Further 15% electricity rise in January, unpaid bills a threat

The continuing rise of natural gas prices, prompting higher electricity prices around Europe as Russia holds back on full supply to the continent over its Nord Stream 2 certification dispute with the EU and the European Commission appears to have run out of possible remedies, threatens to push electricity prices even higher in January, by as much as 15 percent.

Any government support through energy subsidies seems futile under these continually worsening market conditions.

A typical household consumer who was charged a tariff rate of 24.5 cents per KWh in December will, under the current conditions, face a tariff level of 28.4 cents in January, a 16 percent increase.

At the Greek energy exchange, wholesale electricity prices yesterday settled at an exorbitant level just short of 416 euros per MWh, after peaking at 542 euros per MWh for an hour, a rise prompted by Monday’s wholesale natural gas price of 146 euros per MWh.

The problem is affecting all of Europe, the energy price surge continuing around the continent. The EU has maintained a relatively passive stance despite Europe’s rising energy poverty. In Greece, the threat of a new round of unpaid receivables for suppliers is intensifying. This would be a destabilizing development for the market.

Government officials estimate that a wholesale natural gas price average of 70 euros per MWh in 2022, up from 20 euros per MWh in 2020, a year of lockdowns, would deprive the GDP of more than four billion euros. This figure could double if current conditions are sustained.

 

Energy crisis entering acute winter period, EU disjointed

The energy crisis’ greatest challenges lie ahead with energy exchange futures indicating a fiery period that will last at least three months, until March, followed by a very slow de-escalation in prices.

The problem is not just the exorbitant price levels experienced over the past few months, but the even higher prices anticipated over the next few months. January gas futures are approximately 50 percent over November levels.

A series of support measures announced for consumers in Greece by Prime Minister Kyriakos Mitsotakis over the weekend would normally ease some of the strain, but, given the upward trajectory in prices, this support will soon be cancelled out.

In the absence of a uniform EU strategy to tackle the crisis, member states are being called upon to find solutions for themselves. European leaders failed to reach consensus at a summit meeting late last week.

EU gas reserves are at 62 percent capacity at the start of winter. The European Commission’s ongoing dispute with Russia over certification of the Nord Steam 2 gas pipeline, running direct to German via the North Sea, as well as the threat of a Russian invasion of Ukraine, are key geopolitical factors behind Europe’s energy crisis. Russia covers 60 percent of Europe’s natural gas needs.

 

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.

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.

 

Electricity prices could be driven further 13% higher in December

Latest complications in the licensing procedure for the Nord Stream 2 gas pipeline running directly from Russia to Germany through the North Sea, as well as the EU’s deteriorated ties ties with Belarus, key transit territory for Russian gas entering the EU via Poland, appear set to push electricity price levels even higher in coming weeks.

Wholesale electricity in Greece averaged a price of 221 euros per MWh in the first half of November, up from 198 euros per MWh for October, overall.

If current conditions do not improve, suppliers estimate that retail electricity prices will reach nearly 300 euros per MWh in December, up 13 percent from the current November level of 265 euros per MWh.

Market players are being pushed to the edge. Some suppliers are waging survival battles, others are seeking to appease unsettled customers through campaigns offering energy-efficiency tips, while others are seeing their market strategies overrun by the continual flow of unfavorable developments.

Greek government officials are also jittery, realizing that household electricity subsidies of 39 euros per month offered for November and December for the first 300 KWh of consumption will not be enough.

 

 

Solid trader interest for LNG terminal slots despite crisis-related concerns

Demand is high for LNG slots at the Revythoussa terminal in 2022, made available through ongoing gas grid operator DESFA auctions, attracting strong interest from importers, despite concerns that the current energy crisis and difficulty to make price projections could dampen interest at these sessions, ending November 2 with a third and final auction.

The level of interest for LNG slots at DESFA’s Revythoussa terminal, on the islet just off Athens, is significant for the gas grid operator as well as power grid operator IPTO, as it helps shape the country’s energy security picture, especially for the challenging colder months, right up until the end of April in 2022.

A total of 2.5 billion cubic meters of LNG is expected to be needed in 2022 to satisfy the Greek market’s needs, according to sources.

Besides LNG, overall natural gas consumption in the Greek market next year is expected to reach 7.5 billion cubic meters.

Of this total, 5 billion cubic meters is expected to be supplied through pipeline gas imports, 3.5 million cubic meters coming from Russia, one billion cubic meters from Azerbaijan, through the TAP route, and 0.5 billion cubic meters from Turkey’s Botas.

