Gas hub set to form in Greece as supplies converge, Depa says

Greece can become a natural gas price hub for southeast Europe within three to four years as supply projects come together in the Mediterranean nation, according to Depa SA.

Plans to ship gas from Azerbaijan, link Greece’s grid to Bulgaria’s, build a floating liquefied natural gas terminal in the northern Aegean Sea and possible Israeli and Cypriot supplies would create price differences with current pipeline gas from Russia and LNG from Algeria, Depa Chief Executive Officer Spiros Paleoyannis said in an interview in Athens. That would allow buyers to negotiate rates for gas volumes, he said.

“Greece took a strategic decision in the 1990s to expand its supply sources, to make the country a transport hub and to participate in the wider southeast Europe market,” Paleoyannis said. “The Aegean LNG terminal will be a new import source for the Balkans that will enable gas price differentiation and that will allow Greece to become a pricing hub.”

Depa supplies almost all of Greece’s gas, about two-thirds of which comes from Russia via Turkey and Bulgaria and most of the rest shipped in as LNG from Algeria into the Revithoussa terminal near Athens. The country has sought to diversify supplies after it was forced to import more LNG and switch a power plant to oil in January 2009, when a dispute between Russia and Ukraine disrupted flows to the region.

The Trans Adriatic Pipeline, or TAP, will carry Azeri gas across Greece and Albania to Italy from the Turkish border. Construction on the link with capacity of 10 billion cubic meters (350 billion cubic feet) a year is planned to start in 2016, according to the company, a venture that includes BP Plc and Statoil ASA.

Interconnector, LNG

A final investment decision on the 183-kilometer (114-mile) IGB pipeline “is very near” and will be taken in the first half of 2015 while the project has secured necessary environmental licenses in Greece and Bulgaria, Paleoyannis said. With an initial capacity of 3 billion cubic meters a year, and the possibility for an upgrade to around 5 billion, the pipeline can serve as a northern link from Greece to Bulgaria, Romania, Serbia, Hungary, elsewhere in the region and even Baltic nations, he said.

In addition to a connection with TAP, the link could be fed by imports to Depa’s planned floating LNG storage and regasification facility near Kavala in northern Greece, Paleoyannis said. An investment decision has yet be taken on that project, given the negative effect of the economic crisis on demand for gas in Greece and its neighbors, he said.

“Bulgargaz, Romania and Serbia are all interested in the Aegean LNG project and could participate as part of a joint venture,” he said.

Golar LNG Ltd. remains attracted to the project, an LNG producer could also take part and Depa would keep a stake of 15 percent to 20 percent in the facility, Paleoyannis said.

Cyprus, Russia

Development of the 1,680-kilometer East Med Pipeline could also see imports of Cypriot and Israeli gas to the facility. While the planned pipeline from Cyprus to Greece has “huge technical challenges, it’s viable with 8 billion cubic meters of gas a year,” he said.

While Depa no longer expects a disruption to gas supplies this winter after an agreement on a price and debt dispute between Russia and Ukraine, “we still want to have the option of being able to import from early next year, if needed, an additional two or three extra cargoes of as much as 125,000 cubic meters each” of LNG into the Revithoussa terminal, Paleoyannis said. Depa has a contract with Algeria’s Sonatrach Group for the supply of 500,000 metric tons of LNG. [Bloomberg]

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