas from Azerbaijan's Shah Deniz Stage 2 to the EU countries.

Connecting with the Trans Anatolian Pipeline (TANAP) at the Greek-Turkish border, TAP will cross Northern Greece, Albania and the Adriatic Sea before coming ashore in Southern Italy to connect to the Italian natural gas network.

The project is currently in its construction phase, which started in 2016.

Once built, TAP will offer a direct and cost-effective transportation route opening up the vital Southern Gas Corridor, a 3,500-kilometer long gas value chain stretching from the Caspian Sea to Europe.

TAP shareholders include BP (20 percent), SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).

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Follow the author on Twitter: @Lyaman_Zeyn

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