Update on Greek Natural Gas Developments

Since the failed privatization process of Greece's natural gas sector, a series of developments have occurred, most notably the selection of the Trans-Adriatic Pipeline (TAP) as the Southern Corridor route. This has led to smaller scale developments that impact the local and regional gas market.

To begin, it was recently made known that Gazprom and DEPA are about to sign a new long-term supply agreement that will stipulate substantial decreases for the price of gas being supplied by the Russian side. More specifically, DEPA has for months asked for a decrease in future gas deliveries of approximately 35% and it seems that a 15% drop will be announced over the coming weeks. Concurrently, DEPA managed to get a 7% cut off of LNG prices from its long-standing contract with Algerian Sonatrach.

Negotiations between DESFA and SOCAR seem to have stalled due to a number of unresolved issues. The Azeris are interested in securing terms that will define an "Independent commercial policy" for DESFA with the ability to freely raise levies for the use of the domestic gas network. The Greek side would like SOCAR to significantly raise the price tag for the company while local pundits expect negotiations to drag on throughout the summer.

Also important is the progress being made regarding the Interconnector Bulgaria-Greece (IGB), which expects in the coming weeks to accept offers by interested companies to supply the pipeline in the future by pre-arranging the quantities they wish to transfer through it in the future. This particular interconnector will mostly serve the connection between TAP and the Bulgarian market and its formation as a project played a significant role for the selection of that pipeline by the Shah Deniz. It will have a total length of 180 km, 32 inches diameter and could transfer 3 bcm per annum with provisions for upgrades up to 5 bcm, a quantity enough to supply the Bulgarian market and also leave quantities to flow further north to the Romania-Bulgarian interconnector. 

Capital expenses for the initial stage of construction for IGB are estimated at €210 million and it is owned by the IGI Poseidon consortium (DEPA & Edison) and by the Bulgarian Energy holdings, each one with 50%. The EU has pledged around €50 million in assistance for the project.  Nevertheless, political turmoil in Bulgaria and the financial distress in Greece, have already delayed plans for the project and it is speculated both by Bulgarian diplomats that Natural Gas Europe spoke to, as well as Greek energy stakeholders that foreign investors of low cost international loans are going to be needed by both countries in order to be able to complete the pipeline and make it operational as envisaged by early 2015.