Gas utility DEPA, whose long-term pipeline gas supply agreements with Gazprom have developed into a heavy burden amid a changing market of sharply reduced gas prices, is seeking more favorable terms.
Talks between the two sides have commenced but Gazprom officials do not appear willing to reexamine details at any great depth, sourced informed.
DEPA’s agreements with Gazprom, which include take-or-pay clauses, are no longer competitive. The Greek utility, on one of its unfavorable fronts, is pushing for a favorable revision to its take-or-pay clause concerning supply in 2019.
DEPA absorbed approximately 500 million cubic meters less than it had agreed last year, a shortage expected to cost about 100 million euros, based on the current supply terms agreed with Gazprom.
It is believed DEPA may escape with a smaller payment for 2019 and have leftover quantities transferred to future years.
Even so, the gas utility still faces a major problem for 2020. DEPA recently had its Gazprom supply contract for the year revised so that 40 percent of supply is indexed to the Dutch gas trading platform TTF, one of Europe’s biggest hubs. The other 60 percent has remained oil-indexed.
DEPA’s oil-indexed 60 percent of Gazprom supply for 2020 is far more expensive than LNG prices currently available in the market, meaning the gas utility will not be able to sell this proportion to customers.
Essentially, DEPA’s ability to sell its Gazprom supply of gas in 2020 will be restricted to the TTF-indexed 40 percent proportion.
DEPA’s first-quarter results are not impressive and the situation seems set to deteriorate as international LNG prices keep sliding amid the global financial impact of the coronavirus pandemic. It is feared DEPA’s take-or-pay clause cost for 2020 will exceed the 500 million amount estimated for 2019.