Gazprom

US to offer counterproposal to Gazprom plan, minister says

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The USA intends to offer Greece a counterproposal to Gazprom’s plan for “Greek Stream,” the local segment of “Turkish Stream”, Greek Foreign Minister Nikos Kotzias has announced.

Kotzias, currently on an official visit in the USA, told reporters that Russia had made Greece “a very good offer” while adding that his US counterpart John Kerry promised the USA will make a counterproposal to “Turkish Stream” and that the US Department of State’s Acting Special Envoy and Coordinator for International Energy Affairs, Amos Hochstein, will soon visit Athens for talks.

“Turkish Stream” is Moscow’s latest natural gas pipeline proposal for supply to the EU from the south, via the Greek-Turkish border area, following the indefinite shelving of “South Stream”, over EU-linked legal complications. This project was planned to bypass Ukraine, cross the Black Sea, and reach Bulgaria.

Kotzias noted that Greece’s recent talks with Gazprom on the pipeline project were based on economic concerns, not political. He described Gazprom’s interest to develop pipeline infrastructure through Greece as part of a wider effort against US intentions aiming to limit central and eastern Europe’s dependence on Russian energy.

Responding to a question on Greece’s negotiations with European creditors, Kotzias noted that Greece was ready to compromise and that “nobody will play any games.” The minister added that European officials will need to respect leftist Syriza’s election victory last January, based on an anti-austerity platform. “We’ve had very bad results after five years of austerity,” he noted.

 

‘Greek Stream’ prospects hit by EU charges against Gazprom

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Yesterday’s decision by the European Commission to formally charge Gazprom for abusing its dominant market position dampens the development prospects of “Greek Stream”, the local segment of “Turkish Stream”, Moscow’s latest natural gas pipeline proposal for supply to the EU from the south, via the Greek-Turkish border area.

The Brussels decision was reached following a lengthy investigation that concluded the Russian energy giant is imposing geographical restrictions on supply deals with wholesalers and certain industrial consumers in various countries. Gazprom, according to the decision, has also imposed other measures that prevent cross-border natural gas flow.

The European Commission decision was also based on the conclusion that Gazprom is overpricing in five EU member states, Bulgaria, Estonia, Latvia, Lithuania, and Poland.

The Russian company has denied it is implementing a strategy that combines geographical restrictions and overpricing.

The European Union’s Third Energy Package, legislative measures intended to further open up the gas and electricity markets in the EU, is at the core of the European Commission’s ruling against Gazprom.

Based on these latest developents, if “Greek Stream” stands any chance of receiving EU approval, offering pipeline access to third parties will be necessary. Russia did not permit this for its previous proposal, South Stream, which led to its indefinite shelving.

‘Greek Stream’ agreement not reached with Gazprom head

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No deal was signed yesterday between Greece and Russia for “Greek Stream”, the local segment of “Turkish Stream”, Moscow’s latest natural gas pipeline proposal for supply to the EU from the south, via the Greek-Turkish border area, but both sides appear determined to work on maintaining the prospect.

Gazprom chief executive Alexey Miller, who met in Athens yesterday with Greek Prime Minister Alexis Tsipras and Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis, was obviously extremely conscious of a fresh European Commission threat, announced just hours after his trip to Athens had been confirmed, of imminent sanctions to be imposed on the Russian energy giant over monopolistic practices and overcharging buyers in eastern Europe, based on the findings of an investigation launched in 2011. The legal action may be announced today by the EU’s competition commissioner Margrethe Vestager, leading to consequent penalties worth billions of euros.

Even though the Greek government’s expectations for a “Greek Stream” deal had remained reserved in the lead-up to yesterday’s meeting, a wave of reports, including one stemming from a Syriza party source, claimed Miller would sign a memorandum of understanding in Athens for the pipeline project in exchange for a sum of between three billion euros and five billion euros as an advance payment to Greece for the country’s anticipated pipeline-linked earnings.

Which raises the obvious question as to why the Gazprom head visited Athens in the first place, even though a deal was not going to be signed. His visit could be interpreted as a move intended to make clear the prospective pipeline project remains a priority on Moscow’s agenda. Also, it came as a swift reponse to the Greek Prime Minister’s official visit to Moscow a fortnight ago, the overall underlying message here being that bilateral ties are warming and that a willingness exists to seek a solution for the pipeline’s development.

