Greece, Italy, Albania reach pipeline deal for Caspian natural gas

Feb 13, 2013 12:00 AM

Greece, Italy and Albania have signed an agreement backing a proposed pipeline to transport natural gas from the Caspian Sea to western Europe, intensifying the rivalry with a competing project.

The 800-kilometre (500-mile) Trans-Adriatic pipeline system, or TAP, would have an initial annual capacity of 10 billion cubic meters (353 cubic feet) of natural gas from Azerbaijan. The venture is run by consortium comprised by Germany's E.ON Ruhrgas, Norway's Statoil and the Swiss-based Axpo group.

Greek Prime Minister Antonis Samaras said the project would provide €1.5 billion ($2.02 billion) of private investment in his country, which is suffering through a sixth year of recession.

"This will change Greece from a second-tier energy destination to a significant transit point," Samaras said. "It will create 2,000 Greek jobs in the early stages of the project in regions that are suffering high rates of unemployment."

TAP is widely seen as a competitor of the Nabucco West pipeline, a separate proposed project that would transport gas to Austria via Bulgaria, Romania, and Hungary. Both are vying for the right to transport natural gas from Azerbaijan's Shah Deniz gas field to western Europe by 2019.

The Shah Deniz gas producers will decide in June which route to use to export their gas to Europe.

TAP officials said they did not yet have an estimate of the total cost of the project and added that, if selected, construction of the pipeline would start in 2015. The pipeline's annual capacity could be doubled to 20 billion cubic meters, they said.

Wednesday's agreement was signed by Greek Foreign Minister Dimitris Avramopoulos, along with Albanian Finance and Energy Minister Edmond Haxhinasto and Italian Development Minister Corrado Passera, while representatives of the Azerbaijani government also attended the ceremony.

"This is an important step for the diversification of Europe's energy supply and access by Azerbaijan to Europe's market," Passera said.

European governments are keen to bring Azeri gas to their markets, and ease current domination by Russia.

Kjetil Tungland, TAP's Managing Director, argued the venture would also spur other badly-needed growth-boosting projects in Greece.

"Projects like TAP signal confidence for other investors," he said.

The TAP route would connect with a pipeline in Turkey and cover 478 kilometres (297.03 miles) in Greece, 209 kilometres (129.87 miles) in Albania, and include a 105-kilometre (65-miles) undersea section before reaching southern Italy. It would run as deep as 810 metres (2,650 feet) below the surface of the Adriatic Sea.

The Nabucco pipeline, which would only run across land, would extend for 1,300 kilometres (808 miles).

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