 

 

 

EU leaders hesitate to take energy crisis action

EU leaders, disunited by conflicting interests, have hesitated to take any decisive energy crisis action at a summit of the 27 member states in Brussels, whose agenda includes the energy crisis. The leaders have opted to defer the issue until October 26, when EU energy ministers are scheduled to meet.

The EU’s member states of the south, short on storage infrastructure for green energy, are pressing for solutions to the energy crisis, while Europe’s north, better equipped to weather the storm, sees no real need for urgent action, despite the exorbitant energy price levels.

Industrial producers in the south, consequently disadvantaged and under greater pressure, are calling for intervention.

Russian president Vladimir Putin, pressuring for EU approval of the new Nord Stream 2 pipeline running to Germany via the North Sea, yesterday informed that gas supply to Europe could only be increased via this new pipeline route. Russia’s reduced supply is a key factor of the current energy crisis.

In Greece, the only possible solution for the short term would entail reducing fuel taxes, an option the government may adopt to soften the effects of the energy crisis, which, if left unattended, will lead to political repercussions.

As for longer term solutions, EU member states could agree, at the upcoming meeting of energy ministers, on the prospect of placing joint natural gas orders as protection against future crises. This would send a signal to markets that Europe possesses the political will to stand up to crisis situations, which could prompt some degree of price de-escalation.

Ministry official to hold strategic energy talks in Washington

Strategic opportunities emerging as a result of the Greek energy market’s ongoing transformation as well as the geopolitical significance of certain major projects, such as the Southern Gas Corridor, intended to diversify Europe’s gas sources and reduce the continent’s dependency on Russian gas, will be discussed by the energy ministry’s secretary-general Alexandra Sdoukou with American officials during her visit to Washington this week.

The Greek official, travelling to Washington today, plans to hold discussions covering the entire range of energy policy issues, from new RES technologies, hydrogen, the energy mix, as well as investments of geopolitical nature, including Balkan gas interconnections, the Alexandroupoli FSRU project in northeastern Greece, the underground gas storage (UGS) facility at the almost depleted gas field of South Kavala in the Aegean Sea’s north, as well as Greece’s role as a regional hub for energy source and route diversification.

Inevitably, the talks will also cover the current energy crisis troubling the world, especially Europe.

US Secretary of Energy Jennifer Granholm has directly criticized Moscow for deliberately subduing its gas supply to Europe in order to manipulate the energy market and pressure Brussels for approval of Nord Stream 2, an underwater gas pipeline directly connecting Russia with Germany through the North Sea.

Certain countries that stand to lose significant gas transit revenues oppose this new pipeline. It has also generated years of conflict between Berlin and Washington. Nord Steam 2 has almost been completed and is now undergoing trial runs.

Europe is heavily dependent on Russian gas, while some countries in central and eastern Europe, including the Balkans, are almost entirely dependent. The US is seeking the greatest possible share for supply of American LNG.

More energy price hikes feared as Europe searches for solution

Another round of record-breaking energy price increases throughout the continent could be looming. Europe is primarily placing its hopes on an increase of Russian gas supply, which would greatly ease the ongoing price ascent, but, for the time being, energy prices are continuing to rise at unfathomable rates.

Under the currently alarming conditions, shaped by an unfavorable combination of international market trends, including main supplier Russia’s subdued gas supply to Europe, Dutch TTF hub futures for November contracts are set to once again reach levels of 160 euros per MWh. This would skyrocket wholesale electricity prices to 350 euros per MWh, a 70 percent increase on the current record level of 204 euros per MWh and 300 percent higher than a year ago.

Russia has cut back on its gas supply to Europe as a means of pressuring the EU for approval of its Nord Stream 2 gas pipeline, running through the North Sea to Germany. The project is opposed by some EU members as they would lose significant sums in transit revenues.

The EU has been left without a Plan B and greatly dependent on Russian gas supply for a number of reasons, including a gas reserve drop in many countries due to the summer’s prolonged heatwave, as well as increased LNG demand in Asia.

In Greece, roughly 50 percent of the country’s electricity generation is produced by natural gas-fired power stations, meaning gas price levels directly impact electricity prices.

 

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.

Oil prices rise sharply, time running out for oil-rich countries

Petroleum-rich countries, seeking to end the reliance of their economies on oil trade through investments in new domains as they prepare for the diminished role of fossil fuels in the new era, currently have a golden opportunity to boost output and make the most of elevated oil prices, especially if other producers remain disciplined in accordance with OPEC rules.

