The European Bank for Reconstruction and Development's (EBRD) Board of Directors has approved a $500 million loan for the Trans-Anatolian Natural Gas Pipeline (TANAP) project, the largest part of a $40 billion project to bring gas to Europe from the Caspian Sea along the Southern Gas Corridor (SGC) and make an important contribution to energy security and diversification, according to a statement from the EBRD.

The bank's financing will fund the completion of the pipeline which passes through Turkey. TANAP is a key part of the SGC which will strengthen Europe's energy security, promote interconnectivity and open gas markets. It will also help provide a better energy supply mix for consumers in the Balkans and southeastern Europe as well as achieve significant carbon reductions through the substitution of obsolete coal-fired power plants.

"The Southern Gas Corridor includes gas infrastructure investments into a 3,500-kilometer pipeline running through six countries with a total cost of $40 billion," the EBRD statement said.

The key components are the Shah Deniz offshore gas field in Azerbaijan the Southern Caucasus Pipeline in Azerbaijan and Georgia, TANAP in Turkey and the Trans-Adriatic Pipeline (TAP) through Greece, Albania and Italy. The initial annual throughput capacity will be up to 16 billion cubic meters (bcm), equivalent to the annual energy consumption of more than 10 million households in the region.

Turkey will consume 6 bcm and several European gas traders, mostly in the Italian market, have already contracted the remaining 10 bcm.

Around $1.4 billion in financing loans were granted last year for TANAP - $800 million from the World Bank and $600 million from the Asian Infrastructure Investment Bank (AIIB). The European Investment Bank (EIB) is reported to be financing $2 billion of the project, but its final decision is due next month.

The natural gas from Azerbaijan will be produced from the Shah Deniz 2, one of the world's largest gas fields developed by a BP-led consortium. The first gas combustion from TANAP is planned for 2018, with the project currently ahead of schedule, according to an announcement by Energy and Natural Resources Minister Berat Albayrak during his latest inspection of the site.

TANAP is 58 percent owned by the State Oil Company of Azerbaijan Republic (SOCAR), 30 percent by Turkey's state-run BOTAŞ Petroleum Pipeline Corporation and 12 percent by BP.