May 18, 2026

by AEA in News

US-Backed LNG Projects Reshape the Western Balkans’ Energy Landscape

The United States is seeking to reshape the energy map of the Western Balkans through a network of bilateral agreements and infrastructure projects centered on liquefied natural gas (LNG). The broader objective is to reduce the region’s dependence on Russian gas while strengthening a strategic energy corridor linking Southern and Central Europe.

A series of projects is being advanced across Croatia, Bosnia and Herzegovina, North Macedonia, Albania, Montenegro, Kosovo and Serbia. These initiatives include new gas pipelines, LNG terminals and gas-fired power plants, supported politically and financially by both Washington and Brussels. Some projects are already under construction or in the contracting stage, while others remain in planning. Together, they signal a gradual shift in the region’s energy mix toward gas supplies from the United States, Azerbaijan and the Mediterranean basin.

Jonathan Stern of the Oxford Institute for Energy Studies notes that Southeast Europe has already developed alternative gas supply routes. These include LNG terminals in Greece and Croatia, the Southern Gas Corridor from Azerbaijan, and Romania’s Neptun Deep offshore field in the Black Sea, whose exploitation is expected to begin next year and whose reserves are estimated at around 100 billion cubic meters.

Bosnia and Herzegovina Seeks to End Dependence on Russian Gas

Bosnia and Herzegovina has recently become a focal point of regional gas diversification efforts through the Southern Gas Interconnection project with Croatia. The pipeline would give the Federation of Bosnia and Herzegovina access to the LNG terminal on the Croatian island of Krk and to alternative gas suppliers. At the same time, Republika Srpska continues to pursue separate gas links with Serbia, including the Eastern Interconnection project from Bijeljina to Banja Luka.

For nearly five decades, Bosnia and Herzegovina has depended almost entirely on Russian gas, delivered through TurkStream and used mainly for heating in Sarajevo. In overall volume terms, the country remains a relatively small gas consumer compared with Serbia.

The intergovernmental agreement between Bosnia and Herzegovina and Croatia on the Southern Gas Interconnection was signed in Dubrovnik in April, in the presence of US Secretary of Energy Chris Wright. The pipeline is planned to extend from Dalmatia toward central Bosnia, with additional branches toward Herzegovina and the country’s northwest. Croatia’s state-owned Plinacro is leading the Croatian section, while the US-based company AAFS Infrastructure and Energy has been designated to manage the project on the Bosnian side.

The project has, however, drawn criticism from the European Commission and the Energy Community. Concerns center on the Federation of Bosnia and Herzegovina’s special-purpose law, or lex specialis, which named a private American company in the project framework, as well as questions over compliance with EU and Energy Community rules.

Bosnia and Herzegovina currently consumes up to 250 million cubic meters of gas annually, while the planned pipeline is expected to have a capacity of around 1.5 billion cubic meters. This has prompted discussion about the possible construction of gas-fired power plants capable of supplying electricity to roughly 400,000 households. At present, about 80% of the country’s electricity is generated by coal-fired thermal power plants, some of them more than half a century old.

The new pipeline would also connect with the existing gas route arriving from Serbia. Still, Stern argues that while the project is important for Bosnia and Herzegovina, its wider regional relevance is less clear. He also questions the commercial viability of an investment estimated at around EUR 1 billion, particularly given the lack of available LNG transit capacity from Croatia and Serbia’s expanding access to gas through Bulgaria.

Serbia Balances Diversification and Russian Gas Dependence

Serbia is expanding its gas infrastructure as it seeks to preserve its position as a regional energy hub while creating room for US LNG and broader Western investment in the sector.

In February this year, Serbian Minister of Mining and Energy Dubravka Đedović Handanović signed a joint statement with the United States and several Central and Eastern European countries during the Transatlantic Gas Security Summit in Washington. The statement focused on strengthening the resilience of regional gas markets and improving supply security.

