Uncertainty, multiple thoughts ahead of EU ministers meeting

The EU’s energy ministers meet in Brussels today amid a climate of uncertainty, exacerbated by a barrage of energy-crisis proposals, inappropriate conditions for crucial decision making.

Today’s session comes in the wake of the European Commission’s rejection of a proposal by 15 EU member states for a universal price cap on gas. Many proposals have since emerged.

Brussels yesterday brought back a price-cap proposal for Russian gas. However, it is believed there is little chance of the EU-27 reaching consensus on this measure for two key reasons. Firstly, it is feared Moscow would be prompted to disrupt its European gas supply through all remaining pipelines, including TurkStream, which supplies Greece. Secondly, a price cap on Russian gas supply would represent a breach of contract, by European companies, of Gazprom’s supply agreements, experts have warned.

Other proposals that have been brought forth in the lead-up to today’s meeting of EU energy ministers include European agreements with major LNG producers; the establishment of an alternative to the TTF benchmark that would be connected to the American Henry hub; a price cap on gas used for electricity generation; a windfall tax on excess refinery earnings; a limit to electricity producer windfall profits; and a compulsory reduction of electricity consumption.

Regardless of the choices made and route taken, ordinary European citizens will be anxious to see a reduction in energy costs.

Energy sufficiency fears rising, extra FSU may be required

The probability of a complete disruption of Russian gas supply to Europe, including the Turk Stream pipeline supplying Greece and other Balkan countries, is becoming increasingly likely, members of the country’s crisis management team have told energypress.

Over the past few weeks, energy operators have been staging more frequent simulated tests for the country’s electricity and natural gas systems in an effort to measure the extent of energy shortages that would result from a Russian decision to cut off all Gazprom supply routes to Europe.

The tests, according to sources, include rapid moves securing additional LNG cargo orders as replacements for Russian gas quantities.

An extra FSU at the LNG terminal on Revythoussa, the islet just off Athens, in addition to one just installed at the facility, cannot be ruled out at this stage, Athanasios Dagoumas, president of RAE, the Regulatory Authority for Energy, noted yesterday during a speech at the OT (Oikonomikos Tahydromos) Forum.

 

September LNG quantities lower but still considerable

Natural gas quantities to be shipped to the Revythoussa islet LNG terminal just off Athens will total 562,000 cubic meters in September, below the 609,000 cubic meters tallied in August, but equally important for the country’s energy sufficiency effort.

A total of six LNG tankers will moor at the Revythoyssa facility this month, bringing in 13 separate orders.

More specifically, Bulgaria’s MET energy has ordered four shipments for 104,000 cubic meters, Motor Oil is expecting one shipment carrying 36,900 cubic meters, Bulgargaz is awaiting two shipments for a total of 110,00 cubic meters, Mytilineos has placed an order for one shipment carrying 147,700 cubic meters, Elpedison has placed an order for three shipments totaling 62,00 cubic meters, and DEPA is expecting two shipments totaling 100,000 cubic meters.

These orders have been placed to support the country’s gas-fueled power stations during these challenging times, and also to cover energy needs in neighboring Bulgaria, which has stopped receiving Russian gas for some months now.

Bulgaria’s caretaker government is seeking to increase LNG quantities received through Greece to take advantage of the Greek-Bulgarian IGB pipeline’s upcoming launch, expected imminently.

The neighboring country is also in talks with Azerbaijan for increased imports. Sofia has not ruled out new gas supply negotiations with Russia’s Gazprom should other solutions prove insufficient.

Coal, nuclear exit slowdowns, demand-response part of EU plan

The European Commission plans to announce an energy-crisis emergency plan on July 20, its measures believed to include a slowdown of nuclear and coal-fired facility withdrawals in the EU, as well as a demand-response mechanism offering industrial consumers incentives to curb energy demand in exchange for compensation.

The EU is bracing for further cuts to Russian gas supply. Kremlin-controlled energy giant Gazprom shut down Nord Stream I, a subsea pipeline linking Russia with Germany on July 11 for a 10-day period of maintenance work, according to Gazprom.

The EU’s emergency plan, to coincide with the end of this ten-day period, is expected to include measures aiming to cut gas use, incentives for firms to curb energy demand and gas savings now for stockpiling ahead of winter.

The European Commission plan will also call on EU member states to encourage industrial enterprises and electricity producers to switch energy sources and opt for biomass, biomethane, solar and and other renewable energy sources.

In addition, the plan will require thermal power stations equipped to also run on diesel to take necessary precautions enabling them to switch to diesel for continual periods of at least five days.

Europe on edge as Russia limits supply, fiscal revisions needed

Emergency measures are being prepared around Europe, confronting reduced Russian gas supplies and fearing even greater cuts. It remains a mystery if the Nord Steam I gas pipeline – linking Russia with Germany, and by extension, other markets – will reopen on July 21. The pipeline was shut yesterday for a 10-day period to undergo maintenance, according to Russian officials.