Earlier this week, Miller, speaking at a Berlin conference, offered a far more daring stance by threatening to interrupt Russian gas supply to the EU following 2019 if the European Commission obstructs “Turkish Stream”.

Following yesterday’s meeting, both sides appeared keen to keep the pipeline’s prospects alive. But it was made clear that plenty of work lies ahead. The prospect of an advance payment to Athens was not even hinted at. “Turkish Stream”, Russia’s alternative to its indefinitely shelved “South Stream” plan, over EU-linked legal complications – the project was planned to bypass Ukraine, cross the Black Sea and reach Bulgaria’s east coast, further north – will require EU approval. Also, prospective gas buyers will need to be secured before any preliminary progress is made.

Miller ascertained yesterday that “Turkish Stream” will be developed in compliance with EU law, noting this was not a concern for Moscow, and that the project would be developed by a Russian-European consortium. “European companies have already expressed interest to participate,” the Gazprom head remarked.

Certain pundits have suggested that Athens may be willing to go as far as to obstruct the development of TAP (Trans Adriatic Pipeline), the EU-backed rival project to carry Azeri natural gas to the EU via Greece, if the European Commission blocks “Turkish Stream”. This may seem farfetched, but sources noted Greece’s archaeological authority could make life hard for the TAP consortium if it chose to.

 

Last year’s domestic slump in gas demand rolls over into 2015

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The decline of natural gas demand in Greece, which fell by 25 percent, year-on-year, in 2014 has continued into the present year with demand during the first three-and-a-half months down by roughly eight percent compared to the equivalent period last year, according to figures provided by DEFSA, the Natural Gas Transmission System Operator.

The DESFA figures showed that demand during the current year’s first three-and-a-half months amounted to 10.55 million megawatt hours, from 11.47 million MWh during the equivalent period in 2014. In cubic meter terms, consumption reached about 907 million cubic meters for the period, down from 980 million cubic meters in the equivalent period last year.

The drop has been primarily attributed to a considerable reduction in gas-fueled electricity production as a result of regulatory revisions made mid-way through 2014.

DESFA’s latest figures showed that the country’s power stations – both those run by the PPC power utility and independent units – are aborbing 25 percent less natural gas than they were a year ago. The drop for PPC’s power stations, alone, is even greater, at 40 percent.

Demand for natural gas was essentially supported by the industrial sector, small-scale consumers, and, to a lesser degree, certain independently run power stations, whose consumption drop has been fare more restricted than that of PPC’s.

It should be noted that the declining demand for natural gas has coincided with falling natural gas prices, tagged to crude oil price levels.

Officials at DEPA, the Public Gas Corporation, are hoping that a recently announced 16 percent tariff reduction for natural gas in Greece, for all consumer categories, effective as of April 1, may boost demand in the sector.

Should this downward trajectory in natural gas demand be sustained, and no contractual revisions are made between DEPA and its suppliers, primarily Russia’s Gazprom, then a new round of take-or-pay claims will most certainly arise.

Greece overestimated its gas order from Russia for 2014, which subsequently activated a take-or-pay clause in the natural gas agreement between the two sides. The resulting cost for Greece is believed to exceed 100 million euros, if the take-or-pay clause is strictly upheld.

Domestic gas demand last winter was partially covered by LNG imports made by M&M Gas, a Mytilineos Group and Motor Oil Hellas wholesale venture, which capitalized on attractive international LNG market opportunities. Taking this into account, the drop in sales at DEPA is far greater than the overall drop in demand.

 

 

Gazprom CEO in Athens today amid mixed reports on deal

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The Greek government is remaining reserved ahead of today’s official visit to Athens by Gazprom CEO Alexey Miller for talks with Prime Minister Alexis Tsipras and Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis, even though an agreement is likely to be signed for the “Turkish Stream” natural gas pipeline.

Considering Gazprom’s representation at the meeting, by its top official, and not a subordinate, a memorandum of understanding (MOU) may well be signed today for the segment of the pipeline to cross through Greece, dubbed “Greek Stream” by local officials.

“Turkish Stream” is Russia’s latest natural gas pipeline proposal for supply to the EU, planned to bypass Ukraine, cross the Black Sea and reach the Greek-Turkish border area. If developed, it will replace Russia’s indefinitely shelved South Stream proposal, which was planned to reach Bulgaria’s eastern coast, further north. That proposal was blocked by legal complications with the European Commission.