Following the summit, Srbijagas Director Dušan Bajatović stated that Serbia would eventually need to purchase American gas, although no quantities or formal supply contracts have yet been defined. Serbia’s 2024 strategic energy cooperation agreement with the United States envisages diversification of energy sources, but it does not currently include a binding agreement to buy US LNG.

Potential US LNG deliveries to Serbia could come through the Krk terminal in Croatia or via Greece’s Alexandroupolis terminal, supported by new interconnections through Bulgaria and North Macedonia. Serbia currently operates approximately 2,500 kilometers of gas pipelines, is planning new links, including one toward North Macedonia, and is expanding the Banatski Dvor gas storage facility.

Despite these diversification efforts, more than 80% of Serbia’s gas still comes from Russia through TurkStream. Major energy assets, including the TE-TO Pančevo combined heat and power plant, remain tied to Russian-linked structures involving Gazprom and the Serbian oil company NIS.

Montenegro Explores an LNG Terminal and Gas-Fired Generation

Montenegro, which currently lacks a domestic gas network, is also being drawn into the emerging US-backed LNG framework. Plans include an LNG terminal at the Port of Bar and the possible development of gas-fired power generation.

The country participated in the Transatlantic Gas Security Summit in Washington in February and joined a broader political statement on gas cooperation between the United States and several Central and Southern European countries.

In 2023, the Montenegrin government signed a memorandum of understanding with US companies Enerflex Energy Systems and Wethington Energy Innovation regarding potential LNG and power infrastructure. However, no LNG supply agreement has been finalized, no volumes have been specified, and no binding commercial contracts have been signed.

Montenegro has also supported the Ionian-Adriatic Pipeline (IAP), which would connect the Trans-Adriatic Pipeline (TAP) in Albania with Croatia, although the project remains at the conceptual stage. Separately, gas-fired power plants ranging from 50 MW to 400 MW are being considered in Bar, Podgorica and Pljevlja, including hybrid solutions and possible conversions of existing facilities.

Studies prepared for the Electric Power Company of Montenegro by Japan’s JERA and Switzerland’s SS&A Power Consultancy concluded that the options assessed are technically feasible and economically viable. Depending on the selected plant capacity and fuel supply source, estimated investments range from EUR 233 million to EUR 362 million.

Kosovo Remains Outside the Current Gas Push

Kosovo currently has no gas infrastructure and relies almost entirely on coal-fired power generation. A proposed gas interconnection with North Macedonia had been included in the European Union’s investment plan for the Western Balkans, but the project was suspended, with the government citing high costs and a strategic preference for renewable energy development.

The proposed pipeline would have provided Kosovo with access to gas from Greek LNG terminals in the Aegean Sea, while a separate link to Albania had also been considered. US officials have indicated that they remain open to supporting commercial cooperation if market conditions become more favorable.

Kosovo also declined to direct roughly USD 200 million in Millennium Challenge Corporation funding toward gas infrastructure, instead shifting the investment toward battery energy storage systems.

North Macedonia Emerges as a Strategic Southern Corridor Link

North Macedonia is building new gas infrastructure with support from Washington and Brussels, aiming to reduce its long-standing dependence on Russian gas and position itself as a regional energy transit hub. As a NATO member and EU candidate country, diversification of energy supply has also taken on a clear geopolitical dimension.

The TE-TO Skopje cogeneration plant, which provides heat to the capital and produces electricity, remains dependent on Russian gas and is controlled by interests linked to the Russian group Sintez.

Skopje has signed a memorandum related to the purchase of US LNG, though detailed commercial terms have not been publicly disclosed. The Gevgelija–Negotino gas pipeline is under construction and is expected to connect North Macedonia with Greek LNG terminals. Its initial annual capacity is planned at 1.5 billion cubic meters.

The European Union is financing the project through a combination of loans and grants. At the same time, an interconnection with Serbia is being planned, with construction expected to begin in 2027. North Macedonia’s Ministry of Energy, Mining and Mineral Resources has also stated that the country plans to develop 67 new energy facilities with a combined installed capacity of 4,416 MW, including a cogeneration plant near Negotino.