Anything is possible from July 21 onwards. Russian gas supply through Nord Steam I could increase or may dry up completely.

In response, German officials are preparing to reactivate coal-fired power stations to make up for energy-source insufficiencies prompted by Russia’s reduced gas supply, while, energy-consumption restrictions, including an order urging household members to take fewer hot showers, could also be introduced, if needed.

In France, industries are turning to oil for energy, while Italian oil and gas company ENI has announced Gazprom will cut its gas supply by a further one third.

In Greece, the fiscal pressure caused by the months-long energy crisis, exacerbated by Russia’s war on Ukraine, is seen resulting in a budget deficit of 2 percent in 2022. A fiscal adjustment will be needed to transform this deficit into a 1 percent primary surplus in 2023.

Such a fiscal improvement, however, may not be possible given the current gas and electricity price levels. The government’s electricity-bill subsidy support for consumers is costing between 800 million and one billion euros a month.

 

Europe on alert, energy futures surging, concerns grow in north

Intensifying fears of energy security dangers around Europe next winter are becoming apparent as energy futures continue skyrocketing to unimaginable levels.

Europe is now in a state of heightened alert as the continent’s north, better equipped with greater energy storage facilities, is showing clear signs of serious concern, which was not the case earlier this year, when members of the continent’s south, including Greece, were systematically underlining the dangers ahead at every EU summit.

EU energy ministers have lined up yet another extraordinary Council meeting for July 26 to seek solutions for the Russian-induced gas supply crisis anticipated for next winter.

Highlighting Europe’s growing concerns, French futures for the fourth quarter, the heart of winter, yesterday peaked at 1,000 euros per MWh.

The French government’s announcement of a plan to fully nationalize debt-laden energy giant EDF in order to help it ride out the European energy crisis and invest in atomic plants preceded this latest price surge. Half of EDF’s nuclear reactors are currently sidelined as a result of technical issues.

In Germany, futures for December, 2022 yesterday exceeded 455 euros per MWh, fueled by news that the country’s Ver.di trade union has asked the government to accelerate a rescue plan for the Uniper energy group. The company itself has ascertained that a lump-sum tax plan stands no chance of being imposed, adding that consumers will not be called upon to cover the cost of the energy group’s rescue plan.

In neighboring Austria, moves are being made to secure space at Haidach, one of Europe’s biggest storage facilities, as Russia’s Gazprom has not met rules requiring storage facilities to cover a minimum level.

 

 

 

IGB moves close to launch, ICGB consortium certified

The Greek-Bulgarian IGB gas pipeline has moved a step closer towards its launch, expected around the end of this month, following the completion of a certification procedure for the ICGB consortium behind the project.

The European Commission, according to information made available, has approved a certification application submitted by the Greek Regulatory Authority for Energy, RAE, and its Bulgarian counterpart, EWRC.

Greek Prime Minister Kyriakos Mitsotakis and Bulgarian leader Kiril Petkov will both attend the project’s inauguration ceremony in Komotini, northeastern Greece, this Friday, ahead of the project’s commercial launch towards the end of the month.

The two leaders are expected to highlight this project’s contribution to the EU’s ongoing effort to end the continent’s reliance on Russia’s Gazprom.

The IGB gas pipeline will offer an alternative natural gas route into Bulgaria, initially via the TAP route and, from autumn onwards, through Greece’s gas grid. From 2023, the IGB will serve as a gateway for LNG imports from coastal FSRUs in the region. LNG quantities will reach Bulgaria, Romania, even Ukraine, through pipeline interconnections.

EU on edge as gas supply falls, emergency action in Germany

As officials in Greece and Europe tentatively wait to see if the TurkStream pipeline will resume operating next week, following an announcement several days ago by Russia’s Gazprom that gas supply via both lines of its TurkStream pipeline would be temporarily suspended June 21 to 28 for scheduled annual maintenance, Germany has just moved into the second of its three-stage emergency gas plan after Russia slowed supplies to the country, intensifying concerns of a market collapse.

The TurkStream suspension comes amid major disruptions to Gazprom’s supplies to Europe. Natural gas flow through the Nord Stream pipeline, running from Russia to Germany and also supplying the rest of Europe, has been cut by more than half since last week. Gazprom cited an equipment hold-up in Canada as a result of sanctions over the Ukraine war.

With fears, over recent months, of a drastic slowdown in Russian gas supply to Europe, now confirmed, the EU and its member states, all on high alert, are laying out emergency plans ahead of next winter.

Germany warned the country’s energy crisis may trigger a “Lehman effect” across the utility sector as it moved one step closer to rationing natural gas. “The whole market is in danger of collapsing at some point — so a Lehman effect in the energy system,” German economy minister Robert Habeck admitted at a press conference.