The UAE, a pertinent case, have invested heavily over the past decade in facilities boosting output, the objective being to maximize oil-export revenues for the financing of the country’s economic transition.

However, OPEC will first need to accept this increased production ability before the UAE can implement it. This is a tricky issue as if OPEC accepts the UAE plan, the cartel will then also face similar-minded requests by other members, which would hammer oil prices to low levels.

The UAE seem adamant on their national plan, considering it a matter of existential significance. Saudi Arabia and Russia face a difficult mission as the two countries will need to quell the UAE intention without instigating its withdrawal from OPEC.

In general, oil producers are now striving to sell as much oil as they can, for as long as they can, taking into account that the global decarbonization effort is gaining momentum.

North Macedonia energy business opportunities for local players

Greek companies stand a great chance of gaining further presence in North Macedonia’s energy market through participation in projects and investments promising to contribute to the country’s diversification of energy sources and capture a bigger energy-mix share for green energy, the neighboring country’s Prime Minister Zoran Zaev made clear during comments in Athens yesterday.

North Macedonia appears determined to reduce its dependence on Russian fossil fuels and also cut back on carbon emissions, objectives offering investment opportunities for Greek energy groups, currently eyeing the neighboring market as part of plans to increase their business interests abroad.

The North Macedonian leader said yesterday that an agreement concerning the relaunch of Hellenic Petroleum ELPE’s Thessaloniki-Skopje oil pipeline is nearing finalization.

“The idea is to have reached an agreement with them by the end of May so that this important pipeline can begin operating,” Zaev remarked.

The oil pipeline’s reopening would be combined with the conversion of ELPE’s North Macedonian OKTA refinery into a petroleum products distribution hub covering the western Balkan region.

ELPE currently operates 27 petrol stations in North Macedonia through its OKTA subsidiary. Also active in Bulgaria, Serbia, Montenegro, the Greek petroleum group operates over 200 petrol stations in the wider region.

Zaev added that North Macedonia is involved in negotiations with a Greek company, presumed to be Mytilineos, for the development of a natural gas-fueled power station in the capital, Skopje. These talks, however, still appear to be at an early stage.

Also this week, Greek energy minister Kostas Skrekas told participants of the Delphi Economic Forum that a bilateral agreement for a Greek-North Macedonian gas pipeline interconnection is virtually ready and awaiting the approval of European authorities.

For North Macedonia, this gas pipeline project would end Russia’s monopoly in the country’s gas market, enabling more competitive gas prices and reinforced supply security, while for Greece, the gas pipeline’s development would represent a further step in the country’s objective to transform into a regional gas hub.

North Macedonia pipeline market test by September

Gas grid operator DESFA has begun preparations with the energy ministry to stage a market test by September for the Greek segment of a gas pipeline interconnector to run to North Macedonia.

RAE, the Regulatory Authority for Energy, requested a market test, to ensure sufficient capacity reservation by users, for the project when it endorsed DESFA’s development plan covering 2017 to 2026.

North Macedonian authorities are also working on preparations for the project’s development. Just days ago, the country’s transport and communications minister Blagoj Bocvarski noted that all will be ready by the end of 2021 for the announcement of a tender concerning the construction of the project’s North Macedonian segment.

All licensing requirements will have been resolved earlier, by the middle of this year, Bocvarski added.

DESFA and its North Macedonian counterpart MER signed a Memorandum of Understanding in October, 2016 for the pipeline project.

Its Greek segment, budgeted at 51.4 million euros, will cover a 57-km distance, beginning from Thessaloniki’s Nea Mesimvria area.

The pipeline will be linked to Greece’s prospective Alexandroupoli FSRU in the northeast. North Macedonia currently fully depends on Russian gas supply through a Balkan pipeline.

Gas market competition intensifies, TAP lowering prices

Competition has intensified in the country’s wholesale gas market at a time of changing conditions and negotiations for 2021 deals between importers and major-scale consumers, namely electricity producers and industrial enterprises.

Many gas supply contracts expired at the end of 2020, requiring a large number of players to renegotiate deals. Some of these big consumers have already reached new agreements with gas wholesalers.

Market conditions have changed considerably compared to a year earlier. Supply of Azeri gas through the new TAP route has already begun to Greece as well as Bulgaria, increasing overall supply, which has obliged, and permitted, gas utility DEPA to pursue a more aggressive pricing policy as the company pushes to absorb quantities it has committed to through clauses in existing contracts.