Albania Positions Vlora as a Future LNG Hub

In April 2026, Albania signed a strategic agreement worth USD 6 billion involving Venture Global and Aktor LNG USA for long-term LNG supply beginning in 2030. The agreement is part of a broader effort to turn Albania into a regional entry point for US LNG in Southeast Europe.

The plan includes the development of an energy hub in Vlora featuring an LNG terminal and a gas-fired power plant with a capacity of approximately 380 MW. The project would also connect with the Trans-Adriatic Pipeline (TAP), which has transported Azerbaijani gas to Italy since 2020.

Vlore, Albania

Washington views Albania as a potential distribution platform for supplying US gas to Kosovo, North Macedonia and other Western Balkan markets. This is particularly significant because Albania does not currently operate a functional internal gas network, while most of the infrastructure inherited from the socialist period is no longer usable.

For Albania, whose electricity system depends overwhelmingly on hydropower, a gas-fired power plant could serve as a strategic reserve during drought periods and times of rising power demand.

Energy expert Stavri Dhima has argued that Albania’s gasification strategy should combine several elements: construction of the Ionian-Adriatic Pipeline, connection to Croatia’s LNG terminal, access to the Trans-Adriatic Pipeline carrying Caspian gas, and development of an LNG terminal and gas storage facility in Dumrea.

If completed, the LNG terminal in Vlora could become a regional gas hub serving Albania, Montenegro, North Macedonia and Kosovo. Through IAP and TAP, gas could potentially also be directed toward Bosnia and Herzegovina and Italy.

Still, experts caution that infrastructure alone does not guarantee energy security. Countries seeking to reduce dependence on Russian gas must also secure reliable, long-term supply contracts with multiple alternative suppliers.

September 9, 2017

by AEA in News

TAP receives around 95% of total pipes needed for construction

By Leman Zeynalova:

Approximately 95 percent of the total 55,000 pipes to be used for the construction of the Trans Adriatic Pipeline (TAP) have been received in Greece, Albania and Italy, said the message from TAP AG.

The last shipment of offshore line pipes has been offloaded in Brindisi, Italy, between 3 and 6 September 2017.

TAP’s contractors have cleared approximately 70 percent of the project route in Greece and Albania (539km out of 765km). Also, over 45 percent of welded steel pipes are already in the ground (backfilled).

“We are pleased that TAP continues to progress on time and on budget. We therefore remain on track to deliver the first Shah Deniz II gas in 2020, bringing a much-needed new source of energy into the European energy network,” said TAP Managing Director Luca Schieppati.

“I want to underline that our project is built with the utmost care for the environment. Our teams are working very carefully along our route to ensure that the land on which construction has been completed is returned to the owners or users in its original condition or better. We are also collaborating with local authorities and local stakeholders to ensure that the benefits of our project are tangible across all those communities crossed by the pipeline,” Schieppati added.

Nearly 2,500 tie-ins have been completed as part of the implementation of TAP project in Greece and Albania, TAP AG consortium said in a message on its Twitter page.

“This is the construction step where 2 pipe strings (~1km) are welded together inside the trench,” said the message.

TAP is a part of the Southern Gas Corridor, which is one of the priority energy projects for the European Union. The project envisages transportation of gas from Azerbaijan’s Shah Deniz Stage 2 to the EU countries.

The pipeline will connect to the Trans Anatolian Natural Gas Pipeline (TANAP) on the Turkish-Greek border, run through Greece, Albania and the Adriatic Sea, before coming ashore in Italy’s south.

TAP will be 878 kilometers in length (Greece 550 kilometers, Albania 215 kilometers, Adriatic Sea 105 kilometers, and Italy 8 kilometers).

TAP’s shareholding is comprised of BP (20 percent), SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).