Under the second stage of Germany’s emergency gas plan, utility companies can pass on price increases to customers. The government is holding back on triggering a clause preventing this for now.

 

Russian gas payments by Greek companies due next few days

Greek companies that have imported Russian natural gas supplied by Gazprom and face installment payment deadlines expiring between May 20 and 25 are expected to accept Moscow’s ruble-currency demands as part of a wider EU approach that still remains unclear.

Even so, the European Commission, appearing set to revise EU directives concerning payment procedures by member states for Russian gas, is believed to be adjusting to Moscow’s ruble-currency demands.

Greek companies that have imported Russian gas believe the dispute will soon be resolved and are awaiting EU directives and related signals from the Greek government before proceeding with installment payments, sources informed.

The Greek government and the country’s energy players are continuing to observe emergency plans as energy supply security remains a threat as long as Russia’s war on Ukraine continues.

 

 

LNG order costs fall as much as 40% below TTF prices

The cost of LNG orders placed in recent days has fallen 10 to 40 percent below levels at the Dutch TTF exchange, driven lower by fine weather around Europe and subdued demand in Asia as a result of lockdown restrictions imposed over the past two months by authorities in China, insisting on a zero-Covid policy.

LNG price levels are also lower at the TTF exchange, easing to levels between 93.5 and 94 euros per MWh, the lowest since February.

Market pressure has also eased as a decision by Ukraine to disrupt a pipeline supplying Russian gas to Europe has had less negative impact than initially feared.

Ukraine’s decision, believed to have been taken to pressure the West for stricter sanctions against Russia, prompted Russia’s Gazprom to find a bypass solution through alternative routes to the EU.

These developments could lead to a significant reduction in wholesale electricity prices as a result of less price pressure faced by electricity producers.

The duration of China’s lockdown will greatly shape LNG market developments. For the time being, LNG orders that had been intended for China are being redirected to Europe.

Though supply to Asia has fallen considerably from high levels recorded just months ago, LNG demand typically increases in China, Japan and South Korea during summer.

 

Unclear EU stance on Moscow’s ruble payment demand for gas

The European Commission appears to be deliberately maintaining an unclear stance on Moscow’s demand for natural gas supply payments in the ruble currency, an in-between position that presently enables European companies to abide by Russian President Vladimir Putin’s related decree without breaching EU sanctions imposed on Russia.

Yesterday’s EU council meeting of energy ministers for a common European stance on Russia’s ruble-currency payment demand for Gazprom natural gas failed to produce an agreement, instead maintaining the ambiguity that has hovered in recent weeks.

European Commissioner for Energy Kadri Simson reiterated that payments for Russian natural gas in the ruble currency would represent a violation of European sanctions on Russia, and, as a result would not be accepted. However, she did not offer specific advice on how European companies should make their payments for Russian natural gas when the next round of payments are due. Simson ascertained that clearer directions would soon be issued, without specifying when.

Italian minister for Ecological Transition Roberto Cingolani has allegedly supported that European companies must be given the ability, at least temporarily, to conform to Russia’s payment demands, according to a Politico report.

However, the Italian government has denied that Rome is preparing to make ruble-currency gas payments to Russia, describing the Politico reports as misleading.

 

 

 

Athens awaiting EU outcome for Gazprom payment stance

The Greek government’s stance regarding Moscow’s demands for ruble-currency payments to Gazprom for natural gas supply will depend on decisions to be taken by fellow EU members, government officials have told energypress.

Athens is expected to push for greater clarity on the matter and a common European stance on the issue at an emergency meeting of EU energy ministers called by the French EU presidency for next Monday.

An imminent payment expected to be made by German company Uniper will be pivotal in decisions to be made by EU member states on Moscow’s ruble-currency payment demand for Russian gas supply.

According to German media, Uniper intends to make a euro-currency payment to Gazprom, but, rather than make the payment to a European bank, as the company has done until now, it will instead transfer the related amount to Russia’s Gazprombank, not on the sanctions list.

As has been widely reported, Russian president Vladimir Putin has ordered countries deemed as adversaries to make gas payments through a specific procedure involving two Gazprombank accounts, a foreign-currency account and a ruble-currency account. Gazprombank will convert foreign-currency sums to rubles before transferring the resulting amounts to parent company Gazprom.

All eyes on Germany’s ruble payment stance for Russian gas

Greece and the entire EU are waiting to see if Germany will agree to Russia’s demand for Gazprom gas supply payments in the ruble currency.

Berlin’s next payment to Russia’s state-controlled Gazprom is due tomorrow. To date, Chancellor German chancellor Olaf Scholz has refused to bow to Moscow’s recent payment-term demands.