Also, the TAP-related increase of gas supply to Bulgaria, combined with this country’s inflow of Russian gas through oil-indexed price agreements, currently relatively cheaper, is now depriving Greek wholesale gas companies of entry into a neighboring market that was available for trading activity last year.

Furthermore, conditions have also been impacted by a competition committee decision no longer requiring DEPA to stage gas auctions to make available a share of its gas orders to rival traders. This measure was introduced and maintained to help liberalize Greece’s gas market.

The new conditions are pushing Greek traders towards more competitive pricing policies. They appear to have acknowledged that their profit margins will be narrower in 2021.

DEPA, helped by the fact that a sizeable proportion of its gas purchases is oil-indexed, is said to be playing a dominant role in the ongoing negotiations for new contracts with customers.

It should be pointed out that, unlike rival gas importers such as Mytilineos, Elpedison and Heron, all benefitting through self-consumption of a large part of their gas orders for gas-fired power stations they operate, DEPA does not self-consume.

Prometheus Gas, a member of the Copelouzos group, remains a formidable player, while the power utility PPC and petroleum company Motor Oil are less influential in the wholesale gas market.

Higher LNG prices, compared to pipeline gas, will decrease demand for LNG this year and weaken the interest of traders for LNG supply through gas grid operator DESFA’s Revythoussa terminal on the islet just off Athens. Last year, this facility was a hot spot of trading activity as a result of lower-priced LNG.

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.

 

TAP’s commercial launch now on the final stretch

The Trans Adriatic Pipeline (TAP) project, to enable the delivery of Caspian gas to destinations throughout southeastern, central and western Europe, is almost ready for its commercial launch, four years after construction began and 17 years after its first feasibility study was conducted.

The project, running from the Shah Deniz gas field in Azerbaijan, will represent the EU’s main alternative route for natural gas, greatly contributing to the end of the continent’s dependence on Russian gas, supply security and intensified competition.

The TAP project will begin operating at a capacity of 10 billion cubic meters, annually.

Greece was the first of the project’s host countries to complete its segment of construction work, a 550-km stretch across northern Greece, from Evros’ Kipoi area in the northeast to Ieropigi in the Kastoria province, at the Greek-Albanian border.

Just days ago, Greece’s energy ministry approved the operation of the project’s Greek segment, running from Evros to Rodopi, Xanthi, Kavala, Drama, Serres, Thessaloniki, Kilkis, Pella, Imathia, Florina, Kozani and Kastroria.

Authorities of the project’s two other host nations, Albania and Italy, will soon grant their respective operating permits, sources informed.

The project’s commercial launch is expected to take place close to the final quarter this year, the energy ministry has announced.

The Greek and Italian gas grid operators, DESFA and Snam, respectively, will need to prepare their national grids so that natural gas quantities can reach consumers via TAP, sources added.

 

Bulgaria gas pipeline explosion highlights need for local projects

Yesterday’s Bulgarian gas pipeline explosion in Bulgaria, prompting a supply cut into Greece from a northern route, yet again highlights how vital it is for Greece to develop two gas infrastructure project plans in Alexandroupoli, northeastern Greece, and Kavala, in the north.

The explosion of this pipeline, carrying Russian gas into Greece via Bulgaria, has not affected Greece’s energy security as supply from the alternate Kipoi route remains uninterrupted, while the contribution of high LNG reserves at the Revythoussa terminal, just off Athens, has also been crucially important.

However, a Greek energy crisis could have resulted if this accident were more serious, or if the Revythoussa facility did not exist, or, worse still, the accident coincided with even greater Greek-Turkish tensions than at present, which could have meant a cut in gas supply from Turkey, hosting one of Greece’s key gas import corridors.

The intensifying geopolitical instability of the wider region, which includes Turkey, an extremely troubling neighbor, makes imperative the existence of sufficient gas storage facilities to safeguard Greece’s energy security. Despite the precarious conditions in the region, Greece remains one of the European countries without sufficient energy storage infrastructure.

In addition to the existing Revythoussa LNG terminal, Greece’s infrastructure definitely needs to be reinforced by projects such as the Alexandroupoli FSRU and an underground gas storage facility at a virtually depleted offshore deposit south of Kavala.

 

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.

Fuel price plunge pressuring refineries, opportunities seen

The plunge of international crude oil prices is impacting Greek refineries and local fuel trade, while, worse still, market forecasts are impossible to make, even for the short term.