Source : Trend

September 9, 2017

by AEA in News

Albania, Montenegro Eye EU Funding for Gas Pipeline

Albania’s Energy Ministry on Friday presented a feasibility study for a 618-million-euros gas corridor between Albania, Bosnia and Croatia, which it hopes the EU and US will support.

Albania’s Ministry of Energy on Friday in Tirana unveiled a preliminary feasibility study for a proposed Ionian-Adriatic gas pipeline, hoping the EU may fund construction of the section of the pipeline between Albania and Montenegro.

Damian Gjiknuri, Minister of Energy and Infrastructure, said Albania had a strong interest in the pipeline project, which could help gasify the country. “We hope for support from the EU and the US [for the project],” he said.

The 511-km-long pipeline, expected to cost up to 618 million euros, aims to link the Trans-Adriatic Pipeline with Montenegro, Bosnia and Croatia.

The feasibility study calls for a new pipeline with a capacity of 5 billion cubic meters per year, BCM, from which Albania and Bosnia hope to consume 1 BCM each, Montenegro 0.5 BCM while Croatia, the biggest and the strongest economy in the Western Balkans, is expected to consume 2.5 BCM per year.

The US Ambassador to Tirana, Donald Lu, expressed America’s support for the project, as a way to obtain a new source of energy that is not dependent on Russia, and as a means to strengthen regional energy collaboration.

The Albanian Energy Ministry said that, in collaboration with the European Commission, its Directory for Energy and the Ministry of Economy of Montenegro had presented a proposal to the Western Balkans Investment Framework, hoping it will finance the development of the project for the sections in Albania and Montenegro.

The Trans-Adriatic Pipeline is currently under construction. It is expected to ship gas from Azerbaijan to Italy through existing pipelines in Turkey and Greece and through a new pipeline running from Greece to Italy through Albania and under the Adriatic Sea.

The pipeline will have an exit point near Fieri, in Albania, which creates hopes of getting new energy supplies for all Western Balkan countries.

They all have large energy deficits and are heavily dependent on coal to generate electricity. Albania and Montenegro have large hydropower capacities but they are not sufficient to cover all their energy needs.

A gas network could help both countries to produce electricity by burning gas and substitute the use of electricity in some functions like heating, thus limiting the need to use coal and protecting the environment at the same time.

Source: Balkaninsight

September 9, 2017

by AEA in News

IAP project counts on EU, US support

The countries involved in the construction of the Ionian-Adriatic Pipeline (IAP), Albania, Montenegro, Bosnia and Herzegovina and Croatia count on the support of the European Union and the United States.

The remarks were made during the meeting of the Project Management Unit for IAP project held in Tirana.

Addressing the event, Albania’s Energy Minister Damian Gjiknuri stated that his country has completed the drafting of the Gas Master Plan and has built a fruitful cooperation with Montenegro, Bosnia and Herzegovina, Croatia and the Energy Community for the implementation of the IAP project.

He expressed confidence that this project will be supported by both the United States and the European Union, said the message posted on the website of Albanian energy ministry.

Of course, the Trans Adriatic Pipeline (TAP) project is really the main pillar to support the development of the gas sector in Albania, but IAP pipeline will also play a primary role, said Gjiknuri.

IAP is not just a natural extension of TAP, said the minister, adding that it will also ensure energy security in the region and bring economic progress to the countries through which it passes.

“We point out that three of the IAP countries are NATO member countries and this makes the IAP project even more necessary in terms of strategic interests in the region,” said Gjiknuri.

IAP is a proposed natural gas pipeline in Southeastern Europe (SEE) that will stretch from Albania through Montenegro, and Bosnia and Herzegovina, to Split in Croatia. It will be connected with the Trans Adriatic Pipeline (TAP).

IAP will provide deliveries of Azerbaijani gas to several countries of South-Eastern Europe. The capacity of the pipeline will amount to five billion cubic meters of gas per year.

