Greece Backs TAP, Requests Changes

The Syriza led Greek government has changed the nation's stance on Trans-Adriatic Pipeline (TAP) as it specifically tries to enhance the role of the country in terms of extracting benefits for the state budget along with further energy security guarantees.

The newly appointed Greek energy minister, Panagiotis Lafazanis, recently met with the stakeholders of the Southern Gas Corridor route at an group Advisory Council meeting in Baku and laid down the requests of his government, by offering support for TAP in exchange and the continuity of the project by Greece's side.

First of all, Lafazanis requested for transit fees to be paid to the country once the route is functional, after 2019, as well as, stable amounts of gas to be reserved for the Greek side, bearing in mind that the Greek gas company DEPA had in the past signed memorandums of cooperation with Azerbaijan's SOCAR, for quantities of stable supplies of around 1 bcm per annum. Similar agreements have been signed by Bulgaria, whilst Albania, a country without natural gas infrastructure is institutionally interested in securing supplies.

At this point it should be noted that the EU's Commissioner Maros Sefcovic assured the stakeholders, including all energy ministers of Southeastern Europe, that the Southern Corridor would be able to secure not 10 bcm per year to Europe from Azerbaijan, but at least 20 bcm, due to the inclusion of Turkmenistan via a trans-Caspian pipeline route.

Nevertheless it should be noted that such a plan falls into several major hurdles, including the inability of infrastructure work in the Caspian because of international law disputes of the neighboring countries, and effective opposition by Russia, Kazakhstan and Iran. Furthermore a new linkage such as this would further derail the budgetary aspects of the Southern Corridor projects, which already has surpassed 60 billion Dollars, if one adds the Ionian-Adriatic Pipeline (IAP), planned route in the Western Balkans.

The large Shah Deniz field in Azerbaijan could indeed secure supplies of additional 10 bcm by itself, but only for a medium period of time, since its overall estimated reserves are 1 trillion cbm, and will supply the long-term needs of Azerbaijan, Georgia, Turkey, several Balkan countries up to Italy. Thus it will not be able to actually make a significant diversification change in the energy supply architecture of the major European markets.

Based on all the above, Athens is rushing to secure quantities before other countries jump in and more imports will require the activation of the Trans-Caspian route, an unlikely option for the time being. More importantly Athens made clear to its TAP partners that these Azeri-sourced quantities should be competitively priced compared to the Gazprom's supplies that secure already more than 70% of Greece's needs.

Furthermore, the Greek energy minister, pressed forward for the completion of the Interconnector Greece-Bulgaria, which is a rather small but integral part of the TAP's supply system into the Balkans. Already an agreement has been signed between the Greek delegation in Baku with the Bulgaria energy minister Temenuzhka Petkova, that stipulates that the final investment decision should be taken no later than the 31st of May 2015 and the whole project should be operational by mid-2018 and before the inauguration of TAP.

Lastly Greece is mulling changing the rules regarding the ongoing DESFA privatization process and instead of selling 66% of the state's shares to SOCAR as earlier agreed, it will give up 49%, keeping thus the state active in the Greek transmission manager company. Although SOCAR was reluctant to respond to such offer, well-placed energy executive sources in Baku note for Natural Gas Europe that "This will only be accepted in case a significant discount is made on the share's current agreed price by Athens". In the meantime this particular privatization is frozen due to the EU's competition authority’s negative stance which considers that it essentially violates the third energy package of the EU, a cornerstone of its unified energy policy.

Moreover there has been a notable interest by the Belgium Company Fluxys to compete once and if SOCAR abandons DESFA's privatization bid. Under these terms, the Greek energy ministry seems to be keeping a stance of flexibility trying to accommodate all these different policies and actions in line, before it truly decides for its final course.

Concluding, the newly elected government is playing ahead with the TAP and the Southern Corridor project and puts forward certain demands, aiming to boost the country's budget and energy role. For the moment, there are positive signs that these demands were approved by all sides, thus leaving space for technical consultation and negotiations amongst the technocrats of each side.