BP to sell non-controlling stake in TAP gas link unit to Apollo

BP has agreed to sell to global asset manager Apollo a non-controlling stake in its subsidiary BP Pipelines TAP, which holds a 20% stake in the key TAP pipeline that brings gas from Azerbaijan to Europe.

In a statement, BP said the agreement for the Apollo-managed funds -- Apollo Funds -- to purchase the stake was valued at some $1 billion and that upon completion BP would remain the controlling shareholder of BP Pipelines TAP.

William Lin, BP's executive vice president for gas and low carbon energy, said that while bringing in a new investor, the deal did not diminish BP's role in the strategic asset for its Azerbaijan gas business.

"We see great potential in building innovative arrangements such as this and look forward to continuing to explore further opportunities with Apollo through growing this collaborative relationship," Lin said.

BP operates the Shah Deniz gas field offshore Azerbaijan and has stakes in the Southern Gas Corridor that brings the gas via Georgia and Turkey to the border with Greece where the TAP pipeline begins.

For Apollo, partner Skardon Baker said the agreement would provide its investors with "long-term exposure to an industry-leading infrastructure asset with a stable cash flow profile."

The proceeds from the transaction will contribute to BP's 2024 divestment and other proceeds target of $2 billion$-3 billion, BP said.

In recent years asset managers and investment companies have increasingly taken stakes in European gas infrastructure operators as they can offer a reliable and regular source of income.

TAP expansion

TAP currently has a capacity of some 10 Bcm/year but the operating company said in January 2023 that it would make 1.2 Bcm/year of additional capacity in pipeline available from 2026 following of a binding capacity bid process.

Most of the additional capacity being made available in the TAP pipeline will be used to supply Italy, with an extra 1 Bcm/year to flow to the Italian market.

The remaining 0.2 Bcm/year of gas is expected to be delivered to Albania, Azerbaijan's energy ministry said earlier this year.

The initial 10 Bcm/year of capacity in TAP was earmarked for Italy (8 Bcm/year), Greece (1 Bcm/year) and Bulgaria (1 Bcm/year).

Albania -- which has very limited gas demand -- has made it a priority to develop a gas sector primarily for power generation and for industry.

Greece's DEPA Commercial in November last year agreed to supply gas to a new gas-fired power plant under development in Albania and to take a stake in the plant developer

DEPA said it would take a 35% stake in the capital of Fier Thermoelectric, founded in September 2022 for the development of a 174-MW gas-fired power plant in Relievi Roskovec, Albania's first gas-fired power plant.

Under its Gas Master Plan from 2016, it is planned for a handful of gas-fired power stations to be built and for total gas demand to reach up to 2 Bcm/year by 2040.

'Reliable' partner

The TAP pipeline -- the final part of the Southern Gas Corridor linking Azerbaijan with southern Europe -- could ultimately be expanded to 20 Bcm/year, with expanded capacity being offered in regular open seasons.

The EU has said it hopes to be able to import 20 Bcm/year of gas from Azerbaijan by 2027 under a memorandum of understanding signed in July 2022.

Azerbaijan's gas exports to Europe reached 11.8 Bcm in 2023, up 3.5% year on year, while exports to Turkey totaled 9.5 Bcm and to Georgia 2.5 Bcm.

Europe has turned to what the EU describes as "reliable" supply partners, including Azerbaijan, to help fill the gap left by lost Russian gas supplies.

European gas prices hit record highs in August 2022, partly due to curtailed imports from Russia and high storage demand.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26, 2022.

Prices are now back closer to pre-crisis levels thanks to healthy storage levels and demand curtailments, though remain high, with Platts assessing the TTF month-ahead price on Sept. 13 at Eur35.77/MWh.