Bank of China participates in EUR 3.765 billion syndicated loan for Trans-Adriatic Gas Pipeline (TAP) Project

On December 7, 2018, Trans-Atlantic Pipeline (TAP) AG — a special purpose vehicle (SPV) and joint venture of BP (20%), State Oil and Gas Company of Azerbaijan (SOCAR) (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%) — signed a €3.765 billion EUR ($4.25 billion USD) debt financing package with a syndicate of 22 lenders, including Bank of China (BOC). In addition to BOC, the lenders included Santander, Caixabank, Crédit Agricole, Intesa San Paolo, KDB, Mizuho, MUFG, Natixis, SMBC, Société Générale, Standard Chartered, UniCredit, BNP Paribas, ING, bpiFrance, EBRD, EIB, Euler Hermes, SACE, Helaba, and UBI Banca. The debt financing package consisted of four tranches: a €700 million EUR loan from the European Investment Bank (EIB), a €500 million EUR loan from the European Bank for Reconstruction and Development (EBRD), a €500 EUR million ‘B loan’ syndicated to 16 commercial banks, and a €2.065 billion EUR loan from BOC, BNP Paribas, Caixa Bank, Crédit Agricole, Helaba, ING, Intesa Sanpaulo, Korea Development Bank, Mizuho, MUFG, Natixis, Siemens Bank, Société Générale, Standard Chartered, Sumitomo Mitsui Banking Corporation, UBI Banca and UniCredit. These loans reportedly carried 16.6-year maturities. The export credit agencies Bpifrance (€450 million EUR), Euler Hermes (€280 million EUR) and SACE (€700 million EUR) provided lending cover for some of the commercial bank loans. The Trans-Adriatic Gas Pipeline (TAP) is a gas pipeline running from Greece's border with Turkey to Italy, via Albania and the Adriatic Sea. The route links Europe to a new gas source in the Caspian (Shah Deniz II). The Trans Adriatic Pipeline (TAP) project is the western extension of the Southern Gas Corridor (SGC). SGC exports natural gas – initially 10 billion cubic metres (bcm) per year but with capacity to expand to 20 bcm – from the Shah Deniz II field in the Caspian Sea to western markets via the South Caucasus Pipeline extension (Azerbaijan to Georgia), on through the Trans-Anatolian pipeline (TANAP) stretching across Turkey, and then joining up with TAP at the border of Turkey and Greece. TAP runs for 878 kilometers in total across northern Greece (550 km), Albania (215 km), the Adriatic Sea (105 km), makes landfall in Italy at a small, popular beach in San Foca, and concludes with a short pipeline section (8 km). A further 55 km pipeline, the TAP Interconnection, connects TAP to the Italian gas network. A joint venture of Bonatti (Italy) and J&P AVAX (Greece) was contracted for the engineering, procurement, and construction (EPC) of 360 km of the pipeline in segment in Greece. SPIECAPAG (France) was awarded the EPC contract for a 185 km onshore segment in Greece as well as for a 215 km segment in Albania. SPIECAPAG also carried out the pipeline river crossing at the Greek-Turkish border. A joint venture of Renco (Italy) and Terna (Greece) was awarded the EPC contract for the two compressor stations. Renco was also awarded the EPC contract for the pipeline receiving terminal. Siemens was contracted to supply six gas turbine turbo compressor units for the TAP’s compressor stations. A joint venture of Enereco and Max Streicher was contracted for the construction of the 8 km-long onshore segment in Italy. Saipem was awarded the engineering, procurement, construction, and installation (EPCI) contract for the 105km offshore section of the pipeline across the Adriatic Sea. Statoil (now Equinor ASA) prepared the front-end engineering design (FEED) for the offshore section of the pipeline. Honeywell was contracted for the engineering, procurement, and installation of the Supervisory Control and Data Acquisition (SCADA) telecommunications and security systems of the TAP. Corinth Pipeworks was contracted for the supply of approximately 495 km of 48-in diameter line pipes for the project in Greece. Salzgitter Mannesmann International was contracted to supply 297 km of 48in-diameter pipes for the onshore section and 110 km of 36in-diameter pipes for the offshore section. Industria Meccanica Bassi Luigi was contracted