Shell

RAE decision on natural gas tariffs expected this week

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RAE, the Regulatory Authority for Energy, is expected to announce its decision on new gas supply tariffs for 2017 within the current week. This news is crucial as it will determine whether ENI and Shell, holders of 49 percent stakes in three EPA gas supply companies covering the wider Athens area, Thesaloniki and Thessaly, will take legal action against the Greek State in response to premature ends of their regional monopolies.

If ENI and Shell deem the new gas supply tariffs as satisfactory then they will forget about the legal action they have contemplated taking. If not, then legal action by both can be expected. The two companies may also make one final attempt to gain compensation money.

RAE has already endorsed distribution tariffs and now needs to approve trading tariffs, which will enable Shell and ENI to assess the financial damage caused by the premature ends of their regional monopolies.

In 2001, Shell and ENI secured trading rights for 30 years in their respective markets. These arrangements were nullified as a result of bailout-required natural gas market reforms.

The recently replaced energy minister Panos Skourletis has made clear that the Greek State will not offer any compensation payments to Shell and ENI. His successor Giorgos Stathakis has obviously yet to examine the matter.

DEPA, the Public Gas Corporation, holds 51 percent stakes in all three EPA gas supply companies.

ENI, Shell on standby for crucial RAE tariff level decisions

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ENI and Shell, holders of 49 percent stakes in three EPA gas supply companies covering the wider Athens area, Thesaloniki and Thessaly, are on standby for a RAE (Regulatory Authority for Energy) decision concerning 2017 tariffs submitted for approval about a month ago.

Crucially, Shell, which holds a 49 percent stake in the company serving the wider Athens region, and ENI, holding 49 percent stakes in the Thessaly and Thessaloniki EPA supply companies, are expected to freeze compensation demands from the Greek State, for premature ends to their respective regional monopolies, if RAE approves tariff levels that are deemed satisfactory by Shell and ENI officials.

If the tariff levels approved are not considered satisfactory by Shell and ENI then legal action by the two firms cannot be ruled out.

RAE has already endorsed distribution tariffs and now needs to approve trading tariffs, which will enable Shell and ENI to assess the financial damage caused by the premature ends of ther regional monopolies.

In 2001, Shell and ENI secured trading rights for 30 years in their respective markets. These arrangements were nullified as a result of bailout-required natural gas market reforms.

The recently appointed energy minister Giorgos Stathakis has made clear that the Greek State will not offer any ompensation amounts.

The financial damage suffered by Shell haas been estimated at around 100 million euros, sources said. The company has yet to demand compensation from the Greek State, the same sources informed.

DEPA, the Public Gas Corporation, holds 51 percent stakes in all three EPA gas supply companies.

Gas market’s liberalization increasingly complex

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The natural gas market’s liberalization process, directly linked to the privatization of DEPA, the Public Gas Corporation, is beginning to seem like an equation made increasingly complex by the addition of various factors whose impact remains unknown.

Most recently, the country’s lenders called for DEPA’s withdrawal from Greece’s retail natural gas market, a move intended to swiften the liberalization process, only to prompt the re-emergence of issues from the past that further complicate matters.

Shell, which holds a 49 percent stake in the DEPA subsidiary EPA Attica, a gas distribution company serving the wider Athens area, and Eni, the Italian multinational with 49% stakes in the equivalent EPA ventures covering Thessaloniki and Thessalia, may both seek compensation for the premature end to their regional monopolies. DEPA holds 51 percent stakes in all three EPA subsidiaries.

In 2001, Shell and Eni both signed contracts securing 30-year exclusive retail gas distribution rights to the aforementioned markets. These monopolies were abolished by the Greek bailout’s framework.

The recently replaced energy minister Panos Skourletis had ruled out the possibility of compensation amounts for Shell and Eni, while his successor, Giorgos Stathakis, who took control of the country’s energy portfolio just over a week ago, has yet to engage himself with the issue.