Hellenic Petroleum (ELPE) and Motor Oil, Greece’s two refinery groups, are being tested by the fall of Brent prices to levels of around 30 dollars per barrel. Highlighting this challenge, unleaded 95 octane fuel prices have dropped to less than 1,000 euros per cubic meter (including surcharges before VAT) for the first time in many years.

This represents a drop of more than 100 euros compared to prices on March 9, dubbed “Black Monday” as it was the worst day in markets since the financial crisis, a result of the outbreak of the oil price and output level war between Russia and Saudi Arabia, along with the coronavirus spread’s impact on demand.

The drop in prices is seen continuing. Domestic fuel demand is falling as a result of the Greek government’s broadened enforcement of restrictive measures aiming to contain the coronavirus spread. Local transportation needs have subsequently dropped dramatically, while the only other viable option left for Greek refineries, exports, has been canceled out by plunging fuel demand internationally. Borders have closed and airlines are limiting flights.

The cost of fuel stocks, purchased at far higher prices, is a big concern for both ELPE and Motor Oil. This cost, however, can be partially offset by opportunities currently available for lower-cost production.

On a more positive note, both refineries reduced their loan servicing costs prior to the crisis. This is particularly so for ELPE as the petroleum group was pressured by high borrowing costs. Motor Oil has traditionally pursued a more conservative borrowing policy.

Both refineries will need to take extremely cautious steps amid these highly unpredictable market conditions, analysts agree.

Lower-cost oil, gas an obstacle for RES growth, electric cars

Lower-cost oil and gas, as well as solar module supply chain irregularities caused by the coronovarirus spread in China, the world’s dominant supplier of solar energy systems, have emerged as obstacles for RES sector growth and investments.

Numerous solar energy projects around the world are being delayed or postponed as a result of the solar module supply problems in China.

The recent plunge of oil and gas prices, prompted by the impact of the coronavirus spread on economies and a simultaneous oil-price war between Russia and Saudi Arabia, has suddenly made RES investments less competitive against conventional technologies in terms of electricity generation, energy efficiency or electrification of sectors such as transportation or shipping.

The duration of lower oil prices remains unknown.

Natural gas prices have fallen as a result of idle LNG shipments in China and forecasts for weaker demand worldwide.

Under the current conditions, market forces will turn against green energy technologies, which had just begun establishing themselves as competitive options against conventional technologies.

Questions are also being raised about the growth prospects of the electric vehicle market, still at an embryonic stage.

 

Lower-cost gas may save PPC an estimated €100m this year

The sharp drop in energy product prices, pressured by the coronavirus outbreak and an oil price war between Russia and Saudi Arabia, promises major and unexpected financial relief for power utility PPC.

The plunge of gas prices, alone, should benefit the Greek power utility by an estimated 100 million euros this year – assuming this drop is not ephemeral.

In the first half of 2019, PPC’s total purchasing cost for natural gas reached 222.5 million euros, a 57.1 percent increase.

In the liquid fuels category, PPC’s purchase expenses were also elevated, reaching 319.7 million euros, as a result of higher prices paid for mazut and diesel used by the utility at power stations on non-interconnected islands. To the delight of PPC, mazut and diesel prices are also tumbling.

Electricity tariff hikes made by PPC last September as well as a revised payback plan offering consumers greater incentive to service electricity-bill arrears through monthly installments are both producing favorable results.

A series of memorandums of cooperation, such as an agreement signed this week with Germany’s RWE, all promising dynamic penetration into Greece’s renewable energy market, offer further potential for PPC.

However, the power utility still faces an uphill struggle along its road to recovery. PPC’s financial results for 2019 will be announced in April.

 

Natural gas, LNG, CO2 right, wholesale power prices down

Besides lower oil prices in international markets over the past few days as a result of the coronavirus spread and price war between Saudi Arabia and Russia, energy commodities across the board are under great pressure, which has led to price reductions for natural gas, CO2 emission rights and electricity.

Lower oil and gas prices are offering relief for the economy and enterprises. However, there are two sides to this story, positive and negative. On the one hand, the price drops are creating opportunities for suppliers and consumers, while, on the other, natural gas futures indicate a decline until the end of the third quarter this year, meaning markets anticipate a downward trajectory in Chinese consumption and no sign of an economic rebound until at least September.

