Trans Adriatic Pipeline Project

Location:

Regional

Project number:

45690

Business sector:

Natural resources

Notice type:

Private

Environmental category:

A

Status:

Passed Structure Review, Pending Final Review

PSD disclosed:

19 Dec 2017

Translated version of this PSD: Greek | Albanian

Project Description

Provision of an up to EUR 500 million loan to Trans Adriatic Pipeline AG, the constructor, owner and operator of the Trans Adriatic Pipeline ("TAP" or the "Project"). TAP is a 878 km cross-border natural gas pipeline, currently under construction, stretching from the Greek/Turkish border (near Kipoi) to Italy (near San Foca) after crossing Greece, Albania and the Adriatic Sea. TAP's initial capacity will be 10 billion cubic meters of natural gas per annum.

Project Objectives

Stretching across five countries of operations of the EBRD, the Southern Gas Corridor - of which the TAP Project is an integral part - is an important strategic gas infrastructure project aimed at improving the security and diversity of the energy supply to Europe and Turkey. It will expand gas supply options and provide new energy transportation routes enabling Europe to access gas from the Caspian region and, in the longer term, beyond it, including the Eastern Mediterranean, Central Asia and the Middle East.

As a cross-regional infrastructure project, the Southern Gas Corridor will foster opportunities for international cooperation, economic integration and sustainable economic development in the region. TAP has been included to the European Commission's list of 33 priority energy security projects of common interest. Projects of such scale also create significant opportunities for local employment and businesses. During construction, some 5,000 jobs will be created (in excess of 3,000 in Greece and 1,700 in Albania). The construction of the pipeline has led to the rehabilitation of 58 km of roads and 42 bridges in Albania. In addition, TAP has agreed with each of the governments of Greece and Albania respective Social and Environment Investment (SEI) packages including investments into
health, transport, SME and agricultural sector development.

As countries undertake the long-term transition to a low carbon economy, gas will continue to play a significant role as a complementary fuel. As a relatively low-carbon fossil fuel providing a flexible power generation source, gas can be used to complement renewable energy sources as a reliable back-up to expanding intermittent renewable energy. Most new thermal facilities are expected to be fueled by gas because of lower capital costs, greater flexibility to act as back-up to intermittent renewables and lower carbon footprint. As renewable energy is expanding and as greenhouse gas emission reduction goals are becoming more stringent, gas, as a lower carbon fuel, will have an increasingly prominent role in power generation in the move to a low carbon economy.

Transition Impact

The transition impact of the Project is expected to come mainly from its contribution to the integration and resilience of the energy markets in South Eastern Europe.

The Project will support the diversification of gas supply sources into Europe supporting resilience of the South Eastern Europe energy sector. The Project will introduce or consolidate regulatory and commercial practices such as Third Party Access and short-term products use of which is currently limited in South Eastern Europe.

Additionally, through the Project, the Bank will engage in policy dialogue to support capacity building of the Albanian TSO in the legal and regulatory areas. The Project has already prompted a considerable overhaul of the Albanian's energy system by inducing institutional, regulatory and legislative changes. The Bank will explore other initiatives that strengthen the energy market institutions of Albania.

Client Information

TRANS ADRIATIC PIPELINE AG
TAP AG is the constructor, owner and operator of the Project. TAP AG's shareholders include: BP (UK, 20% shareholder), Snam SpA (Italy, 20%), SGCC (Azerbaijan, 20%), Fluxys SA (Belgium, 19%), Enagas (Spain, 16%) and Axpo Trading (Switzerland, 5%).

EBRD Finance Summary

EUR 500,000,000.00

Total Project Cost

EUR 4,500,000,000

Environmental and Social Summary

TAP is a greenfield development consisting of the design, construction, and operation of a 878 km cross-border natural gas pipeline. The route of the pipeline will start at the Greek-Turkish border and terminate in southern Italy (near San Foca), after crossing Greece, Albania and the Adriatic Sea until its delivery point in Italy. TAP will connect at its entry point to the Trans Anatolian Pipeline ("TANAP") in Turkey and downstream to the Italian natural gas network of Snam Rete Gas ("SRG"). TAP is the last leg of the Southern Gas Corridor ("SGC"), a series of four projects (TAP, TANAP, Shah Deniz 2 & Southern Corridor Expansion) crossings six countries and 3,500 km.

TAP's initial capacity of 10 billion cubic metres (bcm) of gas per year is equivalent to the energy consumption of approximately seven million households in Europe. In Greece, the pipeline (48" diameter) will be approximately 550 km in length, starting at Kipoi and finishing at the Greek border with Albania, south-west of Leropigi. The Greek section will include one compressor station near Kipoi and 22 block valve stations. The pipeline in Albania will be approximately 215 km long (48" in diameter), starting at Bilisht Qender in the Korca region, on the border with Greece and having its landfall site located 17 km north-west of Fier (approximately 400 metres inland from the shoreline). A compressor station and a metering station will be built near Fier, and near Bilisht, respectively as well as 8 block valve stations. TAP's route will then cross the Adriatic Sea (36" diameter) for approximately 105 km along the seabed to the Italian coast. The offshore pipeline through Italian territorial waters will be about 25 km long. The pipeline comes ashore in southern Italy via a microtunnel under the beach, near the town of San Foca. TAP terminates at the Pipeline Receiving Terminal (PRT), 8.2 km inshore where the gas pipeline is tied into the Snam Rete Gas (SRG).The PRT will house the supervisory control centre of TAP. It will occupy a 12-hectare plot of land and has been designed to integrate with the surrounding landscape with limited visual impact. The tie-in point with the Snam Rete Gas system will be at the fence of the TAP facility. In the future, the addition of two extra compressor stations could double throughput or the overall system to more than 20 bcm as additional energy supplies come on stream in the wider Caspian region. The pipeline will also have the so-called 'physical reverse flow' feature, allowing gas from Italy to be diverted to South East Europe if energy supplies are disrupted or more pipeline capacity is required to bring additional gas into the region.

