DESFA system overload action premature, importers contend

DESFA, Greece’s natural gas grid operator, has called for an emergency meeting today to update natural gas market authorities on the abnormal current market conditions, needed adjustments and consequences of last week’s significant reduction in gas consumption levels. The reduced demand was caused by a series of factors.

The recent need to reduce reservoir levels and place emphasis on hydropower facility generation as a result of increased rainfall as well as increased RES production are the two main reasons that have led to lower-than-expected demand for natural gas at gas-fueled power stations. Also, higher temperatures have lowered consumer demand at the EPA gas supply companies.

As a result of all these factors, the country’s natural gas infrastructure is now experiencing an overload, according to DESFA. Subsequently, the operator has ordered gas importers to reduce their inflows at the country’s supply points.

The country’s importers – DEPA (Public Gas Corporation), Promitheas and M&M Gas – have raised objections as they contend pipeline capacities are still well below maximum levels, sources informed.

The country’s natural gas pipeline infrastructure is currently holding 25.5 million cubic meters, well under the maximum level of 45 million cubic meters. Even so, DESFA has called for emergency action.

Natural gas importers are likely to file complaints to RAE, the Regulatory Authority for Energy, over system overload penalties imposed by DESFA, which, they contend, has acted prematurely.


Major battle seen for liberalized gas market in 2018

The natural gas retail market’s liberalization, a new reality in Greece that has arrived along with the New Year as a follow-up to the wholesale gas market’s opening, promises to lead to major changes.

Combined electricity-and-gas packages are already being offered by retailers in a local energy market whose natural gas sales have grown from 2.9 billion cubic metres in 2015 to 5 billion cubic meters in 2017.

The natural gas market is expected to gain further impetus as a result of the electricity market’s liberalization. Numerous gas market retailers, besides EPA Attiki, covering wider Athens, and Zenith, covering Thessaloniki and Thessaly, are examining the prospect of offering combined electricity-and-gas packages.

The main power utility PPC has hired a consultant to help prepare its entry into the natural gas market, while major independent electricity suppliers have already launched campaigns for gas supply. Also, DEPA, the public gas corporation, is considering entering the electricity market, either alone or along with a partner.

As of 2018, independent gas suppliers will seek to further bolster their presence in a market traditionally dominated by DEPA.

The degree of DEPA’s future retail presence in the EPA supply companies serving wider Athens, Thessaloniki and Thessaly, to be determined by ongoing negotiations between the shareholders involved in these ventures, remains to be seen.

The government appears to favor DEPA’s withdrawal from EPA Thessaly-Thessaloniki and continued presence in EPA Attiki. DEPA currently holds 51 percent stakes in these ventures. Shell holds a 49 percent stake in EPA Attiki and ENI a 49 percent stake in EPA Thessaly-Thessaloniki. Shell appears to want to withdraw.

EPA Attiki and Zenith, covering Thessaloniki and Thessaly, have both expressed an interest to broaden their geographic reach.

According to data released for 2015, the retail natural gas market in wider Athens, Thessaly and Thessaloniki exceeded 293 million euros. EPA Thessaly-Thessaloniki posted a pretax profit of 45 million euros and EPA Attiki a pretax profit of 30.1 million euros, according to this data.

As for Greece’s wholesale natural gas market, DEPA, until recently, has stood as the undisputed dominant player owing to its overwhelming control of imports. In 2016, DEPA’s natural gas imports reached 42.7 million MWh, from 44.5 million MWh in total, a 96 percent share.

However, this picture began changing in 2017, beginning with Prometheus Gas, a joint venture of the Copelouzos Group and Gazprom Export, whose imports for the year reached one billion cubic meters, or 20 percent of the 5 billion cubic meter total. These amounts were imported from the gas pipeline at Sidirokastro, via Bulgaria.

According to sources, Prometheus Gas has already signed contracts for a greater amount in 2018. Clients include PPC, which has placed orders for its natural gas-fueled power plants.

