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MD Kjetil Tungland’s thoughts on reaching a major milestone in the project’s development

03 ottobre 2011

As the 1st October deadline was approaching, TAP project team members in Switzerland, Greece, Albania, Italy and Brussels applied the finishing touches to TAP’s submission for the Request for Information to the Shah Deniz Consortium.

MD Kjetil Tungland’s thoughts on reaching a major milestone in the project’s development

The Trans Adriatic Pipeline’s offices have been even busier than usual during the summer.   As the 1st October deadline was approaching, project team members in Switzerland, Greece, Albania, Italy and Brussels  applied the finishing touches to TAP’s submission for the Request for Proposal and Information to the Shah Deniz Consortium. 

The stakes are high. For the competing projects, the right to open up the Southern Gas Corridor from the resource rich Caspian region to energy-hungry Europe. For the consortium, and the government of Azerbaijan,  the success of a US$22 billion-plus investment in that country. For Europe, a major step forward in securing its energy future and security.

To me, this is the most fascinating project of my career and I know that the TAP team, representing 24 different nationalities and our shareholders Statoil, E.ON and EGL, feel the same way. Many of them have been involved in similar ventures before, such as the ground-breaking  Baku-Tbilisi-Ceyhan pipeline, one of the world’s great engineering achievements with many similarities to our own project in terms of terrain and challenges. 

What has impressed me most about TAP during this time is the calm and purposeful way in which this team has gone about their duties. This project may not be named after a Verdi opera or the Greek god of the sea, but this diverse team of professionals have enough sense of history to know just what is at stake. All we ask is for our project to be judged on its merits.

So when the Shah Deniz Consortium’s design of their selection process arrived on my desk in March this year, I was immediately impressed.  The consortium partners have gone out of their way to make the selection process transparent and create a level playing field for all contestants. This is particularly encouraging given the speculation and special pleading that we have seen from certain quarters over the previous months and years.

The Shah Deniz consortium has set eight key criteria against which each competing project will be assessed:

Commerciality: based principally on full export chain value, including market prices and infrastructure access charges and tariffs.

Project deliverability: the technical and organisational capability to execute the project plans on schedule and within budget.

Financial deliverability: the ability to cover development costs through equity, loans, grants or other funding.

Engineering design: scope and quality of the engineering plans.

Alignment and transparency: the willingness to cooperate technically with the Shah Deniz Consortium and to align with the timeline of the Shah Deniz Full Field Development.

Operability: the long-term capability to manage physical and commercial operations safely, efficiently and reliably.

Scalability: the potential for expansion or addition of export facilities to allow transportation of increased volumes as further gas supplies become available.

Public policy considerations: meeting the European Commission’s stated objective of enhancing supply diversity of European natural gas markets, and ensuring sustained support from all stakeholders.

While the content of our submission to Shah Deniz must naturally remain confidential, I am convinced that TAP is the only project that can truly deliver a sound and sustainable solution against each one of these criteria. It is robust, from both a technical and financial point of view, and will be delivered on time and to specification.

The Shah Deniz Consortium will quite rightly want to have confidence that the successful project is able to meet its commitments. As we have seen, financial deliverability has obviously become increasingly important, especially over the past year. The world economic situation has been challenging for everyone but I am glad to say that our shareholders retain the trust and confidence of the financial community during these difficult times.

TAP’s pedigree is un-matched: building and operating pipelines, onshore and offshore; working with governments, regulators and operators; dealing with the commercial aspects of gas supply and purchase.

Drawing upon this experience has enabled us to produce the most cost-effective solution, certainly when compared to other pipeline options and we require no support from the taxpayer in the form of subsidies for our project. 
Combining the contributions from E.ON and Statoil has also allowed us to use their world-class systems, people and experience to plan and execute our project. Our shareholders  have aligned themselves fully behind the project’s goals in a constructive and supportive manner. This inclusive culture bodes well for our future. And we have made no secret of our willingness to welcome other partners who could add further value to the project at the appropriate time.

It is one thing to win a project, however. To be able to work together over many years is another matter entirely. That is why the consortium will require its partners to be aligned with its goals and transparent in its dealings.

Once again, I believe TAP is well positioned here. To coin a phrase, we ‘speak the same language’ as our consortium counterparts and have worked well with many of them on previous occasions. Alignment and transparency have been our guiding principles when dealing with the consortium. We seek to be open and transparent in everything that we do, every plan we make, every problem and challenge that we encounter, and I believe this approach has been much appreciated.

Among the many positive aspects of TAP is the significant private sector investment that we will bring to countries like Albania and Greece. For example , we will be investing in excess of €1.5 billion in Greece as a result of extending the TAP pipeline route by 300km to connect with the Turkey-Greek Interconnector in Komotini. By linking with and extending the regional gas pipeline network with  other pipeline systems, TAP will also give a serious boost to the economic development of South Eastern Europe and the Balkans.

It has certainly been a busy summer. But the busiest time is yet to come.  For while the submission of our proposal is a key stage in the process, negotiations will in all likelihood stretch into next year as we discuss the fine details with the Shah Deniz Consortium.  To borrow the words of a famous statesman, “this is not the end. It is not even the beginning of the end.  But it is, perhaps, the end of the beginning.”