BRUSSELS (Reuters) - The European Investment Bank on Tuesday approved a 1.5 billion euro (1.33 billion pounds) loan for the Trans-Adriatic Pipeline (TAP), part of a $40 billion project to bring new gas supplies to Europe.
The European Union is trying to reduce its dependence on Russian gas by developing the so-called Southern Gas Corridor which is expected to bring around 16 billion cubic metres of gas per year to Europe by 2020.
The gas would come from the Shah Deniz 2 field in Azerbaijan via several routes, including the Trans-Adriatic Pipeline (TAP) to Greece, Albania and Italy.
TAP is slated to bring up to 10 billion cubic metres of gas to Italy from Shah Deniz 2 - one of the world’s largest gas fields developed by a BP-led (BP.L) consortium.
EIB Vice President Andrew McDowell told Reuters the TAP project would help to offset declining European production, provide a diversified source of gas and displace coal-fired power generation in central and south eastern Europe.
TAP would be the first non-Russian gas pipeline to supply Europe since Algeria’s Medgaz link nearly a decade ago, helping to dilute Gazprom’s one-third share of Europe’s gas market.
“The argument we are persuaded by, that made by the European Commission, is that it is simply not fair to leave large parts of Europe, particularly central and south eastern Europe, at the mercy of a single supplier,” McDowell told Reuters.
Last year, Gazprom (GAZP.MM) said it was considering selling its gas through the pipeline, potentially upsetting EU plans to diversify gas supplies. McDowell said this would not diminish the importance of the capacity already booked from Azerbaijan.
The 870-km pipeline will join up with the Trans Anatolian Pipeline (TANAP) at the Turkish border, crossing Greece, Albania and the Adriatic Sea. Its shareholders include Azerbaijan energy group Socar, oil major BP and Italian gas group Snam.
McDowell said he hoped the EIB’s stamp of approval would smooth the way for the 4.5 billion euro ($5.57 billion) pipeline to seek further financing from the market in the coming weeks.
TAP has said the final shipment of pipes were delivered in the autumn and are ready to lay.
The European Bank for Reconstruction and Development is also expecting to decide on a loan for TAP this year, a spokesman said. In October, it approved a $500 million loan for the TANAP pipeline, through which the first gas flows are expected in 2018.
But TAP has been dogged by delays because of protests against it in Italy.
Campaign groups have also questioned the wisdom of pumping more gas into the EU as the bloc seeks to increase the share of renewables in its energy mix.
They have said that funding the Azeri-backed project would go against the EBRD and EIB’s principles.
The EIB says it has listened to civil society groups and carried out due diligence on the project.
Reporting by Alissa de Carbonnel; Editing by Jane Merriman