TAP Managing Director upbeat about Azerbaijani gas export to Europe, potential expansion of SGC [INTERVIEW]

By Azernews

Azerbaijan has proven to be a reliable partner to Europe and managed to increase gas exports in a short period of time in this direction. Against the background of the recent global events and gas crises, Azerbaijan plays an important role in ensuring Europe’s energy diversification. In turn, Europe also has repeatedly voiced the wish to increase the supplies of Azerbaijani gas via the Southern Gas Corridor.

With the completion of the Trans-Adriatic Pipeline construction on December 31, 2020, Azerbaijan began commercial gas supplies to Europe via the Southern Gas Corridor. Last year TAP transported 8.1 billion cubic meters of gas to Europe, by late 2022, Azerbaijan plans to increase gas supplies to 9.1 billion cubic meters and to 11 billion cubic meters in 2023.

Ayya Lmahamad of Azernews presents an exclusive interview with the Trans-Adriatic Pipeline (TAP) Managing Director Luca Schieppati on Azerbaijan and Southern Gas Corridor's role in diversifying gas supplies to Europe, Azerbaijani gas export, potential expansion of SGC and the possibility of supplying hydrogen.

- As the Russian war in Ukraine has been underway for over 100 days with no end in sight, pessimist predictions are abundant that global economies would deteriorate as sanctions start to bite Russia. Do you think Europe can refuse Russian gas if the Kremlin continues to go ahead with its war? Given such a negative scenario, how would you assess Azerbaijan and the Southern Gas Corridor’s role in more or less guaranteeing incessant gas supplies to Europe?

TAP plays a key role in boosting Europe’s energy security, supply diversification, as well as decarbonisation objectives. In the future it could play an even greater role in terms of both providing substantial supplies for this market and contributing to lower carbon emissions in line with the EU objectives.

As part of the Southern Gas Corridor, TAP is an independent Transmission System Operator, owned by multiple shareholders. With regards to relations between sovereign states, TAP is not in a position to comment.

- What is the volume of Azerbaijani gas transported via SGC so far and what are the volumes that are expected to be transported this and next years?

Since we started transporting gas on the last day of 2020, TAP has delivered more than 13 bcm to Europe.

TAP’s initial forward firm long-term capacity, approximately 10 bcm/a, has been allocated to shippers based on long-term gas transportation contracts signed in 2013 for 25 years, which was necessary to underpin the investment.

At the same time, capacity corresponding to approximately 5 percent of the initial capacity is available for short-term bookings through auctions in line with the European regulations via the PRISMA capacity booking platform. Lately, TAP has been close to full utilization, with significant short-term bookings to Italy on top of long-term commitments since mid-February. Our expectation for 2022/early 2023 is continued high-capacity utilization, both in the long and the short-terms. In the course of 2021, mainly thanks to the contribution of TAP, Italy began exporting gas to Northern Europe.

That said, TAP could double its current capacity in the future.

- Is the expansion of SGC foreseen in the future? If yes, what scenarios are on the table? If no, what does it mean, a refusal to increase gas from the Caspian basin?

About a month ago, the European Commission published the REPower EU plan to drastically accelerate its clean energy transition and increase Europe's energy independence. In this plan the European Commission announced its intention to intensify cooperation with Azerbaijan in the light of the strategic importance of the Southern Gas Corridor. According to the European Commission’s proposal ‘scaling up TAP’s capacity would increase the gas supply to the EU and the Western Balkans’.

TAP could double its current capacity in incremental steps to further support Europe’s security of energy supplies. Doubling the capacity of TAP is something that has been designed at the project conception phase. More specifically, TAP’s current capacity can reach slightly over 20 bcm per year.

TAP’s expansion capacity is offered to the market through regular market tests in an open, transparent, and non-discriminatory way. Thus, TAP offers the opportunity to any interested party to submit their binding bids for long-term incremental capacity in the infrastructure.

The 2021 TAP Market test is currently in progress. TAP, together with SRG and DESFA, held a public consultation on the draft project proposal for the 2021 market test between January 18 and March 18, 2022. Following feedback received during the public consultation and the recent gas market developments, TAP, SRG and DESFA recently announced that they intend to propose a first binding phase in November 2022 and, eventually, a second binding phase in 2023, to complete the allocation of all the offer levels.

If market demand is there in the form of firm commitments from shippers, that are sufficient to make the expansion economically feasible, TAP can double its capacity by installing additional compressors to accommodate these volumes.

- How would you assess the possibility of supplying hydrogen via SGC?

We are fully committed to a sustainable future. Now that the entire industry is focused on hydrogen as a most likely means to eventually achieve carbon neutrality by 2050, TAP has been quick to embrace this notion from the outset. We are currently in the process of assessing the degree to which TAP can technically accommodate transporting a blend of natural gas and hydrogen. In 2021, an Initial Hydrogen Readiness study confirmed that TAP has the potential to transport hydrogen blends in the future.

TAP is continuing with its development and working closely with its shareholders, key vendors and the industry, as the investment in the facilities upgrade and percentage to be transported will likely be developed incrementally over time to match the hydrogen market demands and in line with the relevant regulations.

TAP is also a participant in the Joint Industry Project H2Pipe for the development of the world’s first guideline for the transport of hydrogen gas in existing and new offshore pipelines, which will not only benefit TAP, but other transnational interconnectors.

In fact, we are now testing our pipe materials in an internationally recognised laboratory to ensure that the asset is compliant with the forthcoming hydrogen requirements and opportunities.