Natural gas business fizzles
Foreign investors who have invested more than 360 million euros in the Greek retail natural gas market in the last two years and consequently had high hopes of its prospects have been disappointed. The foreign investments in this sector have been the biggest in the energy industry. Though constantly cited by the government, they appear to have run into difficulties even before they got off the ground. Two years ago, gas company DEPA held tenders in search of investors to help develop the suburban natural gas network in Attica, Thessaloniki and Thessaly, which attracted the interest of all major natural gas companies in Europe. Italagas was eventually selected, paying 151 million euros for a 49-percent stake in the Thessaloniki Gas Supply Company and 38.4 million euros for a similar holding in the Thessaly Gas Supply Company. Cinergy and Shell together paid 164 million euros to acquire a 49-percent stake in the Attica Gas Supply Company last year. Two years later and even as DEPA is due to launch tenders for investors for the domestic natural gas market in Macedonia and Evia, foreign investors are already facing disappointments. They have had to scale back their original timescales for constructing the network and for linking consumers to the grid due to problems over the institutional framework, the market and management. Regarding the institutional framework, sources said promises to regulate the installation of natural gas facilities have not been kept and in some cases there have even been distortions and deficiencies. One example is the requirement that buildings built after 1988 should be obliged to commission a survey on the construction of natural gas facilities. Generally, this has not been adhered to and in those cases where it has been upheld, the surveys were a mere formality and even fraudulent at times. In order to install natural gas facilities, building licenses need modifying. House owners, however, have shied away from this process for fear that construction irregularities will be discovered during the re-examination. Another problem is that the current requirement does not cover buildings constructed prior to 1988, meaning that a significant majority of residences would face difficulties getting connected to the natural gas network. A flat owner who wants to link up with the network would have to get agreement from all other owners in the building as the natural gas supply company is obliged to install facilities in areas in common use. Public buildings are obliged to get connected to the natural gas network. This requirement, however, has not been observed due to the red tape and time-consuming procedures as well as the costs involved. Furthermore, people with vested interests in maintaining oil as fuel are against the change as they would lose out. Another requirement, that small enterprises should get connected to the natural gas network a year after they are set up, appears to be something that the majority of companies do not know about. The firms, of course, see no reason to take on additional costs, especially after the government recently cut the tax on fuel oil. As a result, industrial use of natural gas is not expected to be significant. The second major problem facing natural gas suppliers are the technicians to install the facilities and companies selling home appliances fueled by natural gas. An absence of statistics on the natural gas market means that companies have only stocked up on a very limited number of appliances and in some cases can only supply the customer with the product after a month. Prices of such appliances are also very high. This is compounded by the fact that technicians also demand high fees for connecting residences to the natural gas network. The conversion from oil to natural gas-fueled facilities costs a hefty 2,900 euros. Sources said if the natural gas companies do not subsidize the conversion, it would be very difficult to win over customers. Management is also another major problem. Foreign investors in gas supply companies have the management even though they are the minority stakeholders. They have been slow to take action. One example is the requirement for public buildings and small companies to convert to natural gas, which the gas supply companies have not done anything about. They have also failed to inform consumers of the benefits of natural gas. The Thessaloniki Gas Supply Company started operations in September 2000 but only launched a marketing campaign this March. None of the three gas supply companies achieved their targets in 2001, leading them to lower their objectives for this year. The Attica company had originally planned to construct a network of 3,000 km (1,860 miles) this year but has since then scaled it down to 1,000 km (620 miles). Instead of hoping to sign on 1,500 customers, it is now aiming for 180. Both the Development Ministry and DEPA know about the management problems. Sources said the gas company is due soon to submit proposals to the development minister which will alter the current situation.