M&M, a joint venture involving Motor Oil Hellas and the Mytilineos Group, has also made imports.

In recent comments to Reuters, Evangelos Mytilineos, chief executive of the Mytilineos Group, noted that the corporate group ranks as the country’s biggest natural gas consumer with a level of 1.5 billion cubic meters, adding that M&M Gas could soon start trading annual amounts of natural gas measuring around one billion cubic meters.

Despite the emergence of new players in Greece’s wholesale gas market, DEPA managed to increase its volume-based sales increase of 9 percent for 2017’s nine-month period, while its operating profit (EBITDA) rose by 32 percent to 223 million euros.


Increased gas trading activity at Sidirokastro entry point

The implementation of a Capacity Allocation Mechanism (CAM) at Greece’s gas entry point in Sidirokastro, on the Greek-Bulgarian border, has led to increased trading activity.

The mechanism is designed to facilitate gas transport and trading in the EU.

As a result, a greater number of importers and suppliers are now purchasing natural gas amounts at this border point. More specifically, three gas companies have imported gas amounts from the Sidirokastro gateway, whose capacity was fully covered until recently.

However, full implementation of an interconnection agreement, still encountering practical issues, is needed to further facilitate trade.

Besides DEPA, the Public Gas Corporation, two more firms, Promitheas (Copelouzos, Gazprom) and M&M (Mytilineos, Motor Oil Hellas) are now actively involved in gas imports. ELFE has also purchased gas amounts at the border. So, too, have a number of traders and industrial consumers, such as the energy firms Heron and Cedalion, as well as Yioula, Greece’s biggest glasswork industry, and Elval (Hellenic Aluminium Industry).

The increased activity is reshaping market shares. Promitheas currently holds approximately 20 percent of the gas import market, while M&M, supplying industrial consumers, has also gained a considerable share.

Increased import potential is also possible at Kipoi, the Greek gas system’s second-biggest entry point (to and from Turkey). Negotiations concerning the implementation of an interconnection agreement and CAM system at this entry point are now in progress.

Efforts have been made in the past to forge an opening towards the east. A big market, Turkey would offer major trading opportunities if obstacles are cleared.




M&M takes initiave to start importing gas from Bulgarian pipeline

M&M, a wholesale trading venture involving the Mytilineos Group and Motor Oil Hellas, has become the country’s first ever private-sector supplier to receive a natural gas order via a pipeline, six years after the same firm had also led the way in the LNG sector.

According to local media sources, M&M has begun importing small amounts of natural gas on a daily basis as of June 1 from a northern pipeline interconnection in Sidirokastro, on the Greek-Bulgarian border.

Company officials have neither confirmed nor denied the reports. Even so, the development is considered certain and has already become known amid industrial circles.

Independent natural gas suppliers have had the right to import natural gas via pipelines for a number of years but previous attempts had failed as the network operators on the Greek and Bulgarian sides of the border – DESFA and Bulgartransgaz, respectively – have not signed a needed interconnection agreement.

Although the agreement remains unsigned, DEPA, Greece’s Public Gas Corporation, is receiving natural gas from the Greek-Bulgarian interconnection, which has made it impossible for DESFA to continue using the “interconnection agreement is needed” argument to deprive independent suppliers of access to the pipeline.

DESFA had used a similar argument in 2009 to prevent M&M from receiving an LNG order delivered to the LNG terminal in Revythoussa, an islet close to Athens. M&M demanded compensation from DESFA.

European trade regulations at the time, as well as decisions delivered by RAE, the Regulatory Authority for Energy, specified that all LNG importers should be subject to the same terms as DEPA.

The latest developments in the country’s northeast are expected to swiften procedures leading to the signing of the required interconnection agreement between the Greek and Bulgarian operators.


ELPE, part of mission in Tehran, to sign NIOC deal today

Officials representing ELPE (Hellenic Petroleum) and NIOC, the state-run National Iranian Oil Company, are set to endorse a recent agreement reached between the two sides at a ceremony in Tehran today, marking the resumption of bilateral trade following the lifting, just weeks ago, of western-imposed sanctions on Iran.