The decision to be reached by Germany on this dispute with Moscow is expected to serve as a guide for most EU members.

Berlin has officially noted that Russian president Vladimir Putin’s payment demand violates the terms of an agreement signed between the two sides.

Besides creating artificial demand and, subsequently, greater value for the ruble, which has been impacted by sanctions on Russia, Moscow’s demand for natural gas payments in its currency is also seen as a Russian show of strength aiming to force the EU to succumb to Russian demands.

The EU’s refusal, so far, to bow to Russia’s ruble-currency pressure for natural gas payments has contributed to keeping gas prices at high levels.

Greek officials who took part in an energy-security meeting yesterday, called by Prime Minister Kyriakos Mitsotakis, reportedly stated that the EU made a mistake to reject Russia’s ruble payment demand, made in late March.

The ongoing political tension and market turbulence, resulting in higher natural gas prices, is benefitting Russia’s gas revenues.

 

PM calls emergency meeting after Russia gas cut to Bulgaria

Prime Minister Kyriakos Mitsotakis will hold an emergency meeting this afternoon at the government headquarters with the energy ministry leadership’s participation following Russia’s decision yesterday to disrupt gas supply to Bulgaria, following a disruption to Poland.

The Greek leader had a telephone discussion with his Bulgarian counterpart Kiril Petkov this morning, pledging Greek energy-supply support, within the framework of EU solidarity, following Russia’s decision to disrupt supply to the neighboring Balkan country.

This support will most likely stem from Greece’s LNG terminal at Revythoussa, the islet just off Athens, through a partial reservation of this facility’s capacity for Bulgaria’s needs.

Consumption in Bulgarian at this time of the year is low, meaning supply through the Revythoussa unit should help cover the neighboring country’s needs, at least temporarily.

Bulgarian-based MET Energy has already ordered a 142,500 m3 LNG shipment through the Revythoussa terminal.

Gazprombank Swift system removal may disrupt gas flow

The removal of a number of Russian banks from Swift, an international payment system used by thousands of financial institutions, expected soon as one of the sanctions to be imposed by the EU, US, UK and allies on Russia to pressure the Russian economy following its invasion of Ukraine, could disable Russia’s ability to collect payments for natural gas and oil exports, but this development could ultimately backfire by prompting Russia to turn off its taps.

Such a prospect will largely depend on whether or not Gazprombank, Russia’s third-biggest bank, is included on the list of banks to be cut off from the Swift international payment system. This specific bank receives all payments for Russian natural gas exports to Europe.

It is feared that Russia could, as a response, disrupt natural gas supply to Europe, greatly dependent on Russian gas, especially if Moscow’s military attacks in Ukraine fail to produce the desired results, despite the cost entailed by such a move for the Russian economy and the country’s funding of the war on Ukraine.

According to British media, Russia’s ongoing attack on Ukraine is costing Moscow 15 billion pounds per day, an amount making the country’s energy export revenues crucial.

DEPA discounts for consumers on a month-by-month basis

Gas company DEPA plans to offer discounts to household consumers on a month-by-month basis, depending on its ability to maneuver, international market prices and market needs, energypress sources have informed.

DEPA also plans to offer a certain level of gas discounts to industrial producers in the medium voltage category.

The gas company has just reached a pricing-formula deal with Russia’s Gazprom for supply in 2022 whose price is 80 percent indexed with the Dutch TTF gas hub, the other 20 percent oil-indexed, deemed.

The Gazprom deal, deemed as a fair agreement by analysts, offers DEPA some leeway for discounts  over the coming months.

Based on current market conditions, DEPA’s agreement with Gazprom results in a wholesale gas price of 77.40 euros per MWh, 12.60 euros less than yesterday’s gas futures prices for February.

DEPA-Gazprom gas talks now focused on pricing formula

Gas utility DEPA’s negotiations with Russia’s Gazprom over a pricing formula for gas supply in 2022 are continuing with some apparent progress but no agreement as yet.

The Russian side went into the talks demanding a gas pricing formula fully indexed with the Dutch gas platform TTF index, but this appears to have now been succeeded by a revised proposal for a gas price 80 percent indexed with the TTF, the other 20 percent oil-indexed.

Gazprom also wants the new pricing formula to run until the end of 2026, when the company’s supply agreement with DEPA expires, not just for 2022.

Another demand by the Russian gas company for reduced annual quantities was flatly rejected by DEPA as a proposal crossing the red line. This Gazprom demand appears to have been taken off the negotiating table, the Russian company now seeming willing to accept an unchanged annual quantity of two billion cubic meters until 2026.

Talks, as a result, now appear to be entirely focused on the pricing formula.

DEPA’s agreement with Gazprom, its main supplier, expires in 2026 but is subject to annual talks concerning pricing formula and take-or-play clause revisions.