The pipeline will connect to the Trans Anatolian Natural Gas Pipeline (TANAP) on the Turkish-Greek border, run through Greece, Albania and the Adriatic Sea, before coming ashore in Italy’s south.

TAP will be 878 kilometers in length (Greece 550 kilometers, Albania 215 kilometers, Adriatic Sea 105 kilometers, and Italy 8 kilometers).

TAP’s shareholding is comprised of BP (20 percent), SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).

June 14, 2016

by AEA in Publication

Albania and China, a love story or necessity?

Long time relationship between China and Albania since the communism era during the dictatorship of Enver Hoxha.

China Claus is coming to town! For better or for worse, Chinese companies are replacing traditional European investing partners — namely Italy and Turkey — and helping to develop a country in dire need of modernization, particularly if it wants to move from its European Union candidacy status to a full blown member in the foreseeable future.

But, like everything involving China, when the world’s No. 2 economy comes knockin’, they are trying to bring a few hundred Chinese personnel waiting to be let inside. Moreover, the companies investing in strategic assets are often government owned, which should raises eyebrows in the halls of power throughout Europe, particularly in Brussels.

There is concern among some leading Albanian politicians that when China invests, it does so to export its own labor into the foreign market. This is particularly worrisome in the case of Albania that has more than 17.1% unemployment rate, and where jobs are badly needed.

For now, China has become a leading trading partner for Albania, a small, mountainous Balkan state on the Adriatic Sea. Chinese investments are relatively new there, so for companies like Geo-Jade Petroleum, this is a whole new world.

“China is an important economic partner to Albania, but we need to ensure we are getting a fair deal that generates economic growth…and creates more jobs here in Albania, for Albanians,” says Ilir Meta, the country’s former Prime Minister and now Speaker of Parliament since 2013. Meta has been involved in Balkan politics since the implosion of Yugoslavia in the 1990s and remains a popular and influential figure in the country decades later.

The Durres Port in Albania. China is in talks with the government to build an industrial park there. It already owns the country’s largest airport, is rebuilding an ancient Roman Empire road, and acquired rights to an oil field from Canadians.

What is China up to in this small lower-middle income nation of over 3 million including a large diaspora? The second poorest in Europe after Moldova, it has an economy that’s smaller than many Chinese companies.

On June 6, the Albanian government said that it was ready to ink a deal with China State Construction (CSC) to build a 200 million euro, 16-mile stretch of road to neighboring Macedonia. The so-called Arber Road project has been partially built by the Albanians, but parts of it are still a cobbled stoned street that dates back to the Roman Empire, while most of the road is a two lane pothole riddled, slow moving, road that hinders efficient transportation and needs to be turned into a modern highway. The Chinese will pave the way into the 21st Century, creating an important transportation route for Albanian commerce.

In March, China’s Geo-Jade Petroleum, a publicly traded oil company listed in Shanghai, bought controlling rights in two Albanian oil fields then controlled by Canada-based Banker’s Petroleum for a cool $442.3 million. Albania’s Patos-Marinza is the largest onshore oil field in Europe and several international companies have signed exploration contracts with the government, including Royal Dutch Shell in 2012. Those two China deals alone account for nearly 5% of the country’s 2015 nominal GDP.

In April, state-owned asset manager China Everbright and Hong-Kong based Friedman Pacific Asset Management announced they were buying Tirana International Airport in a concession deal that has the Chinese co-owning Albania’s only commercial airport for the next 10 years. The move is consistent with China’s strategy of buying stakes in major transportation hubs along the Mediterranean, including Cosco’s April purchase of Greece’s Piraeus port and Shanghai International’s March 2015 successful bid to operate the new Haifa port in Israel for 25 years.

Within the first four months of 2016, China increased trade to become the second largest trading partner for Albania. In March, it accounted for 7.7% of exports up from 6.3% last year, surpassing old-time partners Greece and Turkey, and next-door neighbors in the Balkans. According to Santander Bank, foreign direct investment in Albania now accounts for 50% of its GDP. China’s newfound love for Albania, therefore, is a vital source of foreign capital.

