Could Fluxys Outmaneuver SOCAR?

Belgian companies are developing their reach into Southeast European gas and energy markets via Greece, having as a main investment Fluxys' involvement in the Trans-Adriatic Pipeline project (TAP).

More specifically, Fluxys has recently signed with Greece to conduct a feasibility study for the establishment of a regional gas hub bringing along significant experience from running its own in Belgium for a number of years. Fluxys also owns 19% of TAP which is scheduled to commence in 2020 and it is from where the bulk of natural gas of this virtual hub would be sourced.

Fluxys signed a first accord with DESFA, the transmission manager of the Greek gas network and is in a process pending still, regarding its acquisition by Azeri SOCAR, the main supplier of gas to the TANAP-TAP system of pipelines in the coming years, which has also expressed its interest in creating a gas hub in Greece to serve the regional markets. The study is scheduled to be ready and submitted by early summer 2015 and will take as main parameters the inflow of Azeri gas in the region and the upgrade of the Greek LNG terminal in Revythousa. Moreover additional features would include the mid-term plans of the Interconnector Greece-Bulgaria (IGB) and the ability to construct an underground gas storage facility of 700 mcm in the Kavala region of Greece.

Fluxys CEO Walter Peeraer, stated that "The prospective Greek gas hub is the first step to enact a peripheral hub for the whole of Southeast Europe and enchase the functioning of the markets, increase security of supply, and developing transparency in pricing, all possible through the new sources that would be available through TAP." Fluxys already runs the Huberator gas hub in Belgium since the late 90's and the Zeebrugge virtual gas Trading Point, since 2012 with great success, having capitalized on increasing revenues by multiple transaction in peak winter and summer periods, despite the general stagnation in the EU markets since 2009 onwards.

Fluxys which is an essential state company of the country, owned in majority by Publigas corporation, has Brussels' full support in terms of national administration and is said to eye DESFA's shares should Brussels (European Commission), decides to halt the entrance of SOCAR as it is widely rumoured and estimated by industry experts. In this case Publigas and its affiliate Fluxys fit perfectly with the 'deregulated' profile of the EU's Third Energy Package, while maintaining a sound financial position in addition to a wide range of expertise in the gas hub sector and also in LNG management, a sector that has been described by the Greek administration as "a long-term strategic sector for the Greek energy security."

Moreover Fluxys is well-integrated into the Western Europe gas transmission system through its shares in the interconnectors between UK and Continental Europe and also through its involvement in the Dunkirk LNG terminal, its role in the NEL and TENP pipelines in Germany and Transitgas in Switzerland.

A Greek energy analyst and former governmental advisor privy to long-term gas market planning in the country stated for Natural Gas Europe that for the moment "It is absolutely certain that Athens and in particular Antonis Samaras' administration is committed into pursuing the privatization of DESFA to SOCAR and has invested considerable political capital towards that aim." Nevertheless it was added that "In case Brussels manage to overturn that prospect, the process will be repeated and in that case Fluxys will have a major advantage and could be seen as the favorite to win, and already they have started making subtle preparations towards that aim from what it seems." Media reports in Athens also confirm that the Belgium Embassy in the country has played a major role into contacting and linking Fluxys with the Greek government, a move that implies state back-up in the whole scheme. 

Further it should be noted that during DESFA's first privatization bids there were quite a few media reports in Athens that described the opposition of most of the EU states for a non-member state public corporation to be able to make its entrance into the single market. At that time the finger was pointed out for Gazprom, but it seems that the new round of a so-called "deep investigation" by the Directorate-General (DG) for Competition against SOCAR, further supports the aforementioned scenario. In this case Fluxys may indeed possess a significant advantage in the event the Baku-based energy company looses the acquisition process or simply decides to resign from setting a foothold in the Greek gas transmission system.