Russia's Sintez sees potential in Greek gas

October 31, 2012

RECORDER REPORT

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Russian energy firm Sintez Group sees Greece as a good investment opportunity and plans to bid for energy assets to benefit from an expected shift to natural gas, its CEO said. Sintez also hopes Greece will develop into a gas transit hub, CEO Andrey Korolev said in an interview.

Sintez, controlled by Russian tycoon Leonid Lebedev, is to bid for Greece's state-owned gas provider DEPA along with the natural gas grid operator DESFA. If successful, the assets would add to its portfolio which includes power-generating facilities in Russia, oil and gas field development and real estate. The energy assets are expected to be among the first big sales in Greece's privatisation drive, which is motivated by the country's need to repay debt.

The two assets could be valued at around 1.5 billion euros ($1.9 billion), a source familiar with the situation said. Non-binding bids are due by November 6. "The current moment is a very lucky one for investment," Korolev said. "It seems to me that the crisis situation simply makes the government take the proper decisions - to move to the state of transparency, introducing market conditions and raising competitiveness."

Greece is launching a privatisation drive as part of efforts to pay down debt and return from the brink of bankruptcy. Athens aims to raise 19 billion euros ($25 billion) by the end of 2015 and about 50 billion euros by 2020 under its asset sale programme. These numbers are to be revised downward, according to people close to the talks with the country's lenders. With its potential wealth, Greece could become a transit hub for gas to Europe if it establishes an exclusive economic zone allowing it to legally extract hydrocarbons south of Crete and in other areas.

"We (have been) keeping a very close look on Eastern Europe, for a long time now, and specifically the Balkan region," said Korolev. "The ... idea which is widely spread now is that the Balkan region will be an energy hub for energy resources to the European countries." Korolev also forecasts that the structure of energy generation in the region is going to change in favour of gas. Carbon-conscious countries are trying to move away from coal-fired generation to more efficient gas-fired generation.

Greece's domestic gas market is still in its infancy, with relatively few households and industries consuming the fuel. The country imports all its natural gas from abroad and about 80 percent of its imports come via pipeline from Russia. Sintez, which is pursuing the Greek assets through its Negusneft division, will be competing against Russian gas giant Gazprom and a number of other firms from Europe and elsewhere in the world.

A total of 14 firms expressed initial interest in buying Greece's state gas firm DEPA, one of the first assets to go under the hammer to reduce the nation's debt, the government said in April. Gazprom, which provides most of the natural gas DEPA uses and supplies about a quarter of Europe's gas demand, is fighting a competition investigation by Brussels into its gas sales.

The European Commission started the inquiry in September, into suspicions that Gazprom, which is more than 50 percent owned by the Russian state, was hindering the free flow of gas across the EU and imposing unfair prices on its customers by linking the cost of gas to oil prices.