Like every other developing country, Albania is busy rewriting the rule books in order to make it an attractive place for corporate investors. It’s adopted new tax policies that aim to reduce corruption and administrative difficulties. Bureaucratic procedures to obtain operating licenses have slowed down investment progress. Since 2013, FDI flows to the country have exceeded $1 billion, a trend that should continue, according to the United Nations Conference on Trade and Development.

Major investments include the Trans Adriatic Pipeline passing through Albania, putting it on the map of a European Commission energy project known as the Southern Gas Corridor. The pipeline’s biggest integrated oil and gas player from the West is BP, with a 20% stake. Azerbaijan’s Socar shares another 20%, along with natural gas pipelines manufacturer Snam S.p.A of Italy. The Commission is bank-rolling most of this in an effort to diversify fuel supply. Russia accounts for at least 30% of foreign oil and gas into the E.U. Other large projects include the Devoll River Cascade, a hydroelectric power plant being built by Norway’s Statkraft. Its most desirable sectors seeking investment: tourism, agriculture and manufacturing.

Tirana International Airport. A Chinese company won a bid to operate Albania’s largest port for the next 20 years. (Tirana Airport corporate photo. Used by permission.)

“Albania’s agriculture sector is rich and ripe for investment,” says Edmond Panariti, the country’s Agriculture Minister. “We want the E.U. and the U.S. to look at agribusiness, and place as much attention on this as the Chinese. This will help create Albanian jobs and stimulate our economy,” he says via email from his offices in Tirana. This month, China’s government cranked up the volume on its soft power by giving Albanian farmers a 1.3 million euro grant to buy new equipment.

For the investment-hungry countries of southeastern Europe, Chinese investments are a welcome complement to E.U. funds. E.U. integration is the long-term goal, supported by a wide cross-party consensus in Albania. But when it comes to funding, some of these countries perceive Chinese cash as practically the only available way to overcome the following dilemma: access to large E.U. structural funds for candidate countries is not possible until they join the Union, but in order to make progress towards accession, countries need to improve infrastructure and transport links both within their borders and with neighbors, according to a report by the Central European Initiative, an intergovernmental forum based in Italy.

Balkan countries will continue to seek European funding for capex-intensive infrastructure projects of European importance that – so far – are not reliant on China. The Trans Adriatic Pipeline is one of those. As is the so-called “Peace Highway”, which will connect Albania with Serbia and Kosovo. But given the remaining financing gap from the multilateral development banks, the slow process of project approval, and other policy obstacles, China is often able to come in and present itself as an attractive alternative. They come in and offer streamlined approval processes with their companies, and Chinese state-backed financing to put the icing on the cake.

Albania remains one of the least developed countries in Europe. A fifth of its population lives under the national poverty line. Over the years, Albania has made incremental improvements and is now less dependent on foreign aid.

China may be willing to throw caution to the wind. But many Western businesses cite high taxation, unfair competition from the state, and government bureaucracies as their biggest stumbling blocks to investing in Albania. A survey in 2015 had 70% saying taxes were unfavorable for their businesses.

Risk averse Westerners are no match for swashbuckling Chinese, who are flush with cash and increasingly allowed to take capital out of China. Albania has become attractive to the Chinese, a country that’s starting to show its expertise in inking deals in the less developed world.

Albania is strategically positioned at a crossroad between east and west, with the major port of Durres linked to the Balkan hinterlands and the rest of Europe by rail. The economy is showing signs of improvement. Albania grew 2.3% last year. In Europe, that’s better than most. The country’s credit rating is still subprime, but it was upgraded in February by Standard & Poor’s to B+.

Albania’s former Prime Minister and now Speaker of Parliament, Ilir Meta, says Albania is “an excellent opportunity” for foreign investors, not just the Chinese newcomers who can’t seem to get enough of it.

