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Italy regulator grants TAP AG more time for first gas delivery, company confirms Q4 deadline

Highlights

TAP AG says extension requested in case of delay due to COVID-19

New deadline for first gas delivery now December 2021

But confirms commitment to deliver first gas in Q4 2020

London — The developer of the Trans Adriatic Pipeline, TAP AG, confirmed late July 2 its commitment to deliver first Azerbaijani gas into Italy in the fourth quarter of this year, despite having asked and obtained from Italy's regulator the possibility of postponing first delivery of gas until December 2021.

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"The TAP project is more than 96% complete and reconfirms the target of transporting first gas to Europe within 2020," Vugar Veysalov, TAP head of external affairs, told S&P Global Platts late July 2.

However, he added the company had decided to request a prolongation of the Exemption Decision in case further obstacles beyond the control of the company arise.

The company obtained in 2013 an exemption from some European provisions, which required the TAP pipeline to be operational within six years (June 2019) for the Exemption Decision to be still valid.

TAP asked for and obtained in 2014 a first extension of the validity period of the Exemption Decision until December 2020, and on June 15 requested a second prolongation, obtaining the possibility of postponing delivery of first gas until December 2021.

"The project has faced several major impacts, beyond its control, mainly with reference to permitting/regulatory obstacles, severe safety and security breaches, suspension of construction activity due to multiple legal proceedings, unforeseen geotechnical/natural events, as well as the wide-ranging effects of the COVID-19 pandemic and the other factors mentioned above," Veysalov said.

It was against this background, he added, that TAP had requested additional time to begin the transport of first gas to Europe.

"TAP will endeavour to commence first gas deliveries by the end of the year," Veysalov said. "Nonetheless, should the effects of the COVID-19 pandemic persist, TAP will continue to hold a valid TPA exemption beyond 2020, complying with the European regulation."

Explaining the rationale behind its decision to grant TAP AG a further extension, Italian regulator ARERA said it considered all of the above-mentioned factors, but gave particular emphasis to the COVID-19 pandemic.

"ARERA [considers] in particular the ongoing COVID-19 pandemic, whose duration and full impacts are not entirely foreseeable at the moment," the document said.

Precautionary approach

In an interview with Platts on April 22, TAP AG's spokesperson said that COVID-19 had had no impact on the pipeline's timeline of construction, and that delivery of first gas was confirmed for October 2020.

The spokesperson said remaining construction sites would have all been completed within few weeks. Any impact from COVID-19 was only seen on environmental works, which would not interfere with the start-up of the project, he said.

Speaking after the release of the company's 2019 earnings in March, Marco Alvera, the CEO of one of TAP shareholders, Snam, said TAP construction works were on track and had not been affected by the COVID-19 pandemic.

But fears of a resurgence of COVID-19 in the winter seems to be behind TAP AG's recent precautionary approach.

"It is important to note that the process of applying for a TPA exemption extension could take time and applying for a prolongation later in the year would have not been feasible," Veysalov said.

TAP is an 878 km pipeline running from the Greece-Turkey border to Puglia, in southern Italy, crossing Albania and the Adriatic Sea. TAP is the last leg of the Southern Gas Corridor, a bundle of pipeline meant to take gas from the Azeri section of the Caspian Sea into Italy.