Demand for natural gas and power rates seen to go higher

Greece will experience a continuous rise in the demand for natural gas, mainly due to new power plants, and increases in electricity rates in coming years, a study says. Management consultants Kantor’s annual survey of energy markets for 2006, out yesterday, also projects that the country’s position on the international natural gas market will strengthen as a result of projects currently in progress. In particular, the survey takes the view that the construction of the planned Greek-Italian gas pipeline, which will ultimately have an annual capacity of more than 8 billion cubic meters of natural gas, is of great strategic value to the European Union. «Its operation will allow the supply of the European Union with natural gas of non-Russian origin, thus reducing risks,» the report says. Nevertheless, despite the introduction of a new regulatory framework, the liberalization of the Greek market is expected to be slow compared to other European countries. «For the time being, the country’s capacity does not suffice to cover peak demand of the system and Greece’s dependence on power imports has increased.» In 2006, these power imports represented 13 percent of total demand and 73 percent of that came from Bulgaria. «More serious problems are expected in the summer of 2007, due to low rainfall in the winter of 2006/07 and the closure of two units at Bulgaria’s Kozloduy nuclear power station, required when the country entered the EU.» Electric power consumption in Greece totaled 59.2 TWh in 2006, a drop of just 0.5 percent from 2005. Although consumer rates remain low, prices in the daily production market increased considerably, the report says. The average marginal price of the system rose from 43 euros/MWh in 2005 to 64 euros/MWh in 2006, mainly due to the rise in the prices of oil and natural gas. «The rationalization of the prices is necessary, as current levels cannot support new investment – which is indirectly confirmed by the strong hesitancy of private investors who have secured production licenses.» Finally, the Kantor report predicts that instability in oil prices, due to the existence of various geopolitical factors, will continue this year and will slow down the growth rate of demand for oil. To a large degree, this instability will influence national energy markets, particularly in countries like Greece where the share of oil in the total primary supply of energy is among the largest in the European Union members.

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