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Greece

Capital Athens
Time Zone EET (GMT+2)
Country Code 30
Mobile Codes 690,693,694,695,697,698,699
ccTLD .gr
Currency Euro
Land Area 131,990 sq km
Population 11.3 million
Language Greek
Major Religion Orthodox Christianity

Greek Natural Gas Developments: LNG, Prospective Expansion, and the New Joint Venture of Two Energy Giants

By Ioannis Michaletos in Athens

DESFA’s Expansion Plans

The Greek natural gas network company, DESFA, announced in its recent board meeting that it has concluded its mid-term planning regarding upgrading of the Revythousa LNG terminal, and that it will construct a third LNG storage facility that will mainly be used in order to secure export supplies to neighboring countries (Bulgaria and Turkey) interested in using the Greek-based facility as one of the main LNG import points in the wider Southeastern European region.

The project has a budget of 130 million euros, and involves the construction of a 95,000 cbm storage facility in Revythousa, as well as the modernization of the local port infrastructure in order to serve vessels having a capacity of up to 180,000 cbm of LNG. This will be a significant improvement, as at present ship storage capacity does not exceed 135,000 cbm. The Revythousa LNG terminal currently has two LNG storage facilities, each of 65,000 cbm.

According to statements made by DESFA President Dimitris Mavrokefalos in the middle of October, for Athen’s Channel 9 Business TV, “the timeline for the completion of the project is scheduled [to be] by early 2014.” Moreover, he added during a press conference that “private companies from both Turkey and Bulgaria have already showed interest in order to secure imports of LNG that will enter Revythousa, and the quantities being discussed are approximately 500 million cbm per year.”

Furthermore, DESFA’s management has unveiled its expansion plans for the future, which include the completion of the Korinthos-Megalopoli natural gas pipeline that will supply the Megalopoli electricity power station of the Greek power company (DEI). The project is expected to be completed by January 2012, and will cost 110 million euros.

The completion of the Athens-Aliveri gas pipeline, which will also supply DEI’s power station, will be ready by September 2011, with a budget of 64 million euros.

The company is also investing in upgrades to the main pipeline from the Greek-Bulgarian border as far south as the Athens region, in order to increase its capacity in imports from this route (under a long-term contract with Gazprom).

Lastly, DESFA’s board of directors has assured investors and the public that it is energetically involved in regards to projects like ITGI and South Stream, and is awaiting a decision from the main shareholders in order to proceed. Should both projects in fact go ahead, DESFA will raise capital in the amount of more than 1 billion euros for its share of the pipelines construction on Greek territory.

DEPA CEO Giorgios Paparsenos also recently commented on the viability of the Prinos depot project, which is currently in discussions with the private firm Aegean Energiaki. This involves the use of the Prinos depot in Northern Greece as a main gas storage facility- specifically, as a strategic reserve installation for Greece and the neighboring countries. He noted, however, that prospective investors with adequate funds and expertise have to be found, while in addition all legal aspects related to such an endeavor have to be thoroughly discussed with state authorities and the bodies in charge of energy affairs in the country.

Lastly, DESFA estimated that it will achieve an approximately 40 million euro net profit for 2010, in comparison with a 33 million euro profit registered in fiscal year 2009.

A New Player in the Greek Natural Gas Market

A new joint venture has been announced by two significant players on the Greek energy scene: Mytilineos Group and the Motor Oil Company which operates Greece’s second-largest oil refinery. Created under the name of “M+M GAS,” this Athens-based company is intended to become a prime LNG importation company in Greece. The Greek market has registered a significant increase of this type of shipments lately, and so the formation of the company comes at a fortuitous time.

The new company will merge the existing LNG importation operations of its shareholding parent companies, which already control around 10% of the local market through LNG imports they have procured since last April. M+M has a share capital of 2 million euros, and will also target natural gas commerce in an LNG form for the regional market.

For the time being, Mytilineos Group and Motor Oil have imported four LNG shipments since April 2010 into Greece (a total quantity of 375,000 cbm), and the newly formed company will now import an additional six shipments recently awarded by the Greek Power Company (DEI). The total value for these, shipments which have to be delivered by the beginning of 2011, is 450,000 cbm.

According to the Athens-based IENE energy institute, the main reason behind the merger in the LNG sector between these two leading Greek energy companies is the complementary nature of their experience and operations. Motor Oil is owned by the Vardinoyannis shipping family, which has a long history in the field of merchant marine transportation. For its part, the Mytilineos Group is traditionally a major user of natural gas in Greece. Moreover, and most importantly, both of these companies intend to participate in the long-awaited privatization of the state-owned natural gas company DEPA, which the incumbent government has put on the list of companies to be sold.

A December 2008 report by the Greek Ministry for Energy estimates the book value of the company to be 2.5 billion euros, though this figure may have changed downwards since then, due to Greece’s ongoing financial crisis.

The decrease of DEPA’s reach in the local natural gas market owes to the end of its monopoly in early 2010. This event has changed the established business order in the sector, and already 40% of the LNG shipments reaching the Revythousa terminal are being ordered by competing companies.

In this light, the creation of M+M establishes it as the first main corporate adversary of DEPA. It also enjoys the advantage of making orders to facilitate the production of the Mytilineos Group and has already secured significant amounts of LNG for DEI, with both of the aforementioned being Greece’s top two consumers of gas.

Since the shareholders of M+M have adequate financial resources and the ability to supply the Greek market with great amounts of LNG, it is likely that the creation of the new company will accelerate competition and will lead to developments in the Greek natural gas business sectors, in parallel with DEPA’s privatization.

Greece’s LNG consumption is increasing because of the low prices, though there is a 50% increase between the first shipments in April 2010 and the ones arriving in September. The energy analyst Sotiris Chiotakis commented in a recent issue of Greek business newspaper Capital that “the first shipment was ordered from ENI at 5 USD per mbtu, while the price tag has reached 7.5 USD presently. Nevertheless, the Russian-imported gas from the existing pipeline system costs just above 10 USD per mbtu, and thus there is still room for further increase in LNG imports in the country.”

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