Brussels sources value the cost of the premature end of Shell’s retail monopoly for the wider Athens area at approximately 100 million euros. The same sources noted that Shell has yet to submit a compensation claim to the Greek government as it is waiting for a late-November announcement from RAE, Greece’s Regulatory Authority for Energy, on new tariffs. The level to be set will determine Shell’s future action. The same goes for Eni.

Should these two companies consider the upcoming new tariff levels as insufficient to cover the losses caused by the retail market’s liberalization, then the Greek State will face compensation claims. Theoretically, DEPA could act likewise as it, too, is being affected by the premature ends to the regional monopolies held by the EPA supply companies.

Given the tight condition of the Greek State coffers, compensation in the form of cash payments is most unlikely, meaning that some type of offsetting solution will need to be found.

DEPA risks facing double trouble as, unlike its EPA partners, the corporation may not be compensated for the premature ends to the retail monopolies and, in addition, would need to provide the compensation payments for Shell and Eni.

Also, the country’s lenders seem to be applying pressure for DEPA to be privatized in 2017. However, this process will be held up for as long as the possible EPA compensation issue and DEPA’s withdrawal from the retail market remain unresolved.

 

Lenders pressuring DEPA to leave retail natural gas market

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DEPA, the Public Gas Corporation, an energy-sector issue in the bailout’s current second review, is being pressured by the lenders to withdraw from Greece’s retail natural gas market, a development that would destabilize the corporation’s future and the prospect of widened natural gas use around Greece.

Thought this latest request is not a bailout prior action, government officials fear the lenders will apply relentless pressure.

Already forced to increase its gas release, the proportion of low-priced natural gas offered by DEPA through its annual auctions as a means of generating market competition, the corporation is under pressure to abandon its 51 percent stakes in Greece’s three existing regional EPA gas supply companies covering the wider Athens area, Thessaloniki and Thessalia, without compensation. This would effectively leave DEPA out of the retail market.

The lenders, especially the European Commisson, represented by its Senior Economist for Greece, Carlo Viviani, want DEPA to abandon its retail role as of January 1, 2017, when distribution and retail activities of gas companies in the country’s natural gas market need to be split. Sources said the lenders are pushing for this move to further liberalize the gas market.

Shell holds a 49% stake in the EPA supply company serving the wider Athens region, while the Italian multinational Eni holds 49% stakes in the Thessaloniki and Thessalia ventures.

This demand will surely prompt major legal issues as the public utility is being asked to abandon assets without any form of compensation. The prospect of expanding Greece’s natural gas network to parts of the country without access is also expected to be set back. The country’s role in prospective international gas transmission projects, through DEPA, would also be affected if the gas company’s role is diminished.

Regardless of this latest request by the lenders, DEPA needs to split its retail and distribution divisions at an administrative level.

 

Alarming crude oil price plunge keeping Shell in Greek market

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Until last autumn, multinational Shell, which holds a 49 percent stake in the EPA gas supply company covering the wider Athens area, was seriously contemplating abandoning the Greek market. The company’s thoughts of leaving Greece were mostly linked to problems caused by the premature end of the EPA Athens gas supply company’s monopoly as a result of bailout-related gas market reforms intended to generate competition in the market. The country’s ongoing deep recession for a sixth successive year was less of a concern for Shell.

However, intensified woes generated by the further plunge in crude oil prices over the past couple of months, down to levels of less than 30 dollars per barrel, a development that has greatly reduced Shell’s international revenue potential, has forced the multinational to rethink and maintain all its money-making ventures worldwide, even in smaller marginal markets, such as Greece, offering moderate earnings for the corporate giant.

According to energypress sources, Shell has now decided to remain in Greece. The bailout deal’s gas reforms, which has divided distribution and trading activities to help open up the market is believed to be the key reason behind Shell’s decision to carry on here. Data has showed that EPA Athens earns 80 percent of its revenues from distribution activities and just 20 percent from trade. The distribution-related earnings are generated through the collection of distribution fees.

Shell anticipates it will continue collecting these distribution fees following the gas market’s break-up, while it could lose a fraction of its earnings generated by trading activity.

