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Greece's pilot natural gas auction clears at about €36/MWh – sources

12 Dec 2012 18:24:55 | esgm

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Greek natural gas incumbent DEPA sold 82% of its offered 365GWh (34 million cubic metres) of natural gas during its pilot wholesale auction on Tuesday, with the sale price settling at about €36.00/MWh, ICIS understands.

DEPA said 23 companies participated in the auction, two of which were power producers with the rest industrial end-users. It was not clear, however, whether all those involved were successful in purchasing any of the gas.

Market participants have said the eventual price was also the auction's starting price. Some traders said the precise figure was €36.14/MWh, although this was not confirmed by all sources.

ICIS understands that the final price was not much lower than some buyers' long-term supply contracts with DEPA but nevertheless was still a worthwhile rate.

One source said that, despite the marginal reduction in cost, the auction gas came with the added incentive that it was a fixed cost.

Under most oil-linked long-term contracts with DEPA, buyers would still have to hedge foreign exchange for the remainder of the month. The oil element of such contracts is usually a six-month rolling price and therefore known.

DEPA sold 300GWh of the 365GWh on offer. One source said that, while not all the gas was snapped up, the volume sold was "significant". Altogether, 1,000 lots were available, with no one company permitted to bid for more than 25% of the volume offered.

Aiding market liberalisation

Traders said that, while the auction went smoothly, DEPA should have been encouraged to report more price details afterwards in order to boost transparency, which in turn would aid the liberalisation of the Greek gas market.

ELPEDISON, the venture between HELLENIC PETROLEUM, Italian company Edison and Greek industrial holding ELLAKTOR was cited by sources as one of the participants, as was HERON, the subsidiary of GEK TERNA.

Last week, when DEPA announced the details of the auction sources predicted that its starting price would be based on the company's own weighted average long-term supply contracts as well as the cost of grid entry (see ESGM 3 December 2012).

Sources also said that it is unlikely that participants would bid lower than their LNG contract price but no higher than their own long-term deal with DEPA.

The final LNG assessment made by ICIS before the expiry of the December '12 spot DES Greece contract was €30.80/MWh.

DEPA was mandated by the Hellenic Competition Commission to sell 10% of its previous year's volume via auction as part of a wide-ranging commitment to open up the Greek market (see ESGM 15 November 2012).

Tuesday's auction was considered a pilot as it covered one month only. From next year, the sales will occur quarterly. While Tuesday's auction covered only a relatively small volume of gas, it has been seen as a turning point in the development of the Greek market.

Standard contracts

As part of its commitment to the competition authority, DEPA has also agreed to draft standard contracts for selling LNG while still in the terminal tanks of Revithoussa and for selling already booked network capacity to third-parties.

On Tuesday Greek energy regulator RAE launched a consultation on both standard contracts, having received them from DEPA. The consultation will run until 21 December.

Included in other elements of DEPA's commitments to the Hellenic Competition Commission are the unbundling of supply contracts and the freeing up of entry-point capacity. TMM

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