A leading Greek energy ministry official yesterday held back on expectations of any Greek-Russian pipeline deal by reiterating Moscow’s denial of reports that an agreement would be reached to offer Greece between three billion euros and five billion euros as an advance payment for anticipated earnings to be generated by the pipeline’s Greek segment.

“We’re still at a preparatory stage with the Russians, and waiting to see their position,” the ministry official noted. “All details concerning the pipeline’s development, including financing, and matters [recently] forwarded by the [Greek] government in Moscow, such as a renegotiation of the gas supply tariff and minimalization of a take-or-pay payment will be examined with Miller,” the official added.

Greece overestimated its gas order from Russia for 2014 as a result of lower domestic gas consumption amid the recession, which subsequently activated a take-or-pay clause in the natural gas agreement between the two sides. The resulting cost for Greece is believed to exceed 100 million euros, if the take-or-pay clause is strictly upheld.

Both the EU and USA are now clearly expressing their displeasure of seemingly warming bilateral ties between Greece and Russia. Yesterday, just hours after Miller’s visit to Athens was officially announced, it became known, possibly not coincidentally, that the European Commission will launch a new legal attack on the Russian energy giant for overcharging buyers in eastern Europe, according to reports by Bloomberg and Reuters. If confirmed, Gazprom will face such European Commision charges, possibly penalties too, for the first time.

Despite all the aforementioned factors and reservations, certain sources close to Lafazanis, Greece’s energy minister, consider the prospect of a Greek-Russian multi-billion euro deal highly likely.

Greece is running out of time to service major debt repayments and still needs to persuade highly skeptical creditors of a credible reforms plan to secure another tranche of needed bailout funds.

 

 

‘Greek Stream’ progress sought ahead of Eurogroup meeting

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Production Reconstruction, Environment and Energy Minister Panagiotis Lafazanis may be denying rumors generated over the past few days of an upcoming visit to Athens by Gazprom CEO Alexey Miller, but this certainly does not mean that talks with Russian officials for “Greek Stream” – the local segment of “Turkish Stream”, Russia’s latest natural gas pipeline proposal for supply to the EU from the south – are not in progress.

As was made evident at the recent meeting of EU energy ministers, the pipeline, intended to bypass Ukraine, cross the Black Sea, and reach the Greek-Turkish border area, is at the top of Lafazanis’s agenda. In comments offered yesterday, the minister assured the project would comply with EU regulations. Both the EU and USA have not embraced the current revival of bilateral ties between Greece and Russia.

According to sources, the Greek energy minister wants a memorandum of understanding, or some form of an agreement, to be signed before next Friday, when the next Eurogroup meeting of EU finance ministers is scheduled to take place. This rush can be linked to an intention by Lafazanis to incorporate – yet again, even if just symbolically – the pipeline project’s developments, as well as Greece’s developing ties with Russia, as negotiating tools at the next Eurogroup meeting.

The sense of urgency has prompted Russian officials to offer their first estimates of the project’s cost, as well as shape. At this stage, it appears that the new Russian gas pipeline proposal will run the same length as South Stream, Russia’s indefinitely shelved previous proposal that would have reached Bulgaria via the Black Sea. Also, the new proposal’s total budget is expected to reach a similar level to that of South Stream, which had been estimated at 15.5 billion euros. Russian company Gazprom has declared that a submarine gas pipeline crossing the Black Sea, already constructed as part of the South Stream project, will now be used for Turkish Stream.

Lafazanis, in another comment yesterday, highlighted Greece’s interest in establishing itelf as a regional energy hub by reiterating the country’s support for TAP (Trans Adriatic Pipeline), the rival pipeline to supply Azeri natural gas to the EU via Greece, now under construction. Greece’s dual support for both projects has drawn heavy criticism from critics who have described the government’s geopolitical energy maneuverings as uncoordinated and without prospects.

The EU, striving to diversify Europe’s energy options by reducing the continent’s reliance on Russia, is not at all happy with Greece’s contact with Moscow amid the overall effort being made to establish Azerbaijan as a key natural gas supplier to the EU.

 

 

Long road still ahead for Turkish Stream’s Greek section

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Yesterday’s meeting between Greek Prime Minister Alexis Tsipras and Russian President Vladimir Putin may have provided a significant first step towards the development of Turkish Stream, Russia’s latest natural gas pipeline proposal for supply to the EU, across Greek territory, but, under no circumstances, means construction activity is now all set to begin.

Both leaders were cautious in their remarks about the project. Putin spoke about examining the possibilities of construction, while Tsipras underlined that Greece will respect EU law.