A 70-member Greek delegation headed by Prime Minister Alexis Tsipras and energy minister Panos Skourletis, has arrived in Tehran to discuss prospective additional business deals over the coming days, including in energy.

Besides ELPE managing director Grigoris Stergioulis, the Greek delegation includes Theodoros Kitsakos, chief executive at DEPA, the Public Gas Corporation, and Panagiotis Kanellopoulos, chief executive of M&M Gas, a wholesale trading venture involving the Mytilineos Group and Motor Oil Hellas.

Unlike the ELPE boss, the DEPA and M&M Gas officials have not traveled to Iran to sign deals but to explore future possibilities. Iran boasts the world’s second largest quantity of natural gas desposits, following Russia.

Based on infrastructure plans, it is anticipated that Greece will be able to supply Turkey and fellow European countries between 10 billion and 20 billion cubic meters of natural gas annually by 2020.

For the time being, the ELPE-NIOC agreement is at the forefront of Greek-Iranian energy developments. Many of the deal’s details have already been disclosed in recent reports.

ELPE expects to cover between 20 to 30 percent of its daily crude needs through Iranian supply. The exact proportion remains to be announced.

The Greek refinery’s repayment of outstanding debt owed to NIOC as a result of banking restrictions prompted by the sanctions on Iran in 2011, estimated at 600 million euros, will be settled over a four-year period to expire in 2019.

Also, the Greek company will cover 50 percent of its debt owed to NIOC through the supply of an equivalent amount of finalized products. It is not yet clear whether these products will be sold directly by ELPE to NIOC or through traders.

In addition, a further 10 percent of the debt amount will be covered through engineering services to be offered to Iran by Asprofos, an ELPE subsidiary firm. The work may include refinery unit revamps.

Various other details, including the credit period’s duration, are expected to be settled at a meeting today between the ELPE and NIOC chiefs.

It remains to be seen whether Iranian officials will reiterate their interest to acquire an equity share of ELPE. Just weeks ago, Iran’s deputy oil minister Amir Hossein Zamaninia, speaking on Iranian state radio, noted Iran is keen to acquire an equity share of ELPE. At the time, ELPE sources responded by claiming that the issue had not been raised during talks with Zamaninia in Athens. Skourletis, Greece’s energy minister, backed these ELPE claims.

The Greek state holds a 35 percent stake in ELPE. It has been transferred to TAIPED, the State Privatization Fund. The Latsis group, which owns a 42.6 percent equity share of ELPE through Paneuropean Oil, has officially rejected any chance of selling its interests in ELPE.

Existing gas infrastructure must be better utilized, M&M chief tells

Until now, Greece’s goal of becoming a regional gas hub has been based on the prospect of developing new infrastructure projects but, in actual fact, the most important objective should be to better utilize existing facilities such as the Revythoussa LNG terminal on the islet just off Athens, being utilized at a level of 15 percent, and also to create appropriate conditions for a liberalized market in which consumers may have access to the supplier of their choice, Panagiotis Kanellopoulos, chief executive of M&M Gas, a wholesale trading venture involving the Mytilineos Group and Motor Oil Hellas, has stressed at the Athens Energy Forum.

Kanellopoulos pointed out that although conditions provided by both Greece and DEFSA, the gas grid operator, are ready to fulfill consumer needs for importing natural gas through pipelines from the country’s northern borders, the needed legal infrastructure for such an initiative does not exist in Bulgaria. The official added that a small section of pipeline infrastructure linking Bulgaria with Romania has yet to be constructed, depriving the region from access to central European markets.

The market will determine which new infrastructure projects are truly needed and sustainable, the M&M Gas chief told the energy event.

Both the Greek and regional Balkan market are small, but clever ways need to be found to utilize the exisiting infrastructure and increase their usefulness, Kanellopoulos noted.