Gazprom negotiations to shape DEPA’s discount ability

A favorable gas supply agreement for gas utility DEPA with Russia’s Gazprom, not too far from the existing deal – indexed to the Dutch TTF gas platform with a 40 percent coefficient, the other 60 percent oil indexed – would enable DEPA to increase its discount rate for December and the first quarter of 2022 from 15 percent to 30 percent, otherwise the discount rate will need to be smaller, Prime Minister Kyriakos Mitsotakis and energy minister Kostas Skrekas have noted.

DEPA, currently locked in negotiations with Gazprom, cannot take any discount-policy initiatives until its talks with the Russian gas company, Greece’s dominant supplier, have concluded.

DEPA chief executive Konstantinos Xirafas (photo) will be continuing talks, via video calls, with Gazprom today.

At this stage, it appears that the Russian company’s initial demand for a 2022 pricing formula 100-percent TTF-indexed has now fallen to 80 percent, the other 20 percent oil indexed. The TTF index has risen by over 500 percent over the past year.

Greece is aiming for an improvement in the pricing formula, negotiated annually as part of a Gazprom supply agreement with DEPA expiring in 2026.

Agreement still not reached in Gazprom formula negotiations

Greek officials have yet to make any progress in negotiations with Russia’s Gazprom for an improved pricing formula concerning gas supply to gas utility DEPA in 2022, as indicated by the government’s failure to make any related announcements yesterday following a meeting in Sochi between Greek Prime Minister Kyriakos Mitsotakis and Russian President Vladimir Putin, their first as heads of state.

Greece is aiming for an improvement in the pricing formula, negotiated annually as part of a Gazprom supply agreement with DEPA expiring in 2026. Whatever the outcome of these negotiations, price levels will be higher than a year ago, given the energy crisis, but Greek officials are striving to subdue the Gazprom price increase as much as possible.

Gazprom, Greece’s main gas supplier, went into the negotiations with a 2022 pricing formula proposal that would index its gas supply price with Dutch gas platform TTF’s index at a coefficient of 100 percent, up from the current 40 percent level. Under the current pricing formula, the remaining 60 percent of Gazprom’s supply price for DEPA is oil-indexed.

The TTF index has risen by over 500 percent over the past year, meaning Gazprom’s proposal would lift gas supply prices to DEPA by five times, a prospect that has been flatly rejected by the Greek government.

A compromise deal entailing TTF indexing between 60 and 80 percent, for example, would offer some improvement compared to Gazprom’s initial offer, but gas prices will nevertheless end up being higher for households, businesses and industrial producers in Greece.

Results of push for improved Russian gas deal seen today

A meeting today in Sochi between Greek Prime Minister Kyriakos Mitsotakis with Russian President Vladimir Putin – their first as heads of state – will made clear if preceding negotiations between officials of the two countries have come to anything for an improved Gazprom gas supply contract for Greek gas utility DEPA in 2022.

Any improvement for DEPA is regarded as a challenging task and would represent a major surprise if pulled off, given the unfavorable conditions, internationally.

The Greek Prime Minister is seeking an improved gas supply deal from Russia, the country’s main supplier, in an effort to boost support offered to Greek households and industry, struggling in the energy crisis, through further energy cost discounts.

Russia currently supplies 45 percent of natural gas consumed in Greece as well as nearly 10 percent of the country’s crude oil.

DEPA’s agreement with Russia’s Gazprom Export, its main supplier, expires in 2026 but is subject to annual talks concerning pricing formula and take-or-play clause revisions.

The Russian side has pushed for the 2022 agreement with DEPA to be fully indexed to the Dutch TTF gas index, but this index has risen 500 percent since last year, prompting Greek officials to resist.

According to energypress sources, Russia has maintained a tough stance in its negotiations with Greek officials, as was highlighted at a meeting yesterday in Saint Petersburg between Greek energy minister Kostas Skrekas and Gazprom’s chief executive Alexey Miller over the pricing formula to apply for Russian gas supply to Greece in 2022.

Greek officials want to avoid a DEPA-Gazprom agreement that is fully indexed to the Dutch TTF gas index and are believed to be aiming for a TTF pricing coefficient of between 60 and 70 percent, which would enable an oil-indexed price for the other 30 to 40 percent.

Crucial Gazprom pricing formula talks in St. Petersburg

Energy Minister Kostas Skrekas is scheduled to meet Russian gas company Gazprom’s chief executive Alexey Miller in Saint Petersburg today for crucial talks over the pricing formula to apply for Russian gas supply to Greece in 2022.

Russia currently supplies 45 percent of natural gas consumed in Greece as well as nearly 10 percent of the country’s crude oil, making today’s talks pivotal for the competitiveness of Greek industry and living standards of households amid the energy crisis.