According to sources, as a first step, Greek and Russian officials will begin holding talks within the current month with the objective of reaching an agreement on the establishment of a company to develop the infrastructure project’s Greek segment.

The following step, if the project is to proceed, will entail arranging funding for the pipeline’s draft plan and preliminary construction studies. At the same time, procedures will need to be launched to secure an Independent Natural Gas System (INGS) licence for the project, as part of the EU Third Energy Package, aiming to make the European energy market fully effective. This license will also recognize the right of access to the pipeline by third parties.

Should the project’s licencing matters be cleared by the European Commission – which was not the case with Russia’s now-shelved previous natural gas pipeline proposal, South Stream, whose route was intended to cross the Black Sea to Bulgaria – then prospective buyers of the natural gas to be carried by the pipeline will need to be found.

The annual capacity of Turkish Stream, planned to bypass Ukraine and reach the Greek-Turkish border area for supply into the EU, is expected to be 47 billion cubic meters, beginning in 2019, when the pipeline’s launch has been scheduled. This new pipeline is planned to cover the natural gas supply needs of countries now served by the TransBalkan System, a pipeline that crosses Ukraine and ends up in Bulgaria and Greece.

If natural gas buyers are found, then final plans for the project will be drafted and construction will commence. It should be noted that construction of one segment, a costly submarine crossing through the Black Sea, has already begun. Initially intended to make up part of the canceled South Stream project, this section will be rerouted to end up further south, in the eastern Thrace region, rather than Bulgaria to the north, as had been planned for the previous project.

Judging by Putin’s reaction at yesterday’s news conference, Russia will not have any objections to Turkish Stream’s Greek section being renamed, as Tsipras pointed out. This segment may be named Greek Stream.

Little was said yesterday on Greece’s request for a Russian revision to a misjudged, by Greece, take-or-pay clause included in an agreement between DEPA, the Public Gas Corporation, and Russian supplier Gazprom.

Greek officials overestimated the country’s gas order for 2014 amid the ongoing recession’s weakened demand, which subsequently activated the supply agreement’s take-or-pay clause, resulting in a cost believed to exceed 100 million euros for Greece, if strictly upheld. However, despite the lack of news on the matter yesterday, sources said the penalty will finally not be imposed by Russia. Sources said details on the issue may be announced later this month, when DEPA and Gazprom officials are expected to meet.

Also, no news was offered on a Greek request for a natural gas price reduction by Russia. This prospect appears to be linked to the outcome of Turkish Stream’s Greek section.

 

 

 

PM to launch tricky political game with Moscow visit

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Today’s official visit to Moscow by Prime Minister Alexis Tsipras launches a tricky balancing act in which the Greek leader will need to strike an equilibrium between strategically broadening the country’s horizons, financially and in the energy sector, and not prompting side effects in its relations with fellow EU partners.

It will be a difficult task as the attempt entails the risk of transforming the perception of Greece as a geopolitical danger, instead of bolstering the country’s negotiating strength with creditors.

The agenda at today’s meeting between Russian president Vladimir Putin and Tsipras may be all-encompassing, covering all major issues, from the prospect of a bilateral loan agreement for Greece, a reduction of Russian natural gas supply prices, Russia’s lifting of an agricultural products embargo, Russian investments in Greek ports, Trainose, the railway company, and DEPA, the Public Gas Coorporation – all in exchange for Greece’s support of Russia’s latest natural gas pipeline plan to bypass Ukraine and reach the Greek-Turkish border area for supply to the EU.

Russia hopes to begin transmitting 47 billion cubic meters of natural gas, annually, to central Europe through this pipeline. It is considered certain that Putin will seek Greek involvement in the infrastructure project.

Efforts made by Greece in recent years to upgrade the country’s role in supporting Russian supply of oil and gas to Europe have not been embraced by the EU and US, striving to limit Europe’s energy dependence on Moscow. However, regardless of various ongoing maneuverings, officials in Brussels know well that the EU heavily relies on Russian natural gas. If a solution is not found to Russia’s conflict with Ukraine, then the EU will need to find an alternative pipeline supply solution for the 63 billion cubic meters of natural gas it consumes via Ukraine. At present, no other supplier can offer such amounts. Nor do alternative pipelines of such capacity exist.