for the engineering and supply of 48in and 36in piggable T-pieces, welded elbows, and scraper traps units for the pipeline. Nuova Giungas (Valvitalia Group) was awarded the engineering, manufacturing and delivery contract for 48in and 36in isolating joints of the pipeline. RMA of Germany was contracted to supply of 55 ball valves and actuators for the pipeline. Himachal Futuristic Communications (HFCL), a company based in India, was contracted to supply approximately 1,550 km of fiber optic cable for the project. Other contractors involved in the project were MTC-MAKEDONIKI, ABKons, ENY Law Firm (as a legal advisor), UTG, and INFODIM. Shipments of steel line pipes, equipment & machinery began arriving in the Albanian port of Durrës in April 2016. Then, on May 17, 2016, a project commencement ceremony has held. During the same month, the first deliveries of steel line pipes and bends for TAP's Greek section arrived at the ports of Thessaloniki and Kavala. By December 2016, 58 km of access roads were upgraded, two new bridges were built, and 40 bridges were refurbished in Albania. Construction of the pipeline was 50% complete as of December 2017. On April 29, 2018, China’s Ministry of Commerce reported that the TAP project had achieved an 86% completion rate. As of October 2019, it had achieved a 91% completion rate. Then, in May 2020, a construction worker died while preparing the construction work for the Snam gas pipeline interconnection between TAP and the Italian gas transportation network in Lecce. One month later, in June 2020, the TAP consortium announced that construction of the 105 km offshore segment of the pipeline across the Adriatic from Albania to Italy had been completed. By the end of August 2020, the project was reportedly 97.9% complete and TAP AG was confident that it would be able to deliver the first Azerbaijani gas to Italy by October 2020. However, at the same time, TAP AG notified Italy's regulator of the possibility of postponing the first delivery of gas until December 2021, principally due to the potential risk of COVID-19 related construction delays. The project ultimately achieved its commercial operation date (COD) on November 15, 2020. Then, on December 31, 2020, SOCAR and TAP AG announced that Caspian gas transported by TAP had begun flowing into Italy, Greece, and Bulgaria. Italy’s Ministry of Ecological Transition has reported that over 2.5 billion cubic meters of gas have been delivered to date. This project has become a target of public scrutiny and controversy. Following a complaint lodged by the environmental NGOs CEE Bankwatch Network, Counter Balance, Re:Common and Friends of the Earth Europe, in December 2020, the European Union's Ombudsman opened an investigation into the EIB's financing in 2018 of both TAP and the related Trans-Anatolian Gas Pipeline (TANAP). At issue is why the EIB agreed to provide major loans for both pipelines without appropriate assessment of their climate impact. The EIB's carbon footprint assessment of TAP projected 2.5 times fewer greenhouse gas emissions than the figure in the environmental and social impact assessment which was submitted by the consortium building the pipeline.

Additional details

1. TAP is part of the Southern Gas Corridor project, an effort sponsored by the European Commission to facilitate a natural gas supply route from Caspian and Middle Eastern regions to Europe. The other components of the project are the operation of the Shah Deniz natural gas field (captured via Project ID#66946), the South Caucasus Pipeline, and the Trans-Anatolia Natural Gas Pipeline (TANAP) (captured via Project ID#665848). Bank of China previously lent $500 million USD to SOCAR for TANAP. 2. The size of Bank of China’s contribution to the €2.065 billion EUR syndicated loan is unknown. For the time being, AidData has estimated BOC's contribution by assuming equal contributions across all 17 participants in the syndicate (€121,470,588 EUR). 3. A useful project implementation timeline is provided via https://www.tap-ag.com/infrastructure-operation/history-timeline#period-7788.

Number of official sources

8

Number of total sources

15