Prices at the Dutch trading platform TTF, a key index for LNG, slid to a three-month low on Monday, registering 8.627 dollars per MMBTU, before edging up to 8.993 dollars per MMBTU yesterday. This index has fallen 39.4 percent since the end of December’s three-month peak of 14.2 dollars per MMBTU.

Besides shaping LNG prices, according to new pricing formulas adopted at Gazprom, the TTF also greatly influences the rise of Russian pipeline gas.

CO2 emission right prices have fallen by 13.6 percent between December and early February, from 26.74 euros per ton to 23.11 euros per ton. A slight rise has been registered this week, to 23.25 euros per ton on Monday and 24.07 euros per ton on Tuesday. Lower prices on this front are favorable for lignite-fired power stations as well as energy-intensive industries.

Prices have also fallen in Greece’s wholesale electricity market. In the day-ahead market, the System Marginal Price (SMP) fell from 49.2 euros per MWh on Friday to 41.42 euros per MWh on Monday before edging up to 43.12 euros per MWh yesterday. A rise to 50.44 euros per MWh is expected today.

 

PPC expects major LNG tender turnout for 2.7 million MWh

Gas suppliers are expected to turn up in numbers for a power utility PPC tender expiring today with offers to provide three LNG shipments needed by the utility between March and May. PPC plans to purchase a total of 2.66 million MWh through this tender.

Between nine and ten gas suppliers, including major Greek and foreign LNG players, will submit offers, PPC has been informed, according to energypress sources.

Besides leading Greek gas traders, the procedure is expected to attract companies such as Rosneft, Eni Trading, Gunvor, Glencore, Shell, Cheniere and Tellurian.

All participants were required to sign Master Sale Agreements, committing them to their offers without any revisions.

PPC wants a first LNG shipment of 900,000 MWh on March 24, a second delivery of 815,000 MWh on April 21 and a third of 950,000 MWh on May 20.

Today’s tender confirms a change of strategy by PPC, searching markets around the world, from Asia to Qatar and the USA to Russia, for low-priced LNG.

The continual drop in LNG prices promises major cost savings for a company the size of PPC, requiring 1.35 bcm per year.

 

East Med, IGB, Alexandroupoli FSRU upgrading Greek role

Three major energy projects of international dimension, the East Med and IGB natural gas pipelines, as well as the Alexandroupoli FSRU (Floating Storage Regasification Unit), all once seeming distant prospects, are now gradually turning into a close reality.

Their development promise to transform Greece into an energy hub and upgrade the country’s geopolitical standing in the fragile southeast Mediterranean and Balkan regions.

The leaders of Greece, Cyprus and Israel are set to sign a trilateral agreement for East Med, to carry natural gas to Europe via these countries and Italy, at a meeting in Athens on January 2. The transmission capacity of this project, measuring 2,000 km, will range between 10 to 20 billion cubic meters. Italy is also expected to eventually join the partnership for this project.

Its development prospects have been further propelled by a decision from Poseidon, a 50-50 joint venture involving Greek gas utility DEPA and Italy’s Edison, to accelerate the completion of all pending issues needed for the project’s maturity.

The trilateral agreement promises to further bolster ties between Greece, Cyprus and Israel amid a period of heightened regional intensity. Turkish provocation has escalated. An East Med Gas Forum to take place in Cairo January 15 and 16 with participation from the energy ministers of Greece, Cyprus, Israel, Egypt, Jordan and the Palestinian Authority should help expand the alliance.

The Greek-Bulgarian IGB gas pipeline is expected to have begun operating far sooner, in July, 2021. DEPA holds a 25 percent stake in ICGB, the consortium overseeing the IGB project, whose initial capacity will be 3 bcm. Through this pipeline, DEPA plans to supply the Bulgarian market with Azeri gas hailing from the TAP route, and, as a result, break, for the first time, the existing Russian monopoly in the neighboring market.

The IGB will not only be fed by TAP, running westwards across northern Greece for Azeri supply to Europe. The Alexandroupoli FSRU to be anchored off coastal Alexandroupoli, northeastern Greece, will also feed the IGB, enabling an alternative gas supply source for Bulgaria, other east European countries, and Ukraine.

DEPA is also involved in this project. The gas utility has just decided to acquire a 20 percent stake in Gastrade, the company developing the FSRU project in Alexandroupoli.

Leading Washington officials have expressed their support for the East Med, IGB and Alexandroupoli FSRU projects. Prime Minister Kyriakos Mitsotakis will be seeking confirmation of this backing on an upcoming official trip to the US from President Donald Trump himself.

