Gazprom Contract Hindering Privatization of Greek State Gas Company

Greece will have a lot of obstacles in the bid to privatize its state-run gas Public Gas Corporation (DEPA), with particular problems emerging for the process that will start with the submission to Parliament of a bill to that effect, Ekathimerini reports.

A take-or-pay safety clause in the procurement contract with Russia’s Gazprom and the recent decision by an Athens court that deemed the pricing method for natural gas illegal are emerging as huge concerns that are hampering the company’s competitiveness and compromising the new plans to privatize it.

The court decision that reduces the debt of Hellenic Fertilizers and Chemicals (ELFE) to DEPA by 60 million euros ($67 million) could set a precedent for similar cases by other major clients of DEPA, which may demand a renegotiation of their contracts with the utility regarding the pricing formula. That would completely upset the gas company’s finances and deter possible investors, the newspaper writes.

The take-or-pay clauses included in the latest revised contract with Gazprom, from 2014, whereby DEPA either absorbs the agreed gas quantities or pays a fine, are an even greater threat to the company.

This year DEPA will have to pay the Russian state gas giant 30 million euros ($33.5 million), its market share is continuing to shrink and the contract doesn’t end until 2026, so the dues to the Russian company are likely to grow with every passing year, Ekathimerini writes.

Russian gas deliveries to Greece began in 1996 under a contract between Soyuzgazexport and the DEPA Public Gas Corporation of Greece, signed in 1988 and covering delivery of up to 3 billion cubic meters (bcm) per year through 2016, inclusively. In 2014, this contract was extended to 2026.