If the conflict with Ukraine is sustained, Russia will place at risk its gas supply prospects with the EU, the biggest recipient of Russian natural gas. EU consumption of Russian natural gas via Ukraine is worth 20 billion dollars, annually. This explains why Russia is promoting the prospect of Turkish Stream, to avoid Ukraine, a major supply-route problem for Russia. It should be noted, however, that should Russia and Ukraine resolve their differences, the new Russian pipeline plan will no longer be necessary, and, politically, will leave Greece out in the dark.

Putin’s anticipated favors for Greece worrying the west

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Russian president Vladimir Putin is expected to make a number of favorable offers to Greek Prime Minister Alexis Tsipras, including in the energy sector, when the two heads of state meet in Moscow tomorrow.

Putin’s gestures, to emerge at a time when the two countries appear to be establishing closer ties despite the disapproval of EU and US officials, are expected to include a softer Russian stance on a misjudged, by Greek officials, take-or-pay clause included in a natural gas supply agreement that has led to a penalty estimated at over 100 million euros for Greece.

DEPA, Greece’s Public Gas Corporation, overestimated its gas order placed with Russia’s Gazprom for 2014 as a result of lower domestic gas consumption amid the Greek recession, which subsequently activated a take-or-pay clause included in the natural gas agreement between the two sides.

Sources said Putin is prepared to order Gazprom to excuse Greece of this resulting obligation’s entire amount.

The same sources also noted that procedures will also begin for a reduction of Russian gas supply prices to Greece. However, the prospect is being linked to Greece’s support for the development of Turkish Stream, Russia’s latest natural gas pipeline plan to bypass Ukraine and reach the Greek-Turkish border area for supply to the EU. Turkish Stream is Russia’s alternate proposal for South Stream, a stalled plan whose route woute have crossed the Black Sea to Bulgaria.

EU and American officials, currently at odds with Russia over the Ukrainian crisis, as well as the country’s maneuverings for monopolistic energy supply to the EU, have not embraced the Russian plan for Turkish Stream. The Greek Prime Minister’s trip to Moscow promises to produce energy-sector developments of geopolitical significance.

Besides the energy matters, Putin is also expected to lift a Russian trade embargo on agricultural products, an initiative that would release Greek exports worth about 200 million euros.

Russia seeks alternative for blocked hydropower project

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Though definitely not at the top of their agenda, Russian officials did mention a blocked plan for the construction of hydropower stations at Acheloos river, western Greece, a project that had been allotted to a Russian consortium, during talks earlier this week with Production Reconstruction, Environment and Energy Minister Panayiotis Lafazanis.

The minister made an official visit to Moscow as part of an effort to forge closer ties with Russia, the energy sector being a key part.

A Russian consortium had secured a contract to construct two hydropower facilities in the areas of Sykia (2 x 60 MW) and Pefkofyto (2 x 80 MW), which was attached to an agreement for Russian gas supply to Greece. However, the hydropower projects did not proceed as they were blocked by the Council of State, Greece’s Supreme Administrative Court.

During their talks this week with Lafazanis, Russian officials requested that Greece propose an alternative project of equal monetary worth to be constructed by Russian companies.

Lafazanis and his delegation did not offer any proposals, but both sides expressed confidence that a solution will be found amid the climate of closer bilateral ties being developed.

According to Greek officials, Russia’s Gazprom has already indicated it will reduce to one third a penalty activated by a pay-or-take clause included in a gas supply agreement with DEPA, the Public Gas Corporation. Greece overestimated its gas order for 2014 as a result of lower domestic gas consumption amid the recession, which subsequently activated the take-or-pay clause, whose total cost exceeds 100 million euros. Based on the latest developments, DEPA will reportedly pay about one third of this amount.

Gazprom to reduce take-or-pay clause cost to one third

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A penalty imposed on DEPA, the Public Gas Corporation, by Russia’s Gazprom, as a result of a take-or-pay deal misjudgement by the Greek side, will be reduced to about a third of the amount, government officials believe.

Production Reconstruction, Environment and Energy Minister Panayiotis Lafazanis has just returned from an official visit to Moscow, during which it was agreed to forge closer ties between Greece and Russia, energy matters being a key part.

Greece overestimated its gas order from Russia for 2014 as a result of lower domestic gas consumption amid the recession, which subsequently activated a take-or-pay clause in the natural gas agreement between the two sides. The resulting cost for Greece is believed to exceed 100 million euros, assuming the take-or-pay clause is strictly upheld. The figure, according to government officials, is now expected to be lowered to about one third of the total.

