Greece's Great Gas Gig
Greece's gas market is opening up, according to Dr. Kostas Andriosopoulos, Senior Advisor to the new CEO and the Chairman of DEPA Public Gas Corporation SA.
Dr. Andriosopoulos, who is also Director of the Research Center for Energy Management at ESCP Europe Business School, explains that the opening of the Greek market (along with DEPA's plans) could translate into big opportunities, both for Greece and for investors. He remarks, “In two-and-a-half years' time the gas market will be completely open, both in the retail and wholesale. That brings new entrants into the market, new market opportunities in general, and more pressure on the company to protect its market share-its business in general.”
Greece's gas market reform having recently been passed in parliament, he contends it is now in the best interests of Greece to go forward with a number of prospects envisioned and voted on by DEPA's Board of Directors. As part of DEPA's 5-year business plan, the company would like to pursue projects like a floating storage and regasification unit (FSRU) project in northern Greece. Dr. Andriosopoulos adds: “On top of that, we are looking at trying to gasify more of the country further, which means we want to enlarge and enhance the gas consumption in the country.”
He says the only way of doing that is for DEPA to engage in partnerships, “by bringing, on one hand, foreign expertise and capital to invest in these type of projects with our position in the market and funds, to enhance consumption through gas-powered vehicles, via compressed natural gas (CNG), and supplying gas to remote locations via CNG and liquefied natural gas (LNG).”
Dr. Andriosopoulos reports that in some remote parts of Greece, where people rely on burning dirty fuels, there are market opportunities for natural gas. “We see a market there,” he explains. “They tend to burn dirty fuels and it's more expensive.”
He tells Natural Gas Europe that DEPA also envisions adding new regions for retail gas, and increasing the gasification of cities in Greece, considering that only cities like Athens and Thessaloniki rely on natural gas.
In addition to the 0.5 billion cubic meters (bcm) increase from adding new Greek cities to the system, Dr. Andriosopoulos contends that there can be an increase of 0.5 bcm for providing gas to remote areas and another 0.2 bcm for powering automobiles. “That would bring the market to a size of about 4bcm and if we see also alongside this a support for regulation, policymaking that allows for more generation of electricity through gas-so you increase the utilization rate of combined cycle gas turbine (CCGT) units that we have in the country as well-we might see a further increase of almost 1bcm.
“We see business that can generate almost double the existing volumes that exist at the moment in Greece,” he says, “from the current 3 bcm up to more or less 5bcm.
“We used to be a 4.6 bcm market 4 years ago; now we're barely a 3 bcm market,” he recalls.
Opening up the market, having more competition, he says he can see this doubling of the market in 5 years' time.
“It's a big business opportunity for us, but, more importantly, the gas business and DEPA have a very strong role to play in this dire economic environment that we live in. Perhaps not the only one, but we are a business that can generate growth, a lot of jobs as well – in decentralized areas, not just in Athens,” he explains.
These are ambitious plans for a company that was almost privatized just a few years ago. Dr. Andriosopoulos recalls the attempts to privatize DEPA, but explains that Greece is now in an environment of low valuations for assets in Greece, not to mention the liberalization of the gas market there and increasing competition. “DEPA is still on the list of the existing structure of a 'Type L' fund for investment and development of Greek assets,” he explains, adding that today, 65% of DEPA belongs to the Greek state, while 35% of shares are held by Hellenic Petroleum.
“The Government’s intention, though still under negotiation with the institutions,” he explains, “is that DEPA is no longer to undergo privatization in this environment of low valuations for assets in Greece, due to the financial crisis, liberalization of the gas market, and increased competition that we might see.”
The best interests of DEPA and Greece, he says, are to pursue the natural gas projects outlined earlier.
Moreover, Dr. Andriosopoulos contends that developing Greece's gas business would generate a strong geopolitical, geostrategic leverage to the country via the projects being proposed.
He offers, “If we are talking about the FSRU in Alexandropolous, alongside the Interconnector Greece-Bulgaria (IGB) and Trans-Adriatic Pipeline (TAP) coming through it, for which we've booked 1bcm of capacity, thus making it a viable project, we think that we can definitely enhance the position of the country within the region and hopefully see DEPA becoming an energy leader, a trader not only as a national champion which we currently are, but as a regional champion in the Balkans and further on.”
According to him, DEPA could also play a key role in spearheading a vertical gas corridor all the way up to Ukraine if the European Union provides support for the various infrastructure projects that Greece is involved in like IGB.
Moreover, DEPA diversifying its gas portfolio, he explains, will lead to better prices for retail customers – final consumers.
“By having the capacity to bring different sources of gas in different forms as well-piped gas or LNG-you can create a portfolio, a mix of gas in the system that could also be optimal in terms of average price to our end customers, who will benefit as well.”
Having booked 1bcm of capacity in the Trans-Adriatic Pipeline (TAP), Mr. Andriosopoulos says DEPA has shown its level of commitment to the project. He says, “It's part of our portfolio to have long-term contract supply agreements with Gazprom for about 65-67% of the quantities that we're buying today; we have an LNG contract with Sonatrech for about 0.7bcm equivalent; and another 0.7bcm/year from Botas, which is Azeri gas.”
He reports that both the Botas and Sonatrach contracts are expiring in 2021, which offers the opening for gas flows from TAP to fill the bill.
“If we are able to increase the size of the Greek market through the projects I've mentioned we're not only adding value to the country and the company, but we'll also be in a position to avoid any take-or-pay conditions for the long-term supply contract that we have with Gazprom to start with, and, while simultaneously honoring our contracts with others, we'll be able to optimize the portfolio,” says DEPA Senior Advisor Dr. Kostas Andriosopoulos.