For Parliamentary Speaker Meta, these are necessary growing pains to get the Balkans looking more like the Baltics, ex-Soviet economies that have escaped the gravitational pull of the planned economy black hole. Albania’s GDP per capita was $4,659 in 2013, making it lower than China’s. Albania GDP per capita has risen three-fold over the last decade, but of the six Balkan states that’s second to the last placed finisher: Kosovo.

On the bright side, there’s plenty of room for improvement. And they have examples from neighbor states like Bulgaria and Montenegro to show them, the Chinese, the Europeans and the Americans, that they might get their too.

Powered by international and U.S. development aid, Chinese financial muscle – and with the gates of E.U. opening in front of it – Albania’s future is better than it used to be. “We are in the final phase of endorsing in Parliament the judicial reform laws with quality, integrity and legitimacy that will change the public perception about how we fight against corruption and organized crime, and are creating a better, safer business climate for investors,” Meta says in an email interview from Albania. “I think it brings us closer to truly starting negotiations for EU accession. We play a big role in the region. We just need to do more to raise the standard of living and that means developing sound economic policies that create jobs,” he says.

Map of the Trans-Adriatic Pipeline. Energy projects are of course a favorite of foreign investors. TAP’s biggest Western investor is BP. (Image from the Trans Adriatic Pipeline website)

May 17, 2016

by AEA in News

Construction Begins on Trans Adriatic Pipeline

ATHENS—Construction work has begun on the Trans Adriatic Pipeline, which is expected to bring natural gas from the Caspian Sea to Europe and ease reliance on Russian gas imports.

The €5 billion ($5.67 billion) project is expected to supply around 10 billion cubic meters of Azeri gas a year to European countries, enough to cover the energy needs of some seven million European households.

The Trans Adriatic Pipeline, or TAP, would transport natural gas from the vast Shah Deniz II field offshore Azerbaijan via western Turkey to Greece, Albania and then across the Adriatic Sea to Italy.

Greek Prime Minister Alexis Tsipras, the European Commission Vice-President Maros Sefcovic and delegations from eight countries on Tuesday attended the inauguration ceremony in the northern city of Thessaloniki for the construction of the 545-mile pipeline, which is expected to start operations in 2020.

“The energy map of southeast Europe is changing, and Greece is turning into an energy hub for the region,” Mr. Tsipras said during the ceremony.

The Greek premier said the investment in Greece would be more than €1.5 billion and is expected to create some 8,000 direct jobs. Greece’s unemployment rate, at more than 24%, is more than twice the eurozone’s average.

TAP is owned by BP PLC, Azeri state energy company SOCAR, Italy’s Snam SpA, Fluxys Belgium SA, Spain’s Enagas and Switzerland’s Axpo.

It is designed to link the Trans-Anatolia Natural Gas Pipeline, or TANAP, which is expected to be completed in 2018, and the existing Southern Caucasus Pipeline, or SCP, which links Turkey to the Azerbaijani gas fields in the Caspian Sea through Georgia. The three pipelines form the so-called Southern Gas Corridor.

“Southern Gas Corridor will be vital for reaching the Energy Union objectives of diversification of sources, routes and energy security,” Mr. Sefcovic said. “Timely completion is crucial so that gas from the new suppliers can flow to Europe by 2020,” he added.

Total investment for Shah Deniz II project—including the cost of drilling, platforms, terminals and pipeline infrastructure—is about $45 billion.

Mr. Tsipras said the project fits well with another gas pipeline, Interconnector Greece-Bulgaria and a liquefied natural gas project off northern Greece.

March 7, 2016

by AEA in News

EU Commission approves agreement between Greece and TAP

The European Commission has found the Host Government Agreement between the Greek authorities and the Trans Adriatic Pipeline to be in line with EU state aid rules. The project will improve the security and diversity of EU energy supplies without unduly distorting competition in the Single Market.

