28
Thu, Mar
51 New Articles

Greece: An Emerging Energy Hub in the SE Mediterranean

Greece
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Greece has long been a regional energy market. However, drastic changes have been taking place which have the potential to transform Greece to an energy hub in the South Eastern Mediterranean region. The first step was made with the inauguration of the Greek-Turkish gas pipeline at the beginning of the millennium.   

Infrastructure Projects

Important infrastructure projects — such as the TAP pipeline, which will transport Azeri gas via Greece to Italy, and the Euroasia Interconnector, which will connect the Electricity Transmission Networks of Greece, Cyprus, and Israel — are reshaping the Greek energy market. Such infrastructure projects will allow the Greek energy markets to become fully interconnected, and thus highly competitive. This development, combined with a set of important ongoing and anticipated oil exploration projects, could transform the Greek Energy Market into a truly mature market. A word of caution though: the on-time completion of projects is critical. Completing the infrastructure projects on time is not only a necessary prerequisite for the opening of the market, but would also send a strong signal to investors that the Greek State is dealing with these issues with the necessary determination.

Liberalization of Electricity and Gas Markets

In past years remarkable efforts were made to liberalize the Greek energy markets. That said, although Greece has properly transposed the electricity and gas EU directives, due to structural inefficiencies and regulatory inadequacies, no real and satisfactory opening to competition has been achieved. However, this seems to be changing.

The Electricity Sector

In the Electricity sector Greece has adopted legislative measures to fully implement the EU Target Model.  theIn wholesale market, the mandatory pool system will be replaced by a new system, consisting of a day-ahead market, an intraday market, an imbalances market, and a financial term products market. These mechanisms will be coupled with an Energy Exchange created according to EU standards. Furthermore, new rules will apply to ensure the short and long term stability and security of the system. These new rules are compatible with EU requirements and will be based on the principle of competition in order to minimize the distortive effect. New rules will also apply, in line with EU approvals, for the promotion of renewable sources of energy (RES) projects. RES subsidization rules will allow the combination of high environmental standards with the principle of free competition. The entry of a strategic investor in the Transmission System Operator (TSO) has already been completed, and the TSO now operates according to the so-called “full ownership unbundling regime.” Market participants are responding positively and a private suppliers in the downstream market have developed an increasing market share.

The Gas Sector

Remarkable progress has also been made in the Gas sector. The privatizations of the incumbent operator (DEPA) and the Transmission Network Operator (DESFA) are ongoing and, once completed, will allow the implementation of the full ownership unbundling model in the gas sector as well. Perhaps most importantly, the unbundling of the gas distribution networks from supply activities has been completed and from January 1, 2018 onwards, all customers, both residential and industrial, are now able to choose their suppliers, which is expected to boost competition in the downstream markets.

New Era for Oil Exploration and Exploitation

In the Oil Exploration sector, important multinational operators have expressed a strong interest in several new tenders, including, in particular, the promising potential offshore oil fields in West Greece and the Crete Sea area. The Greek State has delegated the management of its exploration rights to a specialized entity — the Hellenic Hydrocarbon Resources Management SA (HHRM) — to promote the procedures for oil research, extraction, and exploration more efficiently. In parallel, the ongoing privatization of the dominant player in the Greek oil market — HELPE — is expected to generate additional market interest. 

The combination of all these developments could effectively transform Greece into a real energy hub in the Southern Mediterranean Area. Regulated industries such as energy markets are largely state driven. That does not mean that private initiatives are not necessary and extremely important. Inevitably, however, in order to be incentivized, investors need to have a regulatory framework that is clear, stable, and business-friendly, and which ensures a level playing field. Therefore, the willingness and determination of the Greek State to complete the ongoing projects and reforms in the Energy Sector both timely and effectively will be the decisive factor for achieving this ambitious objective. 

By Vassilis Karagiannis, Partner, KLC Law Firm