 

Officials to examine domestic gas supply security, Ukraine route a concern

The indefinite outcome of ongoing negotiations between the EU and Russia for a renewal of a gas supply agreement facilitating supply to the continent via Ukraine will be a major concern for Greek energy market officials at a meeting scheduled for Monday to examine domestic energy security matters for the forthcoming winter, including alternatives in the case of emergencies.

An existing gas supply agreement between the EU and Russia expires on December 31. It remains unclear when a new agreement could be reached and what terms it could carry. Talks between Brussels and Moscow have been difficult so far.

Officials representing Greece’s energy ministry, RAE, the Regulatory Authority for Energy, gas grid operator DESFA, power grid operator IPTO and the Greek energy exchange, amongst others, will participate in Monday’s meeting, at the RAE headquarters.

In a recent report, ENTSOG, the European Network of Transmission System Operators for Gas, tasked with facilitating and enhancing cooperation between national gas transmission system operators (TSOs) across Europe, pointed out two gas supply security concerns for Greece.

The country, along with central and other southeast European countries, would face problems if Russian supply via Ukraine were to be interrupted during high-demand periods.

Any disruption of LNG supply from Algeria, providing Greece with significant quantities, was also pointed out as a concern in the ENTSOG report.

The European Commission has requested all EU member states to provide respective gas-related energy security plans, given the uncertainty of the EU’s talks with Russia, so that Brussels may establish an overall picture.

Officials in Athens remain confident the Greek energy plan will effectively deal with gas needs in Greece this coming winter. An upgrade in the storage capacity of Greece’s Revythoussa LNG terminal close to Athens, as well as an increase in LNG imports, has helped reinforce this confidence.

 

 

Jetoil placed on the comeback trail by new owner Centracore

Bankruptcy-struck oil trading company Jetoil, now controlled by Austria’s Centracore and on the rebound, has reclaimed approximately 15 percent of the fuel-station network it controlled prior to the rescue plan.

Jetoil now operates 83 fuel stations (DODO, dealer-owned, dealer-operated), primarily in northern Greece, as well as the Thessaly, Epirus and other mainland regions.

At the peak of Jetoil’s crisis in the summer of 2016 – when founder Kyriakos Mamidakis committed suicide, aged 84, not long after the company had filed for bankruptcy – the company’s retail network had shrunk to just 34 outlets.

A Jetoil rescue plan was approved Iast year. Strategic investor Centracore agreed to take on the company’s liabilities following a partial haircut.

Besides a purchase price of 107 million euros, the new Jetoil shareholder has invested 10 million euros to upgrade the company’s storage facility in Kalohori, on the outskirts of Thessaloniki.

Jetoil has increased its sales in Greece and achieved significantly higher exports since its takeover. Total sales for the first financial year since Centracore’s entry reached 420 million euros generated by a trading volume of 350,000 metric tons.

In a year, the company has achieved 35 percent of its business plan’s target, set at one million metric tons of trading volume, or a 10 percent Greek market share, including exports.

The strategic investor, maintaining access to Russian refineries, has admitted the decision to invest in Greece was based on export potential to Balkan markets. Centracore obtained a Greek trading license in July, 2018.

Centracore is a Vienna-based trading company headed by Luxembourg’s UFG Europe Holding, holding an 80.1 percent share and comprised of private equity funds. Russian Petroleum company Rosneft holds the other 19.9 percent.

Balkans-focused energy forum on eve of Thessaloniki fair

Two key regional gas pipeline projects involving Greece and backed by the US, the Greek-Bulgarian IGB gas grid interconnection and a pipeline to link Greece and North Macedonia, will be at the center of attention in talks between energy minister Costis Hatzidakis and peers at the Southeast Europe Energy Forum in Thessaloniki on September 6, a day ahead of the opening of this year’s Thessaloniki International Fair.

Hatzidakis and the US Ambassador to Greece, Geoffrey R. Pyatt, will be key speakers at the forum, where speeches will also be delivered by the energy ministers of Bulgaria, Cyprus, Israel, North Macedonia, Romania and Serbia.

Besides the prospective gas pipeline from Greece to North Macedonia, the talks between Hatzidakis and his North Macedonian peer will also focus on an upgrade of the electricity grid interconnection linking the systems of the two countries, as well as an upcoming relaunch of the Okta oil pipeline, stretching from an ELPE (Hellenic Petroleum) facility in Thessaloniki to the company’s Okta refinery and storage facility in North Macedonia.