Besides the Greek government’s bilateral maneuverings with Russia, Gazprom’s softer stance may be connected with European Commission criticism of the country’s practice of attaching take-or-pay clauses to natural gas supply agreements. Market analysts reminded that European gas companies that have taken legal action against Russian take-or-pay clauses on agreements have been vindicated in court.

If DEPA does benefit from a drastically reduced penalty rate, the smaller amount may not need to be rolled onto consumer bills, especially those of thermal power stations, which are gas-fueled. The sector has already threatened to resort to legal action if its operations are burdened by any take-or-pay related costs.

Greek move towards closer Russian ties entails risk

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Production Reconstruction, Environment and Energy Minister Panayiotis Lafazanis, just back from an official visit to Moscow, has paved the way for close ties with Russia, a move that also promises to spark a stern response from the USA and EU.

If Russian president Vladimir Putin and Greek Prime Minister Alexis Tsipras, who meet on April 8, make official a bilateral agreement for Russia’s latest natural gas pipeline proposal, Turkish Stream, to bypass Ukraine and carry gas to the Greek-Turkish border area, then it will arrive as the first deal between the two countries since 2009. Turkish Stream is Russia’a alternate proposal for South Stream, a cancelled project whose route woute have crossed the Black Sea to Bulgaria.

Greece’s step closer to Russia, a country targeted by international sanctions over the Ukrainian crisis, entails considerable risk amid the region’s reshaped geopolitical standing. The initiative could even lead to repercussions in Greece’s ongoing negotiations with its creditor representatives, market analysts have pointed out.

For Lafazanis, who heads the leftist Syriza-led coalition’s radical left faction, Left Platform, creating a rift between Greece and the country’s creditors may be a natural extension of his political views, but the government is left to deal with the real issues.

Some political analysts believe Lafazanis is seeking to persuade the entire Greek government to join his pro-Russian stance. Others disagree and contend the minister does not intend to fully succumb to a Greek-Russian affair but, instead, through his maneuverings, is seeking greater understanding from creditor representatives over the harshness of their demands imposed on Greece.

Whatever the case, it appears that, at present, Greece is on the verge of sealing a major energy deal with Russia through the Turkish Stream plan. The pipeline, whose construction Russia aims to complete by 2019,  is intended to carry 63 billion cubic meters of Russian natural gas, annually, to central Europe. Its route is planned to run through the Black Sea, Turkey, Greece, the Former Yugoslav Republic of Macedonia (Fyrom), Serbia and Hungary, with Austria as its final destination.

Lafazanis, whose Moscow visit earlier this week included meetings with Russia’s Energy Minister Alexander Novak and Gazprom CEO Alexey Miller, yesterday declared he was greatly interested in the Russian government’s plan to include Greece in the Turkish Stream pipeline project’s route, while noting that a final decision would be made by the government and the the Greek Prime Minister “based on national interests.”

 

Greece, Russia entering ‘new chapter in energy cooperation’

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Greece and Russia are establishing a new chapter of energy cooperation, Production Reconstruction, Environment and Energy Minister Panayiotis Lafazanis declared yesterday following a series of meetings in Moscow with Russian officials, including Energy Minister Alexander Novak.

“You all know that the new Greek government has decided to pursue a multidimensional and multileveled energy policy in its international relations,” Lafazanis told reporters. “We want to follow a policy of international energy relations because we believe that this approach serves our national interests as well as stability and security in our region, energy sufficiency and security throughout Europe and, of course, our country’s energy security,” he continued.

Greece’s energy minister told reporters his visit to Moscow was made to promote and develop these concerns.

“We agreed, especially with the energy minister, at our meetings in Russia, that we need to move on to a new level, a new stage in our energy partnerships, and make them more substantial in as many areas as possible areas, I’d say,” commented Lafazanis.

He added that the new chapter being embarked on would prove beneficial for both the Greek and Russian people, while it also promised to set new standards for the wider region and Europe as a whole.

Responding to a question on whether Russia would soften its stance on a take-or-pay clause for natural gas orders – through which Greece must cover the cost of unabsorbed natural gas amounts as a result of overestimated orders and lower domestic gas consumption amid the recession – Lafazanis noted that “we are expecting a positive response from the Russian side.” Further details on the matter would be available upon his return to Athens, once pending details were discussed, he noted.

