DEPA requests Gazprom extension on take-or-pay deal

DEPA, the Public Gas Corporation, is seeking a three-month extension for an overambitious take-or-pay agreement reached with Russia’s Gazprom. The agreement includes a clause that requires DEPA to pay for entire gas amounts, including unconsumed amounts, if a certain level of gas consumption is not reached by the country over a year.

According to energypress sources, DEPA has requested that the end-of-year deadline for 2014 be shifted to the end of March next year. The corporation hopes the consumption rate will have increased by then to avoid the prospect of needing to pay for unused gas.

DEPA has committed itself to take-or-pay agreements with Gazprom for the next few years. For 2014 and 2015, the clause applies for consumption levels below 2.5 billion cubic meters. As for 2016, the minimum consumption level has been set at even higher, at three billion cubic meters. Any annual consumption amounts below these levels will require DEPA to also pay for the unconsumed amount.

Gas consumption has dropped by 20 percent compared to the already-low demand levels of 2013. The country’s recession and, by extension, subdued level of operations at many of the country’s gas-fueled electricity production stations – these rank as Greece’s biggest gas consumers – are the main factors behind the overall drop in the demand for natural gas.

According to sources, based on the agreement, the amount of gas DEPA will be required to pay for in 2014 exceeds the amount actually required by between 300 and 500 million cubic meters, which translates into a cost of over 100 million euros.

The agreement between DEPA and Gazprom allows for shifting the gas absorption deadline by a few months. Sources said Greek and Gazprom officials are currently involved in discussions, but a deal has not been reached. In its bid for some leniency from the Russians, DEPA has reportedly made reference to its long-standing association with Gazprom over the past 25 years. The Greek company has warned that activation of the take-or-pay clause would devastate DEPA’s financial standing. Electricity producers would also be devastated if the additional cost were to be passed on to them, a DEPA official warned.