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Created on: 2017-02-20 22:30:54
Last update: 2017-02-20 22:30:54 BankTrack and Counter Balance
Greig Aitken, BankTrack campaigner
Xavier Sol, Director, Counter Balance
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The Trans Adriatic Pipeline (TAP) project is the western extension of the Southern Gas Corridor (SGC). SGC is planned to export natural gas – initially 10 billion cubic metres per year – from the Shah Deniz II field in the Caspian Sea to western markets via the South Caucasus Pipeline extension (Azerbaijan to Georgia), on through the Trans-Anatolian pipeline (TANAP) stretching across Turkey, and then joining up with TAP at the border of Turkey and Greece. With estimated construction costs of €5 billion, TAP is planned to run for 879 kilometres in total across northern Greece (545 km), Albania (215 km), the Adriatic Sea (105 km), make landfall in Italy at a small, popular beach in San Foca, and conclude with a short pipeline section (8 km). A further 55 km pipeline is planned to connect TAP to the Italian gas network. The TAP company is promoting and constructing the project; its current shareholding comprises BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%).
Following years of preparatory work dating back to 2003 as well as many protracted negotiations and discussions over the routing and the ownership of the Southern Gas Corridor, TAP construction formally started in May 2016. The TAP company is working to a timetable which foresees TAP operations commencing in 2020, although work on the project’s Italian section is stalled and behind schedule due to opposition from both residents in the town of Melendugno and local and regional authorities. Construction work is moving forward both in Albania, where there is widespread dissatisfaction among stakeholders owing to a flawed compensation and land acquisition process conducted by the TAP company, and in Greece, despite protests and resistance from communities and farmers in the north-east of the country related to the pipeline’s routing through both highly fertile agricultural land and seismic areas close to residences.
To date, no third party financing for TAP from either public or private financial institutions has been agreed but it is widely known that both public and private banks are assessing and considering finance for the project. One commercial bank – Société Générale – has been providing financial advice and guidance to TAP since March 2013.
What must happen
As a result of its harmful environmental, social and climate impacts, further construction and realisation of the TAP project would be a major setback both for the communities affected by the project and Europe’s energy future, bearing in mind the resulting 'carbon lock-in' which the project would bring about. The wide range of impacts put the project's viability at risk, and financial institutions should be aware of all the rights violations and technical shortcomings on the ground in Albania, Greece and Italy – a Counter Balance and BankTrack analysis (published in February 2016) describes how the project is failing to comply with the Equator Principles. All potential financiers – both public development banks and commercial banks – should refrain from entering into any contractual relation with the promoters of TAP and other sections of the Southern Gas Corridor.
TAP's shortcomings in the pre-construction phase and now the construction phase are being resisted by a variety of communities, groups and local authorities. In Albania uncertainty and confusion has been created for many people whose lives, land and livelihoods are being jeopardised. Villages along the TAP route are dotted with scores of olive trees, orchards, pastures and fields providing subsistence for local inhabitants. Two fact-finding missions carried out in 2016 by NGOs (July: 32 villages visited; August: 30+ villages visited) identified extensive community discontent concerning involuntary resettlement, compensation for loss of land and property, damage to property and the engagement methods being used by TAP’s Albanian contractor ABKons. In Greece, as the pipeline routing is planned to cross highly fertile agricultural land in the north-east, farmers' groups have borne the brunt of what they say have been inappropriate consultation methods deployed by TAP, with instances of threats and malfeasance connected with land acquisition dating back to 2015 and still ongoing. Approximately 200 farmers are unwilling to settle terms with the company, and stand-offs between the company and farmers have resulted in police interventions, with farmers confronting TAP workers who have arrived on their land without permits or consent. In Italy, around two hundred families, local fisheries and a burgeoning local tourism sector are directly affected by the project proposal. Trust between TAP AG and much of the affected community in Melendugno, as well as other stakeholders (i.e., local and regional authorities), has broken down – the company's efforts to start construction for the final leg of the project in Italy are currently stalled owing to local opposition and ongoing court cases.
The European Investment Bank (EIB), a potential financier of TAP, is conducting due diligence. Reflecting the level of public grievance over TAP, the EIB has already received 13 complaints about TAP from members of the public and groups in the three transit countries.
Individual environmental and social impact assessments (ESIAs) were prepared for each of the three TAP transit countries. In Albania, the ESIA was approved by the Ministry of Environment, Forests and Water Administration in April 2013, followed by official granting of the Environmental Permit. In Greece, the Ministry of Environment, Energy and Climate Change formally approved the TAP ESIA in September 2014, though legal challenges (ongoing) to the approval have been lodged at Greece's Supreme Court. At issue is the routing of the pipeline section Kavala-Serres-Thessaloniki, 113 kilometres in length, which would disrupt fertile agricultural land and present threats to various villages, and the location of a compressor station close to a number of villages and settlements. Major concerns relate to the pipeline's integrity in the acutely flood-prone region of Tenagi in Kavala, and TAP AG's unwillingness to consider suggested alternative locations for its compressor station in the seismic Serres plain. In Italy, the ESIA approval process has been – and remains – highly contested. In September 2014, Italy's Environment ministry approved the TAP ESIA, yet in so doing also attached 58 mandatory provisions for TAP to fulfil before the beginning of the project's construction. TAP AG is understood to have so far provided documentation which allows it to fulfil only three of these mandatory provisions and – alarmingly – is said to be seeking final authorisation to proceed with construction on the basis of fulfilling the missing provisions only during its implementation of the project. The company's plans to transplant sensitive olive trees continue to be disputed and TAP opponents contend that the mitigation of environmental impacts from drilling work (offshore and onshore) remains uncertain owing to missing assessments on impacts to the seabed and independent studies on species impact.
The TAP project is seeking financing from both public and private sources, with the following institutions currently projected to cover the estimated total project costs of €5 billion:
- European Investment Bank – €2 billion loan
- European Bank for Reconstruction and Development – €500 million loan
- Private banks – €1 billion in a syndicated loan
- Equity financing from the TAP consortium companies and export credit agency contributions – €1.5 billion
While Société Générale has been TAP's financial advisor since 2013, no other private banks have so far indicated an intention to get involved in financing for TAP. The project's financing structure appears similar to another multi-country export pipeline project, the Baku-Tbilisi-Ceyhan pipeline, which involved a syndicate of 15 commercial banks, including Société Générale, ABN Amro, Citigroup and Mizuho who acted as financial arrangers for €1.2 billion of syndicated loans.