SOCAR Still Struggles in Greek Market
Since 2013, the European Commission (EC) has effectively blocked the State Oil Company of Azerbaijan Republic (SOCAR) from completing its 66% majority takeover of Greece’s Hellenic Gas Transmission System Operator (DESFA). Brussels has been reluctant to give the transaction the final go-ahead despite a €400 million agreement signed between Athens and Baku in July 2013.
The deal has been scrutinized by the EC’s Directorate-General for Competition, fearing it may conflict with European Union (EU) regulations prohibiting energy asset monopolies led by firms from outside the EU.
If the acquisition is blocked, SOCAR stands to lose a €40 million down payment in addition to other capital spent on promoting its bid. A final decision is expected as early as September 2015.
Sources suggest the EC wants SOCAR’s stake reduced to a 49.9% minority, a proposal rejected by the Azeri energy major’s senior management. Greece’s sovereign-debt crisis is also weighing on SOCAR’s business decisions.
Even so, interest remains strong. DESFA is seen as a crucial asset in conjunction with the establishment of the Trans-Adriatic Pipeline (TAP) and Greece’s LNG-related prospects summarized in the EU’s Projects of Common Interest plan. The acquisition of the Greek utility is central to SOCAR’s plans to tap into a new long-term customer base in Southeastern Europe, and gain access to international LNG shipments.
SOCAR already owns 20% of TAP, which is scheduled to be operational by 2020, and remains unaffected by the current Greek saga due to the inclusion of global energy giants such as the United Kingdom’s BP and Norway’s state-backed Statoil.
Greece’s Energy Minister Panagiotis Lafazanis has suggested he wants to maximize his government’s revenues by reopening accords signed with the TAP consortium. The group and SOCAR are eager to secure a final deal quickly and prevent further issues from arising that could delay the project’s opening. Given this enthusiasm, it is not unreasonable to assume Athens may achieve concessions on higher transit fees and more social licence handouts to communities traversed by the pipeline. Neighbouring Turkey secured similar guarantees with respect to its Trans-Anatolian Pipeline.
Well-placed sources say SOCAR will intensify its lobbying activities in the country by focusing on projects in the local gas market. Nonetheless, there is evidence to suggest Baku now views Bulgaria as a preferable entrance to the EU’s $18.5 trillion common market.