Gazprom set to bid for Greek energy firm

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Gazprom has expressed the strongest interest of all prospective bidders eyeing the privatisation of Greek gas firm Depa, two Greek energy sources said yesterday (23 October). The deal could undermine EU efforts to reduce Russian involvement in Europe's energy markets.

The sources said the Russian firm has lobbied across media, industry and government ahead of a sale decision which is due in January.

Both sources shied away from touting Gazprom as the likely tender winner, however, stressing that the outcome remains wide open.

Depa plays a key role in integrating south-east European energy markets with interconnectors.

Greece could also become a vital link in bringing vast East Mediterranean and Caspian Sea gas resources to western Europe.

Commission ‘not happy’

"Gazprom has expressed the strongest interest in Depa and [oil refiner] Hellenic Petroleum … although the European Commission [is] not so happy about this," a source familiar with the situation said.

Greek sales of energy assets have been imposed by lenders including the EU to help Athens repay debt. But they could also contradict wider EU energy goals if Gazprom beats rivals to buy the regionally strategic gas company, the source said.

Gazprom's pursuit of Depa clashes with EU efforts to diversify gas supplies away from Russia, which provides about a quarter of Europe's gas demand, by bankrolling new import corridors from the Caspian Sea via Azerbaijan and Turkey.

The EU has also launched a probe into Gazprom amid allegations that it is hindering the free flow of gas across the continent and overcharging customers.

"Gazprom as well as all other potentially interested investors should be treated equally as long as compliance with third [energy] package [regulations] and merger rules are guaranteed," said an EU official, who wished to remain anonymous.

Gazprom is also pursuing other interests in the region, including a stake in Israel's Leviathan gas field, the source with knowledge of DEPA said.

As an acquisition target, Depa offers Gazprom a chance to head off competition from new suppliers in the East Mediterranean.

But the Greek firm is also in talks with Texas-based Noble Energy and Israel's Delek Group to combine gas exports from Leviathan via a pipeline to Europe,

Other companies bidding for Depa (see background), include Azeri state-run energy firm Socar, Italy's Eni and Edison, Spain's Gas Natural and Algeria's Sonatrach. Non-binding offers and business plans are due by 6 November.

The East Mediterranean has emerged as a significant gas province on Europe's doorstep in recent years following a string of discoveries in Israeli, Greek-Cypriot and Lebanese waters that companies are now racing to develop.

Currently, Russia supplies Greece with a majority of its gas under a 20-year deal set to expire in 2016.

Political instability

In the meantime, a concession from Greece's lenders on Tuesday failed to win over two junior parties in the ruling coalition who blocked agreement on a vital austerity package because they oppose labour reforms.

Hopes that a final deal on the austerity cuts was near had grown after inspectors from the lenders left Athens last week saying the two sides had agreed on most reforms and austerity cuts needed to unlock the country's next tranche of aid.

Still, Greece's government first has to overcome internal divisions before it can strike a comprehensive deal on the cuts.

The Democratic Left and PASOK Socialist parties in Prime Minister Antonis Samaras's conservative-led coalition have long opposed unpopular proposals from EU and International Monetary Fund lenders to cut wages, reduce severance payments and scrap automatic pay rises.

"I won't accept or vote for the labour reforms the troika demands, and neither will the deputies of the Democratic Left," Fotis Kouvelis, the party's leader, told reporters after a meeting of the three leaders in Samaras's coalition.

Evangelos Venizelos, head of the PASOK Socialists, also reiterated his opposition to the reforms and urged Samaras to convince his European counterparts to back down on the proposals.

The continued refusal of the junior coalition parties to approve the package threatens a political impasse that could jeopardise Athens' efforts to obtain aid before cash runs out next month.

As cash-strapped Greece is selling many of its state assets, three Russian companies including Gazprom are bidding to acquire the Greek gas companies Depa and DESFA, out of a total of 17 bidders from 12 countries.

If Gazprom is prevented from acquiring Greece's gas assets, two other Russian companies will also be in the race to help it get the deal. These are Sintez, a small company owned by Leonid Lebedev, and an investment fund called Energiya, headed by Igor Yusufov, a former minister of energy and current member of the Gazprom Board of Directors.

Among the other bidders are the State Oil Company of the Azerbaijani Republic (SOCAR), the Czech state energy company CEZ, Edison and Eni of Italy, Spain's Enagas and Gas Natural, the Chinese gas-distribution company ENN, Israel's energy holding Israel Corp., Mitsui of Japan, Algeria's Sonatrach, Vopak of the Netherlands, Greece's GEK Terna, and the Mytilineos and Motor Oil (M2M) consortium.

Greece expects to obtain no less than €2 billon euro from the auction. Depa, the public gas supply corporation of Greece, has been estimated at €1 billion in value and DEFSA, a fully owned subsidiary of Depa, is estimated at €500 million.

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