The cost of the Ionian-Adriatic Gas Pipeline (IAP) that will pass through Albania, Montenegro and Croatia is estimated at EUR 618mn, the Montenegrin government said, quoting the results of the project’s feasibility study.  IAP is designed as a leg of the Trans Adriatic Pipeline (TAP), which was selected last year to bring natural gas from Azerbaijan’s Shah Deniz to Europe as an alternative to the Russian gas. 

TAP will transport the gas via Greece and Albania and across the Adriatic Sea to Italy and Western Europe. In order to connect to the rest of Southeast Europe, one leg of TAP will stretch from Albania through Montenegro and Bosnia to Croatia - this will be IAP.

In particular, the length of the IAP pipeline through Montenegro will be 94km, while the estimated value of the Montenegrin stretch is seen at close to EUR 119mn, the government said on its website. Croatia will have to allocate considerably more funds – EUR 330mn, for its section that will cover 249km. In Albania, the pipeline will stretch over 168km and will cost EUR 169mn.

IAP’s capacity is envisaged at 5 bcm/annually, while the total length of the pipeline is 530km. Its construction will enable the gasification of Albania and Montenegro, southern Croatia and parts of Bosnia. It will diversify and secure the gas supplies for these countries. Moreover, the pipeline will be reverse, meaning the route could also be north-south – starting from Croatia’s LNG terminal, or some other sources.

In Montenegro, IAP has been recognised as the leading option for the country’s gasification. The economy ministry has received a EUR 550,000 grant to draft a master plan of the gasification, which should be completed by the end of 2014. The government in Podgorica has given the role of the gas transmission system operator to state-owned energy firm Montenegro Bonus.

According to earlier estimates, Montenegro could earn some EUR 21mn annually from transit taxes once IAP becomes operational. In the first several years, the gas flow through the country is projected at an annual level of 2.0-2.5 billion cubic metres.

Montenegro, Albania, Bosnia and Croatia initialled talks on the project already in 2007. An intra-government commission has been established, which follows the project implementation. The COWI-IPF Consortium completed a EUR 3.5mn feasibility study on the project in April 2014. Next, the countries involved will have to meet and discuss the study, as well as select a model for implementing the project.

The feasibility study has analysed the possible routes of the future pipeline. Montenegro has accepted to have the pipeline entering its territory at the Adriatic town of Ulcinj though Bar and underwater via the Lustica peninsula towards Croatia.

The feasibility also offers two models for IAP’s construction and financing. The first considers the whole pipeline as a single project that could be implemented by a special purpose vehicle company, whose shareholders will be the countries involved. Later on, this joint company could look for strategic investors/partners for the project financing. Under the second model, the pipeline sections in each country could be considered as detached projects – and the financing will be based on each section separately.