NGO report casts cloud over TAP outlook

European officials recently convened in Baku to discuss progress on the Southern Gas Corridor (SGC), a $40 billion project that is slated to bring Caspian gas to Europe by 2020.

Government ministers involved in the talks were eager to strike a tone of optimism, highlighting the pipeline project’s importance to Europe’s future energy security. Just days earlier, however, a pair of NGOs published a report urging commercial banks to keep well away from the TransAdriatic Pipeline (TAP) project, the European leg of the SGC network.

TAP calls for the construction of an 879 km pipeline through Greece, Albania and Italy with the capacity to pump 10 bcm per year of Caspian gas. The project is being overseen by a consortium of BP (20 per cent), Azerbaijan’s SOCAR (20 per cent), Italy’s Snam (20 per cent), Belgium’s Fluxys (19 per cent), Spain’s Enagas (16 per cent) and Switzerland’s Axpo (5 per cent).

In the report, Belgium’s Counter Balance and The Netherlands’ BankTrack have blasted the TAP project for not complying with the Equator Principles, a set of guidelines on how projects should handle social and environmental issues. The framework has been adopted by 89 commercial banks in 37 countries worldwide.

“Private banks need to be aware about the shoddy way in which the TAP project is proceeding on the ground, far removed from the public relations fanfare ringing out from the governments involved,” Yann Louvel of BankTrack said in a statement. “Serious impacts to communities and the environment are cropping up and not getting resolved.”

According to the NGOs, the pipeline project affects 19,060 land plots and 45,000 landowners across Greece, Albania and Italy.

The report documents a “range of evidence” of the project’s violations of the investment principles in all three countries, including its “heavyhanded” approach to acquiring land and determining the pipeline’s route. It also accuses the TAP consortium of failing in some cases to provide necessary compensation to landowners and mismanaging the process of resettlement. Furthermore, the report documents instances where there has been damage to property and workers have arrived on private land without a permit or consent.

In Italy, it claims that work on the pipeline has come to standstill amid challenges from local communities and regional authorities. “The project’s fundamental lack of preparedness … has resulted in a string of legal disputes still awaiting verdicts in the Italian courts,” the NGOs said in a press release. Opposition stems largely from the pipeline’s perceived effect on tourism and the olive industry.

As a result of the apparent delays in Italy, the TAP consortium may struggle to bring the pipeline on stream by 2020 as planned. What is more, the project has yet to secure funding for its full construction, estimated at a cost of 5 billion euros ($5.26 billion). According to its website, the EIB has been mulling whether to provide a 2 billion euro ($2.11 billion) loan to TAP since 2015.

Meanwhile, the European Bank of Reconstruction and Development (EBRD) has suggested raising 1.5 billion euros ($1.6 billion) for the project from its own funds and from private banks. The remaining required funds are expected to come from companies involved in the TAP consortium as well as national export credit agencies and commercial banks.

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