Greek turmoil threatens Europe’s gas pipe projects

Turmoil in Athens threatens plans to bring central Asian gas into Europe through Greece and will slow efforts to reform the country?s energy sector.

Two out of three international consortia — TAP and ITGI — that are competing to build the infrastructure to carry gas from Azerbaijan?s Shah Deniz II gas field to Europe plan to pass through debt-ridden Greece and through Italy into the rest of Europe.

Access to Azeri gas is crucial to European Union ambitions to loosen its dependence on Russia for energy.

Should Greece default or exit the euro, ITGI in particular could come under pressure as it partly relies on Greek government-controlled gas company DEPA for finance.

Its other partners are Italy?s Edison, and Turkey?s Botas.

?TAP is clearly in a better position compared to ITGI as they decided a few months ago to bypass DEPA and build their own pipeline through Greece,? Massimo Di-Odoardo, analyst at WoodMac said, although he added it was not clear whether this would be enough to get awarded the gas contract from Shah Deniz II.

Italian ITGI partner Edison said it stood by the project.

?Edison doesn?t have any specific comment on the ongoing economic situation in Greece but confirms its strong commitment to build the Greece-Italy gas pipeline in order to complete the ITGI transit corridor and to secure the needed gas from Azerbaijan,? a spokesman for Edison said.

ITGI and TAP both aim to transport 10 billion cubic metres (bcm) of gas a year from Azerbaijan through Turkey and Greece into Italy.

TAP has no Greek partners, but is instead co-led by Norway?s Statoil, Swiss EGL, and Germany?s E.ON Ruhrgas.

?Financing (for TAP) is not linked to the current turmoil in Greece. We continue to offer Greece a solid large scale project that will bring 1.5 billion euros into the country, (and) this is backed by three very financially sound companies amd governments,? a spokeswoman for TAP said.

The Shah Deniz II gas field is co-led by BP and Statoil and thought to contain 1.2 trillion cubic metres of gas.

The third pipeline contending for Azeri gas is the 4,000 km Nabucco project, which plans to transport over 30 bcm central Asian gas through Turkey, Bulgaria, Romania and Hungary into Austria and western Europe.

However, critics say that the project?s costs are spiraling out of control and that there is not enough gas available to fill such as big pipeline.

The Vienna-based consortium?s shareholders are Austrian energy company OMV, German utility RWE, Hungary?s MOL, Romania?s Transgaz, Bulgaria?s Bulgargaz, and Turkey?s Botas.

Despite the fears of a default and a euro-exit, Greece?s energy imports were not threatened.

Public Power Corp (PPC), Greece?s biggest power producer, said it had no problems securing supplies.

?The crisis has not changed the ability of PPC to purchase all types of fuels or affected our relationships with suppliers and traders. We have always been exactly on time when making our payments,? Konstantino Chronis, head of the Fuels Purchasing Department at PPC said.

The company plans to ramp-up purchases of liquefied natural gas (LNG) cargoes in 2012 with the 16 traders and suppliers it has recently concluded master sales agreements (MSA) with, Chronis said.

?We have so far secured seven import slots to bring in LNG and we hope to be able to get most of those quantities,? he added.

Greece also relies on Russian gas imports.

A Gazprom official said ?Greece has its own problems and gas is not the main one for them. They have been paying for gas, and there were no talks on this (ceasing exports to Greece).? In August, Russian gas export monopolist Gazprom agreed to lower its long-term gas price and export volumes to DEPA.

Analysts also said that the Greek turmoil would likely further slow down its planned energy market liberalization and privatization.

?The Greek Prime Minister?s shock announcement that he would call a referendum on the second EU-bail out will further slow efforts to reform the energy sector and privatize state firms,? IHS Global Insight said in a report.

?The process was struggling already under the weight of inept institutions but this move risks further weakening the bureaucracy and driving away any interest from foreign investors.? Under the terms of the last round of austerity measures passed in June, Greece plans to raise 5 billion euros through state-asset sales this year, and 50 billion euros through to 2015, according to IHS.

The government plans to sell 17 percent of PPC, bringing its stake in the power monopolist down from to 34 percent, and the government also plans to sell at least half of its 65 percent stake in DEPA, as well as its entire 31 percent stake in power transmission system operator DEFSA. [Reuters]