New Greek Government Changes Course on Natural Gas Sector

The new government in Greece, a coalition of the Leftist party SYRIZA and its junior right wing partner ANEL, appears to be changing course on energy policy with considerable impact on the natural gas sector.

Newly appointed Minister of Energy Panagiotis Lafazanis commented that: "The privatization process of the DEPA natural gas supply company will not move on." It has to be noted that in 2013 there was already failed attempt to privatize 65% of its shares, but it was also effectively stopped by the previous conservative Greek government."

Officials from the Greek energy ministry declined to comment if the DEPA decision will impact the ongoing privatization of DESFA, the Greek gas transmission operator, which is currently being in the process of being bought by the State Oil Company of Azerbaijan Republic (SOCAR).

Lafazanis commented that the Syriza administration is awaiting the decision of the EU competition authorities in respect to as to whether the proposed acquisition is in line with the EU merger regulation, a process which seem to be dragging for a considerable period. The EC has twice extended the deadline, most recently to April 22nd from earlier announced date of March 23rd.

The EC has concerns that SOCAR’s involvement in the production of natural gas as well as of its wholesale in Greece after acquisition major share in the gas distribution system may reduce competition. DESFA owns and operates Greek's sole high-pressure gas transmission and Greece's only LNG terminal and mainly transports gas through its network

The new Energy minister's comments appear to indicate that Athens has decided that DEPA will remain as a state enterprise and has dropped privatization of DESFA entirely into the EU's hands, in start contrast to the stance of the previous government which had guaranteed to Baku its full support for a satisfactory conclusion to the privatization process.

The Syriza government appears to also be supporting the Turk Stream gas route to replace the cancelled South Stream project. Thanasis Petrakos, a leading figure of Syriza, has whole-heartedly embraced the project and indications from the country's energy ministry point out that Greece will strive at least to gain a spur of this pipeline into its territory in order to resurrect the Interconnector Greece-Italy (ITGI) which may well run in parallel with the Trans-Adriatic Pipeline.

TAP project may also be facing head winds. Local media reports indicate the Syriza government will request in the short term, an amendment of the clauses that have been signed by the previous administration. Most importantly, those include the payment of transit fees by TAP consortium. Should these fees be denied, Syriza will then examine the option of taking the subject to the European Court of Justice, since according to the standing EU and Greek law, transit fees are to be requested by the national member states. In such case, several former governmental figures, maybe found liable of damaging the economic interests of the state that is a punishable penal offence, as a Syriza official emphatically commented for Natural Gas Europe.

Syriza also appears to be pursuing closer relations with Russia. Lafazanis conveyed he personal opposition to the embargo on Russia. It should be noted that already Greece is heavily dependent on Russian energy supplies, receiving 65% of its oil imports and 75% of its gas from Russian companies, most notably Gazprom and Lukoil. The reason for that is that the country has lost its traditional suppliers such as Libya and Iran on oil business, and the gas streaming from Russian pipelines is under long-term contracts and relatively, depending on seasonal adjustments, cheaper that LNG supplies.

Greek energy officials are concerned that a hardening of the relations between EU and Russia may result in serious energy security constraints for the country. Further Syriza's party officials have relayed unofficially, that they aim to get benefits from the Russian side, such as extensive credit periods for the import of Russian oil for up to 9 months, a minimum 10% reduction of the gas import prices, together with a foregone of 100 million Euros already owned by DEPA to Gazprom. The aforementioned are also related to the exposure of the Greek export market into Russia in two niche market products that of agricultural products and furs, which total around 0.4% of Greece's GDP, whilst annual tourism revenues from the Russian market reach 0.7% of GDP over the past few seasons.

Another topic of importance in the natural gas sector is that of the LNG infrastructure.  There appears to be no change in the Greek position, with the upgrade of the Revythousa LNG terminal proceeding as well as the intention of establishing a new terminal in Northern Greece that will aim to diversify both Greek and Bulgaria supplies and away from Russian and Azeri imports.

The Syriza government is also fervently in favour of the use of natural gas as an alternative model for transport, including the widespread of natural gas as preferred fuel for all public vehicles and will push forward the EU's plans to make it a standard mode for all commercial and passengers sea vessels in the coming years.

One critical matter on which Syriza has yet to official state its position is on the movement of gas discovered in the Eastern Mediterranean and on the conflict on between Cyprus and Turkey on the ownership on gas resources. 

In a nutshell, concerning the gas sector in Greece, several changes of tactical level should be expected, such as postponement of the privatization of the gas trading business (DEPA) and changes in the trading agreements of the TAP route. On a strategic level, although too soon to tell, the Greek administration appears ready to examine the prospects of engaging to the Turk Stream, while on a regulatory level, the strong presence of the state is expected to continue.