DEPA awaiting Gazprom news on 100m-euro charge write-off

Greek officials are anxiously awaiting a Russian decision on whether the country’s gas giant Gazprom will scrap a charge of about 100 million euros owed by DEPA, the Public Gas Corporation, prompted by a take-or-pay clause that has come into effect as a result of a Greek misjudgement on its gas order for 2014.

The take-or-pay clause, included in an agreement between DEPA and GazpromExport, a Gazprom subsidiary, was activated after Greece overestimated its gas order from Russia for 2014 as a result of lower domestic gas consumption amid the recession.

Local officials are now waiting to see if Russia will write off the charge, and, if so, whether it will be a conditional move binding DEPA to other commitments over the next few years.

Following up on a recent official visit to Athens by Gazprom CEO Alexey Miller, DEPA requested to be informed of the final decision to be taken by GazpromExport, an energypress source said. The subsidiary firm responded by noting it is expecting a reply from its parent company, he source added.

Miller, who was in Athens just under a month ago, held talks with Prime Minister Alexis Tsipras and Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis. He promised that the amount owed by DEPA would be written off. But no documents were signed.

“Quite obviously, the pending issue with DEPA is not a top-priority matter for Miller,” the source commented.

Gazprom Export officials, in preceding negotiations wth DEPA officials, had gone as far as to say that the amount owed would be significantly reduced, while gas-order quotas would be rolled over to subsequent years.

More recently, amid the seemingly warming bilateral ties being established between Greece and Russia, Miller, on his visit to Athens, went further by saying the 100 million-euro amount owed by DEPA would be excused, without going into any further detail.

Besides offering major financial relief for DEPA, a write-off by the Russians would also benefit major natural gas consumers, such as the main power utility PPC, private-sector electricity producers, and the country’s three gas supply (EPA) companies, which would otherwise be burdened by the take-or-pay clause’s cost, if upheld by Gazprom.  Such an event would severely reduce any benefits gained by gas consumers from lower-priced natural gas, following the drop of oil prices in the international market.

Natural gas consumption in Greece slumped by 25 percent in 2014, and fell by 8 percent in the first quarter of 2015, compared to the equivalent period last year. The continued drop in demand threatens to also activate the take-or-pay clause for 2015.