SOCAR Near Greek DESFA Acquisition
Negotiations are underway in Athens as the State Oil Company of Azerbaijan Republic (SOCAR) is nearing towards the acquisition of a 66% share and the management of Greek natural gas network manager DESFA SA. SOCAR re-submitted a binding bid for just over €400 million, well over the minimum set by the Greek government of €340 million.
Greece sells through the special privatization authority TAIPED, a 31% share in the company, while the remaining 35% is to be sold by the Greek oil company ELPE, which also is taking an active part in negotiations. ELPE also owns 35% of DEPA, whose privatization ended recently after all competitors and most notably Gazprom exited the process without submitting a binding offer.
SOCAR is very much interested in exporting gas not only to Greece but also to Bulgaria and other Balkan countries with which it has in the recent past signed memorandums of cooperation. The Greek side emphasized the establishment of projects such as the Interconnector Greece-Bulgaria (IGB), which are underway and supported as main infrastructure projects by the EU, in order to entice the Azeri interests.
Furthermore, the argument that was used by the TAIPED board and its chairman Stelios Stavridis towards the Azerbaijan is that should they invest in the country, they will gain their first foothold in the EU market. Concurrently, DESFA has decided to award a €100 million contract to the construction company JP Avax to upgrade the Revythousa LNG terminal in the country, in a move that was widely discussed in the local press as a further point aimed at increasing the interest of SOCAR for DESFA, as a stage point for LNG exports.
The two sides are negotiating the price tag for future Azeri exports and Athens is pressuring for the lowest prices possible. This move is also directed to Gazprom as well, where even 30% decreases are demanded, as soon as a long-term contract contract ends in 2016. According to the IENE energy institute in Athens, a DESFA acquisition by SOCAR will be beneficial for the local market since prices of gas will certainly decrease, on the other hand it criticizes the initiatives of the Greek administration to relay that DESFA and Trans-Adriatic Pipelines (TAP) developments are interlinked.
The Greek government has intensively lobbyied over the past year for the selection of TAP by the Shah Deniz consortium and it views, without doubt, the entrance of SOCAR into the Greek market as a major move that will likely increase TAP's chances of being selected. This is a crucial development for Athens since its competitor, the Nabucco pipeline, is scheduled to transport gas from Bulgaria to Austria. Athens has carefully delayed the DEPA-DESFA privatization process so as to coincide with the selection of the Southern Corridor route, which is scheduled for the last days of June.
Thus, negotiations between TAIPED, ELPE and SOCAR have reached a critical level where the Greek side will try to tie the two developments together, while the Azeris would likely rather wait until a final decision is reached before they make any announcement. Likewise, Makis Papageorgiou, Greek alternate Minister for Energy who is responsible for the gas sector in the country, directly linked TAP and DESFA in a Parliamentary speech by stating that SOCAR's entrance into the Greek market greatly increases TAP's chances of being selected.
It remains to be seen if that is the case, while a well-informed source in the Greek Energy Ministry assume that no deal is going to be concluded between SOCAR and DESFA until a selection is due in Baku.