Greece and Russian energy giant Gazprom will soon announce a new gas supply deal including price cuts backdated to last June, sources said on Thursday.
Gazprom is the biggest supplier of Greece's state-run natural gas distributor DEPA. The two sides have been in talks for months, with DEPA seeking a cut of between 15 and 20 percent in the gas supply price and threatening to go to arbitration if there is no agreement.
"We consider that this will be a done deal in the next few days. The lower prices will apply retroactively from June 2013," a Greek ministry official said on condition of anonymity. Gazprom declined to comment.
Greece is keen to reduce its industry's energy costs to help to shield it from the effects of the country's deep six-year recession that has led to a wave of corporate bankruptcies and unemployment of 28 percent
According to another source close to the talks, an outline agreement struck at company level between DEPA and Gazprom last month also got a green light at government level after a meeting between Russian President Vladimir Putin and Greek Prime Minister Antonis Samaras.
The Greeks are now just pressing for marginal improvements, on price or quantities, and are no longer considering going to international arbitration.
"The initial agreement also extends to government level now, so there's no question of arbitration any more," the source said.
According to the second source, the price initially agreed will be below $400 per 1,000 cubic metres of gas, down from the $470 DEPA pays now. The energy ministry source declined to elaborate on the level of the price, saying that it will continue to be linked to oil prices.
The current deal, which expires in 2016, will be extended to 2026, with Gazprom to supply DEPA between 2.5-3 billion cubic metres a year.
Combined with a recent, five-year supply agreement over 1 bcm between DEPA and Azeri consortium Shah Deniz, the Gazprom deal secures DEPA's supply for years to come and may increase its value ahead of its planned privatization, the source said.
"This agreement gives DEPA flexibility to cope with Greece's economic crisis and increases its market value,» the source said. DEPA, whose planned privatization failed in 2013, will be re-launched this or next year. [Reuters]