Pundits have pointed out that even an oil major the size of Shell will not turn its back to a steady supply of guaranteed earnings, even if small, amid such global uncertainty.

However, it is believed Shell would accept a good offer to sell its 49 percent share in EPA Athens, which is unlikely to occur for the time being. DEPA, the Public Gas Corporation, holds a majority 51 percent stake in the EPA Athens venture.

Shell expands its Albanian presence south, just off Greece

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Canadian company Petromanas Energy has agreed to sell its Albanian assets to Shell, a move that provides the multinational giant with entrepreneurial control of the Shpiragu block in Albania’s south.

The development, which brings Shell’s oil interests further south, just above the Greek-Albanian border, coincides with the announcement of the results of a tender for exploration and exploitation licenses at three onshore blocks in western Greece.

The Arta-Preveza block, which had drawn offers from both ELPE (Hellenic Petroleum) and Energean Oil & Gas, has been awarded to ELPE. The Etoloakarnania block was granted to Energean Oil & Gas, the sole bidder for this block, while the northwestern Peloponnese block has been offered to ELPE, also the only bidder.

Interestingly, the Ioannina region in Greece’s northwest, already being explored by Energean Oil & Gas, shares similar geological traits with the neighboring Albanian regions possessing oil deposits. This raises the oil exploration prospects in Greece.

Shell’s broadened activities in the neighboring north increase the likelihood that the company may also turn to Greek deposits in the future.

A total of seven exploration and exploitation licenses have been offered in Greece following the provision of the latest three in western Greece – Arta-Preveza, Etoloakarnania, and the northwestern Peloponnese.

Returning to Albania, it should be noted that Shell declared an interest in the region once a first round of drilling work had been completed. The discovery of considerable amounts of oil and natural gas was announced following the procedure. Shell decided to increase its level of investments in Albania as soon as the discoveries were confirmed, last March, in the Berat area.

As noted by sector authorities, preliminary exploration work for prospective deposits in newer areas such as Albania and Epirus, in Greece’s northwest, requires considerable work, which is usually conducted by smaller companies. The bigger companies move in to invest further, and with greater security, once major discoveries have been made.

The oil industry in Albania is currently booming. A total of eight oil companies have acquired licenses for 18 blocks, both onshore and offshore. Besides Shell and Petromanas, Bankers Petroleum and Stream Oil & Gas, both Canadian, the British firm Cairn, Israel’s ILDC, amd San Leon Energy, owned by major investor George Soros, have all acquired blocks Albania.

 

Shell, Eni await fees before acting on loss of monopolies

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The level of network distribution fees to be set by RAE, the Regulatory Authority for Energy, within the next six months will determine the action to be taken by Shell and Eni, respective shareholders in the EPA gas supply companies for wider Athens and Thessaloniki-Thessalia, with regards to their demands from the Greek state.

The EPA companies have prematurely lost their exclusive regional supply originally agreed to as a result of gas market reforms intended to generate competition in the market.

If the network distribution fee levels, to benefit the EPA companies, are deemed appropriate, then the EPA shareholders will not launch compensation procedures against the Greek state for the loss of their respective monopolies, part of the bailout agreement. If the distribution fee levels are deemed as being to low, the companies are sure to take action.

A highly-ranked official at Shell, which holds a 49 percent stake in the EPA company serving the wider Athens area, raised the issue just weeks ago to energy minister Panos Skourletis. The minister made clear that the state does not intend to discuss compensation packages.

As a result, shareholders of the three exisiting EPA gas supply companies will wait for the distribution fee levels to be set before deciding on any future action.

As has been reported, as of 2017, gas consumers will be charged separate fees for distribution and trade, as part of the overall plan to generate competition in the sector. RAE must set the new network distribution fees by June, 2016.

DEPA, the Public Gas Corporation, holds majority 51 percent stakes in all three EPA gas supply companies. Shell holds a 49% stake in the company serving the wider Athens region, while the Italian multinational Eni holds 49% stakes in the Thessalia and Thessaloniki operations.