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Greek DEPA hopes for big discount on Russian gas

February 12, 2014, 21:45 UTC+3 ATHENS
The two sides have agreed to reduce the price of gas to 398-399.5 U.S. dollars per 1,000 cubic metres, but this has not been officially confirmed by the Greek side
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ATHENS, February 12. /ITAR-TASS/. Greek state-owned gas company DEPA and Russian Gazprom have reached a preliminary agreement on a lower price of gas supplies, but the Greek company now wants a bigger discount, its official who represents the interests of Gazprom in Athens said on condition of anonymity on Wednesday, February 12. 

The two companies have agreed to reduce the price of gas to 398-399.5 U.S. dollars per 1,000 cubic metres, but this has not been officially confirmed by the Greek side so far. “DEPA is playing for time in hope to get a bigger discount,” the official said, adding that the results of the talks would have to be approved by the boards of directors of the two companies.

On January 31, DEPA and the Greek Ministry of the Environment, Energy and Climate Change denied Gazprom Export’s statement that Gazprom and Greece had agreed in principle to reduce the price of gas.

Local media reports say that Greece wants the price of gas to be cut down to the average European level. DEPA would like to get a 20 percent discount to bring the price of gas to the European average of 380 euros per 1,000 cubic metres, while the Russian company offered a discount of 13-15 percent. Both sides are trying to work out a mutually acceptable decision to avoid Athens’ appeal to an international court of arbitration.

Another key issue to discuss is a provision in the agreement that requires the consumer to pay compensation to the seller (Gazprom) if the former fails to use the agreed upon amount of gas. The Greek company wants this condition to be toned down and the discount agreement to be applied retroactively from January 2013 so as to reassess the price of gas supplies last year.

DEPA says that retail consumers (households) in Greece pay 20-30 percent more for natural gas than the rest of Europe on the average. Greek industrial enterprises pay even more. According to the European Commission, the price at which gas is purchased by Greece for its industry is about 52 euros per megawatt-hour, compared to 36 euros in Spain, 35 euros in Germany, 32 euros in Bulgaria, and 9 euros in the United States.

Steel works in Greece pay 47.2 euros per megawatt-hour, which is almost 50 percent more than the European average of 32.2 euros per megawatt-hour.

On February 6, DEPA President Harris Sahinis unexpectedly resigned, saying that he had decided to become a partner in a private investment fund, Global Finance, now that the talks with Gazprom he had conducted were coming to a close.

However, Sahinis will remain DEPA’s head until replaced by the Greek government.

DEPA is focused on wholesale purchases, sales and supplies of natural gas to industrial consumers and households in Greece. It operates within the jurisdiction of the Ministry of Development. In 2005, in order to liberalise the natural gas market, DESFA SA was created as a fully owned subsidiary to transport natural gas within Greece. Since then, DEPA sells gas to large consumers and to the gas supply companies. Natural gas is imported by pipelines from Bulgaria and Turkey and by liquefied natural gas at the Revithoussa LNG Terminal.

DEPA Group is active in the wholesale, trading and supply of natural gas to large end-users. DEPA procures gas through long-term ToP contracts for piped gas and LNG with Gazprom, Botas and Sonatrach totalling 4.2 billion cubic metres per annum. In turn, DEPA sells gas under medium and long-term ToP contracts to power producers, large industrial customers and the three existing gas distribution and supply companies, the EPAs. In 2011, these customer groups accounted for 96 percent of gas sold by DEPA.

DEPA owns 5,600 kilometres of low and medium pressure distribution networks in the regions of Attika, Thessaloniki and Thessalia and has the right to develop and exploit further distribution networks throughout Greece.

The Group is currently in discussions with various parties regarding participation in a number of international pipeline projects including IGB, ITGI, East Med, TAP and South Stream. Given Greece’s unique geographic location, linking major gas exporters in the Southern gas corridor in the Caspian, Mediterranean and Middle East to gas importers in Southeast Europe, Italy and Western Europe, the Group is well positioned to develop significant activities in transit projects.

Through its wholly-owned subsidiary DESFA, the Group owns and operates the regulated high pressure gas transmission network and Greece’s LNG re-gasification terminal. DESFA has the right to operate, maintain, manage and develop Greece’s transmission network, the NNGS and is responsible for providing non-discriminatory third-party access to the system. The NNGS is one of the youngest natural gas transmission systems in Europe with its main pipeline completed in 1996.

At present, the Greek Republic owns a 65 percent stake in DEPA and a 35 percent stake is held by the domestic refining company Hellenic Petroleum.

Greek Energy Secretary Makis Papageorgiou said a new contest for DEPA would be held.

“We believe that there will be better conditions in the next phase for broader participation,” he said.

Last year, Valentina Matviyenko, Chairperson of the Federation Council, upper house of Russian parliament, said Gazprom was ready to bid in the DEPA privatisation tender again.

“If the terms being discussed are used as the basis for a new tender to privatise DEPA, Gazprom is ready to participate in it,” she said.

Matviyenko confirmed that Russia “is interested in investing in Greece and participating in its privatisation processes.”

“Gazprom is interested in the DEPA privatisation, but the terms proposed were unacceptable and the approval of new terms - the Greek government understood that the changes to be made were fair but ran out of time before they could be formalised,” she said.

The international tender to sell the gas company DEPA failed in June following Gazprom’s refusal to submit a binding financial offer.

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