Court battle possible for Gazprom take-or-pay deal

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DEPA, the Public Gas Corporation, is expecting a decision, in writing, from Gazprom within the next few days, according to sources, on the former’s request for revisions to a misjudged take-or-pay clause in its gas supply agreement with the Russian gas giant that may prompt a charge of about 100 million euros for unconsumed gas.

Although the matter has been put on hold in the lead-up to this weekend’s snap elections in Greece, independent gas-fueled electricity production plant operators are feeling jittery. Should DEPA fail to reach an agreement with Gazprom, the clause will be activated and its cost will be passed on to DEPA customers. Independent power plants would be the hardest hit as they are the country’s main gas consumers.

Independent power plant operators will be prepared to take legal action against DEPA in such an event, according to energypress sources.

Based on the exisiting take-or-pay agreement signed by Greek officials, DEPA is required to absorb an annual amount of at least two billion cubic meters of Gazprom natural gas, or, otherwise, pay a penalty if this level is not achieved.

However, demand for natural gas in Greece fell by approximately 35 percent in 2014 compared to the previous year, resulting in an absorption level that is about 300 million to 400 million cubic meters below the agreed minimum. This discrepancy could cost DEPA a penalty of about 100 milion euros.

Gazprom officials have already received a DEPA proposal that includes a wide range of revisions to the current agreement between the two sides, according to energypress sources. If implemented, it would spare DEPA of needing to pay for the gas misjudgement this year, while also offering certain long-term assurances to Gazprom.

 

Gazprom talks over take-or-pay flaw await next government

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Despite having developed into an urgent matter, a take-or-pay clause included in an  agreement between DEPA, the Public Gas Corporation, and Gazprom, which will require the Greek corporation to pay the Russian energy giant for unconsumed amounts of gas as a result of a misjudged demand-related calculation, has, like so many other energy-sector issues, been set aside awaiting the result of the upcoming snap elections.

However, despite the current pause, Gazprom officials have already received a DEPA proposal that includes a wide range of revisions to the current agreement between the two sides, according to energypress sources. If implemented, it would spare DEPA of needing to pay for the gas misjudgement this year, while also offering certain long-term assurances to Gazprom.

Officials at the Russian gas company have apparently examined DEPA’s proposals and invited a Greek delegation to travel to Moscow for negotiations in search of a finalized solution. Amid the current setting, this meeting will seemingly not take place before the Greek elections, as, quite simply, a revised agreement cannot be formulated unless a leadership has been appointed at the Environment, Energy & Climate Change Ministry to either accept or reject any Russian proposal.

According to the exisiting take-or-pay agreement signed by Greek officials, DEPA is required to absorb an annual amount of at least two billion cubic meters of Gazprom natural gas, or, otherwise, pay a penalty if this level is not achieved.

Demand for natural gas in Greece fell by approximately 35 percent in 2014 compared to the previous year, resulting in an absorption level that is about 300 million to 400 million cubic meters below the agreed minimum. This discrepancy could cost DEPA a penalty of about 100 milion euros. If Greek officials eventually fail to reach a compromise deal with the Russian company, then this cost will need to be accordingly passed on to local gas consumers. This would primarily affect gas-fueled electricity production stations, Greece’s biggest recipients of Russian gas.

At present, the Greek side is being represented by DEPA’s chief executive Spyros Paleogiannis, an official backed by extensive commercial experience in the natural gas sector and dealings with Gazprom, as, prior to his current post, he had served as DEPA’s commercial manager.

Turn to LNG, consumption cuts planned if Russia cuts supply

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Maximization of LNG supply, as well as consumption cuts that would offer increased protection to more vulnerable social groups and operations, are among the measures included in Greece’s emergency national plan in the event of a Russian gas supply disruption.

Details on the country’s plan were presented by the country’s Environment, Energy & Climate Change Minister, Yannis Maniatis, during an interview on local radio station Skai.

“The plan is to maximize LNG supply to Greece because, at this point, Bulgaria and other [neighboring] countries don’t possess the infrastructure to receive LNG, and, therefore, will request support from Greece. Only Greece is equipped with this type of infrastructure, in Revythoussa,” Maniatis remarked, referring to the country’s only terminal for liquefied gas, located on the islet close to Athens.

The minister underlined that Greece had to prepare for a worst-case scenario, which would prompt gas consumption cuts. Maniatis noted that he considered the most extreme case, entailing a complete Russian natural gas supply stoppage to Greece, via a pipeline route running through Romania, Bulgaria, and Ukraine, as being a highly unlikely prospect. But, nevertheless, the country had no choice but to also be prepared for such a development, the minister added. In this event, the country would rely in LNG, he said.

