TAP (Trans Adriatic Pipeline) Now Operational
Share on LinkedIn21 Dec 2020
After four years of construction, the Trans Adriatic Pipeline (TAP) started commercial operation on 16 November 2020. The pipeline has completed all operational testing and verification on the Italian Terminal side and will begin to deliver natural gas to the local market.
After four years of construction, the Trans Adriatic Pipeline (TAP) started commercial operation on 16 November 2020. The pipeline has completed all operational testing and verification on the Italian Terminal side and will begin to deliver natural gas to the local market.
TAP is an essential part of the Southern Gas Corridor. The 878 km long pipeline extends the Trans Anatolian Pipeline (TANAP) and South Caucasus Pipeline (SCP). It enables natural gas to transfer over 3,500 km from Shah Deniz field in Azerbaijan to Europe and has a commercial capacity of transporting 10 Bscm of gas per year. This new pipeline is strategically important to Europe as it provides reliable access to a new source of natural gas at more economical prices. This pipeline's operational start is also well-timed as several European countries pledged to phase out coal plants and nuclear plants in the coming years. Inevitably, natural gas-fired power plants will play a more important role in replacing this generation.
Moreover, TAP is critical to the Italian energy market. This pipeline will be the fifth international gas pipeline that brings gas to Italy. The other pipelines are:
- TAG: delivering Russian gas to Italy through Austria,
- Transitgas: delivering North Europe gas through Switzerland,
- TransMed: delivering gas from Algeria through Tunisia, and
- GreenStream: delivering gas directly from Lybia.
The public expects TAP to bring more competition to the Italian gas market and reduce the price premium over the Dutch TTF, a commonly used virtual trading point for natural gas. At present, the Italian market is dominated by a few large importers. Unlike the existing scheme, the price of natural gas transported through TAP will be based on commercial contract formulas indexed to other European gas hubs rather than oil. This is likely to result in more competitive pricing of gas for PSV, the Italian virtual gas hub. We expect to see even more market competition starting in 2023, as several gas import contracts from Russian and North Europe (linked to oil) will expire.
Historically, Italy has always been an essential link connecting commerce between Europe and Asia. TAP again connects the two continents by opening new commercial channels and opportunities and diversifying Europe's natural gas supply. We will be closely following TAP's impact on European energy markets and Europe's overarching strategy development in the coming decade.
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