The gas pipeline is the most important project of the three as an interconnection of the Greek and North Macedonian gas systems does not exist.

The Greek-Bulgarian IGB gas interconnection, along with TAP, to carry Azeri natural gas through northern Greece, Albania and across the Adriatic Sea to central Europe via Italy, are Greece’s two most significant international energy projects.

They promise to further diversify Europe’s energy sources and weaken Russia’s dominance in the region.

Meanwhile, Russia is promoting its own energy and geopolitical interests in the region. Last month, Greece was excluded from Turkish Stream, a Russian-Turkish gas pipeline plan whose second segment is now planned to run through Bulgaria, not Greece.

The first segment of this gas pipeline project is planned to supply Russian natural gas to the Turkish market and the second to Europe’s south and southeast.

 

New effort for East Med agreement at Athens energy summit

Greek gas utility DEPA and Italian energy giant Edison, collaborating on a plan to develop the East Med pipeline, envisioned to link the Greek, Cypriot and Israeli natural gas systems, are looking to take a crucial technical step ahead of construction.

Their YAFA Poseidon joint venture – spearheading the ambitious project, a 1,900-km pipeline stretch with an investment cost of between 6 and 7 billion euros – is gearing up for the launch of FEED (Front-End Engineering Design), environmental and detailed underwater research studies.

The European Commission has approved 34.5 million euros from the EU’s Connecting Europe Facility (CEF), a funding instrument, for these studies. The CEF amount will cover half the cost of the aforementioned preliminary studies, which will push the plan ahead to a mature stage.

The pipeline project is planned to carry southeast Mediterranean natural gas, primarily deposits from Cyprus’ recently discovered “Aphrodite” gas field and the Israeli-controlled block “Leviathan”, along a route stretching from Israel to Europe.

An agreement between Greece, Cyprus, Israel and Italy, where the pipeline is planned to conclude, is still needed.

East Med plans have been at a standstill ever since the current Italian government announced it was stalling the project.

According to sources, the Greek, Cypriot and Israeli energy ministers will seek to restart procedures and also send out a message of encouragement to the Italian government when they meet at an Athens energy summit tomorrow. US Assistant Secretary Francis Fannon will also participate.

East Med, still at a theoretical stage, promises geostrategic might for Greece, Cyprus and Israel, as well as the USA, on southeast Mediterranean energy matters, especially against Turkey’s opposition to hydrocarbon exploration within Cyprus’ Exclusive Economic Zone (EEZ).

The pipeline plan also promises to break Russia’s dominance of gas supply to the EU.

 

 

Greek-Cypriot-Israeli energy summit highlights US interest

Washington’s supportive interest in the energy partnership between Greece, Cyprus and Israel has grown, driven by the prospect of hydrocarbon exploration in the southeast Mediterranean region as well as the East Med natural gas pipeline, planned to carry Cypriot, Israeli and, possibly, Egyptian natural gas to the EU via Greece and Italy.

Highlighting this interest, an upcoming Athens energy summit, scheduled to take place on August 6 and 7, comes as a US initiative, energypress sources informed.

It will follow a meeting just days ago, at the East Med Gas Forum in Egypt, that brought together Greek energy minister Costis Hatzidakis with his Cypriot and Israeli peers, Giorgos Lakkotrypis and Yuval Steinitz, respectively. In addition, Greek Prime Minister Kyriakos Mitsotakis recently met with Cypriot leader Nicos Anastasiades.

US Assistant Secretary Francis Fannon, head of the Bureau of Energy Sources, will also take part in the Athens energy summit. Fannon is scheduled to meet with Hatzidakis, Greece’s energy minister, and the country’s deputy foreign minister Konstantinos Fragogiannis on the eve of the event.

The summit highlights the US-fostered partnership between Greece, Cyprus and Israel, united against escalating Turkish tension concerning offshore hydrocarbon exploration plans within Cyprus’ Exclusive Economic Zone (EEZ).

The event’s participants are also expected to discuss the East Med pipeline. An agreement between the three countries and Italy remains pending. Last spring, Italian Prime Minister Giuseppe Conte claimed he sees no benefits for Italy in the project, effectively bringing the country’s effort in the matter to a standstill.

Washington openly supports this natural gas pipeline as it promises to establish an alternative supply route to Europe that would restrict Moscow’s energy dominance on the continent, through Gazprom.

Sideline efforts are being made to alter Italy’s negative stance, sources informed. A message could be projected to Rome through the imminent Athens event.