By Nina Chestney and Stephen Jewkes
LONDON/MILAN (Reuters) - A major European development bank is likely to approve a loan for the Trans-Adriatic Pipeline (TAP) gas project on Wednesday, raising hopes among its developers that Italy's new government will not stand in its way, sources said.
Italy's environment minister said last month the project was under review, raising fears among TAP's developers that Rome would demand major changes to the pipeline's route, which is set to land at a seaside resort in southern Italy.
The European Bank for Reconstruction and Development (EBRD)'s board of directors, of which Italy is a member, is meeting in Ukraine to approve a direct loan of up to 500 million euros (441.33 million pounds) for TAP, the sources familiar with the matter said.
TAP, the final leg of a $40 billion project called the Southern Gas Corridor to transport gas from central Asia to western Europe, is a cornerstone of the European Union's energy security policy to wean the bloc off Russian gas supplies.
It would be the first non-Russian gas pipeline to supply Europe since Algeria's Medgaz link nearly a decade ago.
An EBRD official told Reuters in February that a direct loan of up to 500 million euros and a syndicated loan of up to 700 million would be allocated to the 4.5 billion euro TAP project this year, subject to internal approvals. The syndicated loan is likely to be provided to TAP later this month, a source with knowledge of the matter told Reuters, but the exact amount has not yet been agreed with other lenders.
TAP will transport up to 10 billion cubic meters of natural gas per year from the Azeri Shah Deniz II field in Azerbaijan to Italy by 2020.
DELAYS Over the past year, ongoing local opposition in Italy has caused delays and raised concerns the project could miss deadlines and even be rerouted.
Italy's new government, a ruling coalition of anti-establishment parties, has said the pipeline is an environmental danger and unnecessary given Italy's excess gas capacity.
However, sources familiar with the matter said that despite the comments made recently, Italy was unlikely to object to the loan at the board meeting.
It was not possible to get an immediate comment from Rome.
The far-right League, a member of Italy's ruling coalition, is in favour of the pipeline.
A spokeswoman for TAP said the company "continues to engage positively with the Italian government". If the EBRD's loan decision is delayed, she added, TAP's shareholders will continue to finance the project.
TAP shareholders include oil group BP (L:BP), Italy's Snam (MI:SRG), Belgium's Fluxys (BR:FLUX) and Spain's Enagás (MC:ENAG).
The European Union's energy chief said the EU has been arguing the case for TAP with the new Italian government.
"We are ready to engage and provide all the good arguments that this project is good for Italy and good for the European Energy Union," European Commission Vice-President Maros Sefcovic told Reuters.
The United States also supports the Southern Gas Corridor as it reduces Europe's reliance on Russian gas.
Earlier this year, the European Investment Bank approved a 1.5 billion euro loan for TAP. Some environmental groups have criticised both banks' funding of TAP due to the environmental impact of the pipeline and human rights issues in Azerbaijan.