Greece will seek Algerian LNG in case of Russian gas reduction

Greece is discussing additional liquefied natural gas supply from Algeria to cover shortages and help neighboring nations if a gas dispute between Russia and Ukraine disrupts pipeline deliveries.

DEPA SA may have to pay $150 million to $200 million to secure extra cargoes for December and January, the peak months of winter demand, George Spanoudis, the state-run gas supplier’s chairman, said in an interview in Londoset shortfalls under the existing contracts with Turkey and Algeria that meet the rest of demand, he said.

Russia, Ukraine and the European Union will meet Oct. 21 to discuss a resolution to a price and debt dispute that saw Gazprom halt supplies to Ukraine in June. While Greece lost as much as two-thirds of its gas supply when flows via Ukraine were cut in a similar conflict during freezing weather in January 2009, it was able to buy LNG to limit the effects of the shortfall and supply neighboring Bulgaria, according to the Oxford Institute of Energy Studies.

“We are preparing for a short crisis, hoping that the crisis will not take place,” Spanoudis said Oct. 10. “The Algerian contract can be extended through discussions we are having as well, to supply extra vessels of LNG.”

Greece is one of the best prepared European Union nations for a possible disruption of Russian gas supplies in the winter, has met so-called EU gas stress tests and is ready for all scenarios, Energy Minister Yiannis Maniatis said Sept. 30. Neighboring Bulgaria, which is 89 percent dependent on Russian gas, is “extremely vulnerable” to a disruption, Felix Hoeffler, director at University of Cologne, said Sept. 25.

LNG terminal

DEPA has a contract with Algeria’s Sonatrach Group for the supply of 500,000 metric tons of LNG into the Revithoussa LNG terminal, according to the International Group of Liquefied Natural Gas Importers. The terminal is also the nation’s only gas storage facility.

The company is looking at extra cargoes of as much as 125,000 cubic meters each, compared with vessels of 75,000 cubic meters normally, Spanoudis said. DEPA is preparing financing to secure the extra LNG, which it expects to come at “reasonable prices,” he said.

The average LNG price for Greece was 31 euros ($39) a megawatt-hour in the first four months of the year, compared with estimates of 29.81 euros for Russian pipeline gas, according to a report by the European Commission Oct. 8. Spot LNG prices in southwest Europe were about 38 euros a megawatt- hour in the period, according to assessments by World Gas Intelligence.

EU solidarity

The Greek government proposed an EU solidarity mechanism to ensure that gas flows where it’s most needed in an emergency, Spanoudis said.

An interconnector is planned to link Greece and Bulgaria to help alleviate any future crisis. The pipeline would be capable of shipping 3 billion to 5 billion cubic meters of gas a year and is due to be operational in 2017, he said. The final investment decision on the link is expected by the end of the year, he said.

“The smaller projects are quite key because they provide the links to integrating European energy,” Spanoudis said. “Instead of having what we have today, which is country-based systems, we are linking the systems into something what you call much more European and much more flexible.” [Bloomberg]

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