Gazprom, aiming to capitalize on the sharp rise in natural gas prices, wants the pricing formula to be fully indexed with the Dutch TTF gas hub index, which the Greek side says it cannot accept, according to comments offered by a senior official to energypress.

Greek gas utility DEPA’s agreement with Gazprom is currently entirely oil-indexed. The two sides had agreed to an extraordinary revision for 2020 and 2021 indexing prices with the TTF gas index as oil prices were considerably higher. The opposite is now the case, with LNG prices well above oil prices in recent months. Gazprom officials now prefer prices to not be fully indexed to oil.

DEPA’s pending agreement with Russia’s Gazprom Export, its main supplier, expires in 2026 but is subject to annual talks concerning pricing formula and take-or-play clause revisions.

Natural gas a leading issue at upcoming Greek-Russian talks

Energy matters, especially sharply risen natural prices, will be high on the agenda at a forthcoming 13th Greek-Russian Joint Interministerial Committee scheduled to take place in Moscow on November 29 and 30.

Gas utility DEPA’s current contract with Russia’s Gazprom runs until 2026 but the two sides renegotiate, each year, the details of its pricing formula and a take-or-pay clause incorporated into the agreement.

DEPA’s supply agreement with Gazprom is entirely oil-indexed but an extraordinary revision was made for 2020 and 2021 as oil prices were extremely high, well over LNG price levels. A large proportion of Russian gas received by DEPA was indexed with the TTF gas hub in the Netherlands.

The situation has overturned this year, LNG prices rising well above oil prices. As a result, Gazprom wants to avoid a fully oil-indexed agreement for gas supply to DEPA in 2022 and prefers a hybrid solution that would partially index its gas prices with the TTF.

DEPA and Gazprom have yet to reach an agreement, but the two sides will need to converge by the end of this month, which would enable the Greek gas company to set prices and establish deals with customers in the Greek market.

Prime Minister Kyriakos Mitsotakis is scheduled to travel to Moscow on December 8 for a meeting with Russian President Vladimir Putin, the first direct meeting between the two leaders since Mitsotakis assumed office in July, 2019.

 

DEPA in gas supplier talks for ’22 prices, Gazprom deal crucial

Gas company DEPA is currently engaged in negotiations with its suppliers for agreements  covering 2022, its talks with main supplier Gazprom being the most crucial. The pricing formula to be agreed on by DEPA with Gazprom will greatly shape the prices to be offered by the Greek company to its customers – electricity producers, industrial producers and retail energy suppliers.

Though there are signs of a possible price de-escalation, gas prices remain elevated. The percentage of Gazprom supply to be oil-indexed will be a pivotal factor in price levels offered by DEPA to customers.

DEPA has already reached an agreement with Algeria’s Sonetrach for a one-year extension to a deal expiring at the end of 2021, energypress sources have informed. A hybrid pricing formula primarily based on the Dutch TTF index has been agreed to, the sourced added.

Greece’s agreement with Turkey’s BOTAS, for natural gas originating from Azerbaijan, is set to expire at the end of this year, but no moves have been made for a renewal as Azeri gas has been supplied by Azerbaijan Gas Supply to the Greek market since the end of 2020 through the new TAP route. This supply contract, fixed and not subject to negotiation, is valid until 2044.

DEPA’s pending agreement with Russia’s Gazprom Export, its main supplier, is the most crucial. It expires in 2026 but is subject to annual talks concerning pricing formula and take-or-play clause revisions.

DEPA’s agreement with Gazprom is currently entirely oil-indexed. The the two sides had agreed to an extraordinary revision for 2020 and 2021 indexing prices with the TTF gas index as oil prices were considerably higher. The opposite is now the case, with LNG prices well above oil prices. Gazprom officials now prefer prices to not be fully indexed to oil.

 

Factors pushing up gas prices, economic activity threatened

A combination of market conditions and structural matters has unbalanced natural gas markets throughout Europe, driving prices higher, which is severely impacting electricity prices.

Recovering economies following pandemic-induced flatness, combined with a policy applied by Russia, Europe’s main supplier, to significantly restrict gas outflow to the continent, has created energy crisis conditions.

In mid-August, Russian gas outflow through the Yamal pipeline, running across Russia, Belarus, Poland and Germany, has not exceeded 20 million cubic meters per day, following levels of as much as 49 million cubic meters per day just weeks earlier, still well under usual levels averaging 81 million cubic meters per day.

According to analysts, this reduction has been attributed to Gazprom’s preference to supply Russian gas through the Nord Stream 2 pipeline, bypassing Ukraine and Poland.

LNG supply to Europe has also fallen in recent times as Asian countries appear more willing to pay higher prices.

In addition, prices are also being impacted by EU climate-change policies designed to limit the use of fossil fuels, lignite as well carbon emissions, all of which has greatly increased demand for natural gas, not only in Europe, but Asia and the US, too, pushing up prices to levels of 48 euros per MWh in recent days.