Margrethe Vestager, Commissioner in charge of competition policy, stated “Today’s decision opens the way for a multi-billion infrastructure project in Greece. The Trans Adriatic Pipeline will bring new gas to the EU and increase the security of energy supply for Southeast Europe. The investment incentives offered by the Greek Government are limited to what is necessary to make the project happen and in compliance with state aid rules.”

Maroš Šefčovič, Vice-President responsible for Energy Union, said: “Today’s approval of the TAP agreement is an important step towards completing the Southern Gas Corridor. The Energy Union framework strategy of February 2015 identified this project as a key contribution to the EU’s energy security, bringing new routes and sources of gas to Europe. Just on Monday, the Southern Gas Corridor ministerial meeting in Baku, which I attended, confirmed the determination of all participating countries and consortia to complete this key infrastructure project in time. “

The Trans Adriatic Pipeline is the European leg of the Southern Gas Corridor, which aims to connect the EU market to new gas sources. With an initial capacity of 10 billion cubic metres of gas per year, the pipeline will transport gas from the Shah Deniz II field in Azerbaijan to the EU market as of 2020. The Trans Adriatic Pipeline will run from the Greek border via Albania to Italy, under the Adriatic Sea. The builder and operator of the pipeline is Trans Adriatic Pipeline AG (TAP), a joint venture of several energy companies. TAP will invest €5.6 billion over five years in the project, of which €2.3 billion in Greece.

The Greek authorities and TAP concluded a Host Government Agreement. This sets out how TAP will construct and operate the pipeline and defines the respective obligations of the parties. In particular, the agreement provides TAP with a specific tax regime for 25 years from the start of commercial operations. This may give the company an economic advantage over its competitors, who would not benefit from the specific tax regime, and therefore involves state aid in the meaning of the EU rules.

The Commission assessed the measure under its 2014 Guidelines on state aid for energy and environmental protection (the “Guidelines). The Guidelines state that such aid can be found compatible under certain conditions when it furthers objectives of common interest. The Commission found that:

the project will contribute to further
sources and routes: it will bring gas from the Caspian Sea region and potentially the Middle East to the EU;
competition on the European gas market will be increased thanks to the extra volumes of gas and new supply route;
the construction of the pipeline requires substantial upfront investment over several years before any revenue will be generated. The project will be funded entirely by private investment and will generate revenues in its Greek part only from the tariffs paid by clients shipping gas on the pipeline. The Commission concluded that the project would be unlikely to be carried out absent the aid;
the aid is in the form of a specific tax regime that, depending on whether tax rates increase or decrease, will lead TAP to pay more or less tax than it would without the aid. If the rates increase the aid will be limited to the minimum tax benefit for TAP;
in particular the scheme has a built in adjustment mechanism that limits the maximum benefit for TAP. If the Greek equivalent applicable tax rate were to rise or fall beyond 20%, an adjustment mechanism to recalculate TAP’s contribution will come into effect. The Greek authorities will monitor this to ensure that TAP complies with the methodology and therefore the aid is limited to the minimum necessary.

The Commission therefore concluded under the Guidelines that the project’s benefits in terms of increased competition and security of energy supply clearly outweigh any potential distortions of competition triggered by the state aid.

The Commission’s agreement on state aid was one of the prerequisites within the Host Government agreement that still needed to be obtained before the Trans Adriatic Pipeline project could start.

Background

Trans Adriatic Pipeline AG is a joint venture company registered in Switzerland. Its shareholders are BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%).

The Trans Adriatic Pipeline is recognised as a project of common interest (PCI) in the framework ofthe EU’s Trans-European Energy Infrastructure Guidelines. PCIs are aimed at helping create an integrated EU energy market and are essential for reaching the EU’s energy policy objectives of affordable, secure and sustainable energy.

The Commission published its first list of PCIs in 2013. The list is updated every two years to integrate newly needed projects or to remove obsolete ones. The current PCI list was approved on 18 November 2015.