Environmental and Social Impact Assessments, covering each country (Greece, Albania and Italy), as well as the offshore marine project components, were prepared for TAP by an independent environmental consultancy in accordance with national and relevant EU requirements (Greece and Italy) and disclosed on the Company's website since 2013-2014.  In 2016, an Independent Environmental & Social Consultant (IESC) was retained to assist the Lender Group to review and benchmark the project against the standards of EBRD (2014) and the other potential Anchor Lenders. The IESC's initial assessment identified areas where the ESIAs needed to be supplemented to meet Anchor Lender requirements. (e.g. assessment of Associated Facilities, & potential cumulative /transboundary impacts, the inclusion of Environmental and Social Management Plans (ESMPs), strengthening of stakeholder engagement and grievance mechanisms, mitigating potential impacts to critical habitats and priority biodiversity features and enhancements to the Company's land easement and acquisition procedures).  As a result, TAP developed a Supplemental Lenders Information Package (SLIP) to address these issues and to  structure the project to meet Anchor Lender requirements (including the substantive environmental standards of the EU, and relevant Performance Requirements of the EBRD and EIB and the IFC Performance Standards). The ESIAs and the SLIP documentation are disclosed on EBRD's and the Company's website: ESIAs | SLIP

Construction of the project commenced in mid-2015 with initial road and bridge improvement works in Albania, followed by pipe delivery in Albania and Greece in Q3-Q4 2016. Works began in Italy in May 2016 in accordance with the Company's Single Authorisation (and related primarily with archaeology and UXO surveys), followed by clearing of the right-of-way in Albania and Greece throughout the rest of 2016-2017. Based on the current schedule, the overall construction phase is expected to be completed in Q4 2019 for receiving first gas in 2020. According to the Company's website, at the end of 2017, approximately 58% of the project has been completed. 

In order to commence construction, TAP first needed to secure access to land along its proposed route so that the pipeline and its associated infrastructure could be built and operated. In total, the project will affect approximately 19,060 plots of land: 10,170 in Greece, 8,700 in Albania and 190 in Italy (represented by approximately 45,000 land owners and users). However due to careful route planning, the project will not result in any physical resettlement. A Guide to Land Easement and Acquisition and a Livelihood Restoration Plan have been prepared for each country outlining the nature and magnitude of land acquisition and the entitlement framework to compensation and livelihood assistance.

To mitigate the project related environmental and social impacts, the Company developed a Health, Safety and Environment (HSE) Policy in accordance with industry best practices. This is further supported by a robust Environmental, Social and Cultural Heritage Management System (ESCHMS), which is aligned with the requirements of ISO14001:2015, the International Organisation for Standardisation`s specification, and Environmental and Social Management Plans (ESMPs) implemented at the project level by TAP (Environmental and Social Implementation Plans) and its Contractors (Contractor Control Plans). These are further supported by additional management documents including Route Environmental & Social Impact Registers and the Company's Social & Environmental Investment commitments.

Implementation of these environmental and social commitments and safeguards has been closely monitored by the Anchor Lenders and IESC, with site visits to all three countries being conducted in 2016 and 2017.  Results of the IESC monitoring reports from 2017 onwards will be publicly disclosed on the Company's website.

Project commitments include the continuous monitoring during construction, commissioning and operation phases, and the release of such monitoring results in the public domain.

Finally, a draft Environmental and Social Action Plan (ESAP) has been agreed between the Anchor Lenders and TAP. The ESAP includes future actions that the Company will need to implement during construction and operations. Actions addressed in the ESAP, include but are not limited to:

(i) update the ESMPs, where required, prior to operations
(ii) engagement of an Independent External Monitoring Group
(iii) undertake additional pre-construction marine surveys to supplement baseline data
(iv) development of a Biodiversity Offset Management Plan that builds upon the offset strategy that is disclosed in the SLIP. 

TAP will provide quarterly construction reports to the Anchor Lenders and also report annually to Anchor Lenders on its performance against project commitments and the ESAP.

The Anchor Lenders will retain an independent environmental and social consultant to supplement the Bank's monitoring throughout the rest of construction and initial operations (through to reinstatement). The IESC will carry out routine monitoring during construction and operations, as directed by the Anchor Lenders

As the Bank's environmental and social due diligence is ongoing, this Project Summary Document (PSD) will be updated prior to Board.

Technical Cooperation

None.

Company Contact Information

Trans Adriatic Pipeline AG
enquiries@tap-ag.com
+41 41 747 3400
+41 41 747 3401
www.tap-ag.com
Lindenstrasse 2 6340 Baar, Switzerland

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Text of the PIP

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