Natural gas shortages have driven wholesale electricity prices higher. In Germany, for example, wholesale electricity prices have risen by 60 percent over the past year. In Spain, the government has reduced energy consumption taxes in an attempt to subdue the wave of price rises.

The situation in the energy market is extremely worrying as it affects economic activity and is placing millions of households at risk of finding themselves in energy poverty.

DEPA appeal against ELFE on January 28, deferral possible

A January 28 date has been set for an appeal filed by gas supplier DEPA Commercial to challenge a 2019 ruling by an Athens Court of First Instance that vindicated an overcharging claim by ELFE (Hellenic Fertilizers and Chemicals), awarding the producer a compensation amount worth 61 million euros.

ELFE was seeking a compensation amount of 302 million euros, arguing DEPA – the gas utility from which DEPA Commercial later sprung forth as a new group entity – overcharged between 2010 and 2015 for supply to the producer’s facility in Kavala, northern Greece, by passing on the increased cost of DEPA’s oil-indexed contract with Gazprom.

Also in 2019, the Athens Court of First had concurrently delivered a separate verdict in favor of DEPA, vindicating the gas company for unpaid receivables owed by ELFE. The producer was ordered to pay a sum estimated between 59.5 and 60 million euros.

In response, ELFE, too, filed an appeal opposing this 2019 decision, the hearing’s date set for September, 2021, sources informed.

Legal sources explained that the two appeals could end up being heard concurrently in September, based on a decision that may emerge from the forthcoming appeal ten days from now. Combining appeal cases is commonly practiced by courts, the sources noted.

If so, the amount of time needed to resolve this legal dispute will be extended, which would impact privatization fund TAIPED’s scheduling of the DEPA Commercial privatization.

TAIPED has set a March deadline for binding offers. This deadline could end up being stretched beyond September.

Should DEPA Commercial’s appeal against ELFE ultimately fail, then other customers of the gas company, primarily electricity producers and industrial enterprises, could also seek compensation amounts for overcharging.

Some pundits have pointed out that electricity producers were probably able to pass on to their customers any cost increase resulting from DEPA’s oil-indexed contract with Gazprom. On the contrary, industries did not have such leeway.

Outcome of ELFE legal battle crucial for DEPA’s privatization

The outcome of an appeal filed by gas supplier DEPA Commercial to challenge a 2019 ruling by an Athens Court of First Instance that vindicated an overcharging claim by ELFE (Hellenic Fertilizers and Chemicals), scheduled to be heard next week, is pivotal for the gas company’s privatization plan.

If ELFE overcomes the appeal lodged by DEPA Commercial – which, as things stand, is expected to return 63 million euros to the fertilizer and chemicals company for overcharged gas supply between 2012 and 2015 – then this precedent will prompt more overcharging cases, for the same period, by other customers, primarily electricity producers and industrial enterprises.

Such a development, which, according to sources, could end up costing DEPA Commercial a total of up to one billion euros in rebates, threatens to derail the company’s privatization procedure as investors would not want to take on such a financial burden. Worse still, DEPA Commercial’s sustainability would be severely tested, the sources added.

DEPA Commercial was formed by gas utility DEPA specifically for its privatization.

The appeals court will require some time before it delivers its verdict. If the ruling is in favor of ELFE, then DEPA Commercial is expected to take the case to the Supreme Court. A prolonged legal battle would surely impact the gas company’s growth plans.

In 2019, the Athens Court of First Instance ruled that DEPA passed on to its customers the cost of an oil-indexed purchase agreement with Russian gas company Gazprom without considering lower prices available at natural gas hubs.

Taking into account this ongoing legal battle, privatization fund TAIPED has set an early-spring deadline for binding bids by potential buyers of DEPA Commercial as well as DEPA Infrastructure, the gas utility’s other new entity.

ELPE seeking greater North Macedonia market share

Hellenic Petroleum ELPE, aiming to capture a bigger share of the North Macedonian market, is currently negotiating for extrajudicial solutions that would enable the reopening of a company oil pipeline linking Thessaloniki with Skopje.

In an effort to help resolve this issue, ELPE has proposed a series of RES investments in the neighboring country as well as a conversion of its Okta refinery into a petroleum products hub facilitating distribution to the western Balkans.

December will be a crucial month for the negotiations between ELPE and North Macedonia as a verdict is scheduled to be delivered on an ELPE compensation request for 32 million dollars for a breach, by the neighboring country, of contractual obligations concerning minimum supply amounts between 2008 and 2011.

The North Macedonian oil market is dominated by two Russian companies, Gazprom and Lukoil, both gaining further ground. Gazprom supplies fuel products to North Macedonia via Serbia and Lukoil does so from Bulgaria.