Greece’s plan includes measures for consumption cuts to protect vulnerable groups, such as households, hospitals, and other crucial national infrastructure requiring constant energy supply, Maniatis noted.

Earlier this week, the Greek Energy minister forwarded a request to the European Commission seeking the creation of an emergency mechanism that would offer protection to Greece and other EU member states that would be affected most by a Russian gas stoppage. These include Austria, Bulgaria, Hungary, Romania, and Slovakia. Greek dependence on Russian gas via Ukraine stands at a level of 66 percent. The mechanism envisions supply support from countries that would not be affected, such as France, Spain, Portugal, and the UK, because they do not depend on Russian gas via Ukraine.

Emergency gas plan meeting postponed; stress test needed

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A meeting originally scheduled to take place Wednesday in Athens, set up by Greek energy-sector officials to finalize the framework of a local contingency plan in the event that Russia interrupts its supply of natural gas via Ukraine, has been postponed for a later date. It remains unspecified.

To be held at the Ministry of Environment, Energy & Climate Change, the meeting is expected to involve the participation of all the country’s top-level energy authorities.

They will need to formulate a stress test simulating the repercussions of a Russian gas supply stoppage next winter. Requested earlier this summer by the European Commissioner for Energy, Mr. Günther Hermann Oettinger, from all EU member states, the stress test is due at the end of August.

A Russian gas stoppage would primarily affect Greece’s natural gas sector. Electricity production in Greece would be far less affected. Greece ranks as one of the EU members with the greatest dependence on Russian natural gas, which, numerically, is estimated to be between 65% and 70%. The picture is less alarming for Greece’s electricity production, which is fueled by natural gas at a level of 25%.

Alexander Medvedev ousted from Gazprom Export top post

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The replacement of Gazprom Export head Alexander Medvedev, who stood as one of the highest-ranking officials at the Russian natural gas giant, has stirred much discussion in the sector.

Medvedev, who, until recently, held the director-general post at Gazprom Export, a position entailing business dealings with the corporation’s international clientele, including DEPA, Greece’s public gas company, is considered as being the key figure behind tough seven-month negotiations between DEPA and Gazprom for a reduction of natural gas prices.

The ousted executive has been replaced by Elena Burmistrova, who assumes her new role having previously served as Medvedev’s assistant, specializing in the LNG market. Burmistrova has been given considerable credit as playing an instrumental role in a recent 400-million dollar deal struck by the Russian firm in China. This deal was regarded as a response by Russia to the pressure being applied by the west over the ongoing Ukraine conflict.

Medvedev, who headed Gazprom Export for 12 years, has remained at the firm with a managerial committee position.

Commenting on the development, Gazprom CEO Alexei Miller described it as being part of “ambitious company plans for the international markets that require new structural and functional decisions.”

The change of leadership at Gazprom Export carries Greek implications as Medvedev is president at Greek-Russian firm Prometheus Gas, a 50-50 venture operated by the Copelouzos Group and Gazprom Export.

Pundits believe Medvedev’s replacement is not connected to recent comments made in Athens by the director-general of Russia’s National Energy Security Fund, Konstantin Simonov, who admitted that a price-related issue did exist in Greece and that Russia could be more flexible and offer greater discounts. In his remarks, the high-ranked official also said that natural gas price levels in Greece were being inflated by taxes as well as commission earnings of middlemen.

Natural gas: Greek-European price gap widens despite deal with Gazprom

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The cost of natural gas in Greece may have been reduced following a deal reached with Gazprom for a 15% discount, but the price gap dividing the country from the rest of Europe remains wide.

The pricing formulae linked to the deal reached with Gazprom has yet to be implemented, subsequently leaving levels of petrol and other petroleum products unaffected.

Following the Gazprom deal, it had been anticipated that petrol prices would fall, prompting a further reduction in natural gas prices for the Greek market. However, these expectations failed to be as a result of the geopolitical developments linked with Ukraine and Iraq that have prompted considerable pressure on the price of petrol, which in turn, has influenced the price of natural gas in Greece.

On the contrary, consumers in central and northern Europe have benefited from renegotiations carried out with Russia, leading to price reductions of petrol by as much as 40%. This fall has also had an impact on the price of natural gas.

At present, natural gas price levels in central and northern Europe – following the renegotiations – are as much as 40% lower than the current price of natural gas supplied to Greece.