Greece pipeline state aid approved

The European Commission (EC) has approved tax breaks from the Greek government that will benefit the Trans Adriatic Pipeline (TAP) project, reports Keith Nuthall. The gas pipeline will run from from Greece to Italy, via Albania.

The EC had to decide whether the support complied with European Union (EU) state aid rules, designed to limit national government subsidies to companies in the EU’s border-free single market. While it decided that TAP would get special tax treatment compared to other energy operators, it said this was justified because of the importance of the pipeline to EU energy security.

The TAP pipeline will have an initial capacity of 10bn cm/y of gas, transporting gas from Azerbaijan’s Shakh Deniz II field to EU markets as of 2020. Some €5.6bn is to be invested in the project over five years, €2.3bn in Greece.

Under a deal with the Greek government, TAP operations in Greece will have a special tax regime for 25 years. It involves taxation rates being adjusted lower than normally applied to such projects – although that reduction is capped if Greek general tax rates fall below certain floors.

In its decision, the EC said TAP would ‘diversify European energy supplies’ and would be ‘unlikely to be carried out’ without this government help.

The decision comes as the European Investment Bank (EIB) approved €330mn in financing to help develop another key Adriatic energy initiative – the first LNG import terminal in Croatia. Built on the island of Krk in the northern Adriatic, it will have a throughput capacity of 6bn cm/y. It will include a tanker jetty to accommodate an LNG carrier, two LNG storage tanks with total LNG storage capacity of up to 360,000 cm, vapourisers and ancillary equipment. The developer is LNG Hrvatska doo.