US officials, seeking to inhibit the dominance of Russian energy firms in North Macedonia, have intervened to help resolve the country’s differences with ELPE.

Just days ago, a meeting on ELPE’s effort to reopen the oil pipeline was held in Thessaloniki during an official visit to the city by US Secretary of State Mike Pompeo. US government officials, Greece’s energy minister Costis Hatzidakis and North Macedonian government deputies participated.

For quite some time now, Washington has made clear its stance aiming to limit Europe’s energy dependence on Russian companies and, as a result, is promoting the ELPE oil pipeline as an alternative supply route into North Macedonia.

 

DEPA sales down by €210m in 2019, LNG, competition factors

Gas utility DEPA’s sales, down by approximately 210 million euros in 2019, a year in which gas consumption and import records were broken, highlight the domestic gas market’s intensified competition and impact on the corporation, which has just posted its annual results for last year on the company website.

Gas consumption in the Greek market last year reached 57.4 TWh, up from 52.4 TWh in 2018, while gas imports in 2019 totaled 57.7 TWh, the majority, 54.5 percent, in the form of LNG and the remaining 45.5 percent as pipeline gas.

Intensified competition and lower LNG prices were cited as key reasons behind DEPA’s reduces sales, from 970.9 million euros in 2018 to 760 million euros last year.

“International gas market conditions during 2019 were characterized by significant price reductions at international hubs and an LNG oversupply, which led to a corresponding reduction of LNG prices in spot markets,” DEPA noted.

These conditions encouraged opportunistic imports by major consumers in Greece who generally cover a great part of their needs through DEPA long-term supply contracts, the gas utility noted.

Besides lower LNG prices, DEPA’s long-term contracts for pipeline gas supply were another factor behind DEPA’s reduced sales figures in 2019.

DEPA’s administration successfully negotiated a supply contract revision with Russia’s Gazprom, effective as of the second half of 2019, enabling greater LNG indexing on pipeline gas prices. This revision will help bring about a rebound, the company anticipates.

Long-standing DESFA northern Greece pipeline plan scrapped

Gas grid operator DESFA has scrapped plans for a natural gas pipeline that had been envisioned to run across northern Greece, from Komotini in the northeast to Thesprotia in the northwest, after maintaining the project in the company’s business plans for about a decade.

DESFA reached this decision as Russian President Vladimir Putin is supporting Gazprom’s development of a second branch for the wider Turkish Stream gas project, deviating Ukraine, to supply the Balkans and central Europe via Bulgaria, not Greece, as was initially considered.

A first Turkish Stream branch supplying Russian gas to Turkey is already operating.

“The project remained on the business plan for approximately ten years without progressing to the construction stage, while there is no sign of conditions leading to its construction in the immediate future,” DESFA announced.

The Komotini-Thesprotia pipeline project was budgeted at 1.8 billion euros.

The total cost of projects included in DEFSA’s development plan for 2021-2030 is now budgeted at 545.5 million euros.

PPC triggers options for 2021 gas orders from DEPA, Prometheus Gas

Power utility PPC has activated options to extend, by an additional year, its 2020 gas supply contracts with gas utility DEPA and Prometheus Gas, a joint venture involving the Copelouzos group and Russia’s Gazprom, for respective gas orders of 2 million MWh and 2.5 million MWh, according to sources.

PPC expects to require a total gas amount of between 17 million and 18 million MWh for its electricity generation needs in 2021, unchanged compared to the estimate for this year.

A nine-year gas supply agreement between PPC and DEPA securing the power utility approximately 11 million MWh of gas, annually, expires at the end of this year. As a result, PPC will need to reshape its gas supply policy from scratch.

The gas supply prices secured by PPC through its aforementioned one-year contract extensions with DEPA and Prometheus Gas are roughly 8 to 9 percent lower compared to the prices of the power utility’s long-term agreement with DEPA.

The cost of PPC’s additional one-year gas order from DEPA is believed to be about 30 million euros, while the 2021 order from Prometheus Gas is estimated to be worth 36 million euros, sources said.

Early this year, PPC purchased additional gas amounts totaling 4.5 million MWh from DEPA and the Copelouzos group, through a competitive procedure, to primarily cover needs at its Aliveri and Megalopoli power stations.

PPC is also covering this year’s gas needs through supplementary LNG orders. The power utility has so far brought in three shipments of 2 million MW each, and may order a further 2 million MWh in the second half.

Natural gas market forecasts for 2021 remain hazy. RAE, the Regulatory Authority for Energy, has yet to determine the manner in which slots will be distributed at gas grid operator DESFA’s LNG terminal on the islet Revythoussa, just off Athens. In addition, the sale of DEPA Commerce, a new DEPA entity established for the gas utility’s privatization, is expected next year.