EIB to go ahead with controversial €1.5bn loan for TAP pipeline

EIB to go ahead with controversial €1.5bn loan for TAP pipeline
Welded steel pipes are lowered into trenches on the TAP route in northern Greece. / TAP AG
By Clare Nuttall in Bucharest February 7, 2018

The European Investment Bank (EIB) has approved €1.5bn of financing for the Trans-Adriatic Pipeline (TAP), which will carry gas from the Caspian to southern Europe. 

The EIB decision, made by its board on February 6, follows heavy pressure from environmental groups who argued that the development bank should avoid investing in major fossil fuel projects. 

The pipeline, currently under construction, is a key part of the Southern Gas Corridor. It is intended to connect to infrastructure carrying gas from Azerbaijan’s giant offshore Shah Deniz II field to the Turkish-Greek border and on across Greece, Albania and the Adriatic Sea to southern Italy.

The EIB funding was approved by the bank’s board along as part of a total of €6.5bn in of new financing for 36 projects in 17 EU countries and as well as projects in Africa, Asia and Latin America.

These also comprised funding for renewable energy investments including a new 17MW wind farm in Austria, a hydropower plant on the Nenskra river in Georgia and medium-sized renewable energy projects across Africa.

The bank said its decisions reflected the “EIB’s commitment to support both renewable energy and strengthen security of energy supply”. Its February 6 statement noted that the TAP project was a strategically important component within the EU’s energy policy. 

In December, the EIB decided to delay its decision on a €1.5bn loan for the TAP, with a spokesperson telling bne IntelliNews that the delay was because TAP was a “large project with a number of due diligence issues that merits proper discussion”. 

The news of the delay broke on the day of the One Planet Summit at which dozens of major international financial institutions, including the EIB, affirmed their commitment to the fight against climate change, but according to the EIB spokesperson this was coincidental. The World Bank announced on the same day it would end funding for oil and gas exploration and gas extraction projects.

Several environmental groups have criticised the EIB’s decision to fund TAP, claiming in a joint statement that the Southern Gas Corridor “could be as emissions-intensive or even more so than coal power” and detrimental to the EU’s efforts to cut greenhouse gas emissions. 

The TAP project was the subject of additional controversy when it was later revealed that top European Commission officials had been lobbying the two development banks to extend financing for the pipeline infrastructure between Azerbaijan and Europe. 

Miguel Arias Canete, the EU's climate change and energy commissioner, and Maros Sefcovic, vice president of the European Commission, were found to have sent a letter to the EIB and the EBRD urging them to finance a gas pipeline running from Azerbaijan to Europe, Climate Home News revealed on November 27.

The European Commission released the letter, which was dated July 13, 2017, under freedom of information laws. In it, Arias Canete and Sefkovic urge Werner Hoyer, the EIB president, to support a project that the European Union has deemed as of common interest, namely the Southern Gas Corridor.  bne IntelliNews was told that Hoyer was resisting pressure to sign off on the financing.

In a joint statement on February 6, Bankwatch, Counter Balance, Friends of the Earth Europe and 350.org criticised the institutions promoting or financing the corridor for failing to actively publicise a climate impact assessment of the project. 

“This is symptomatic that the Southern Gas Corridor has been approved without EU institutions disclosing its climate impact,” commented Anna Roggenbuck, EIB policy officer with CEE Bankwatch Network. 

“The European Investment Bank is now shamelessly locking Europe into decades of fossil fuel dependency even as the window for fossil fuel use is slamming shut,” added Colin Roche, extractives campaigner for Friends of the Earth Europe. “The bank’s biggest ever investment in dangerous fossil fuels undermines the EU’s commitment to climate action when we urgently need to be transitioning to a fossil free future.”

The project is also backed by the European Bank for Reconstruction and Development (EBRD), which announced in December it is providing a €500mn loan to the project operator. 

The 878km TAP will stretch from the Greek-Turkish border to Italy after crossing Greece, Albania and the Adriatic Sea. The pipeline will be supplied with natural gas from the second stage of the Shah Deniz gas field development in the Azerbaijani section of the Caspian Sea. Its initial capacity will be 10bn cubic meters of natural gas per annum. 

In its latest update in mid-January, operator TAP AG said that around 90% of the pipeline route had been cleared in Greece and Albania.