Socar expects to complete DESFA acquisition in first half of 2015

The European Commission said it has opened an in-depth investigation to assess the conformity of the proposed acquisition of DESFA by the State oil company of Azerbaijan, with the EU merger regulation.

DESFA owns and operates Greek’s sole high-pressure gas transmission and Greece’s only LNG terminal and mainly transports gas through its network.

“The commission has concerns that the transaction may reduce competition on the upstream wholesale supply market for natural gas in Greece because it could allow the merged entity to hinder SOCAR‘s competitors in accessing the Greek gas transmission network,” EC said in a statement.

The commission aims to ensure that the sale of 66 percent in DESFA, part of the Greek government privatisation programme with a view to modernise and liberalise the energy markets, does not result in competitive harm and ultimately higher gas prices for consumers in Greece.

The commission now has 90 working days, until 23 March 2015, to take a decision.

The commission’s initial market investigation indicated that the merged entity may have the ability and the incentive to hinder competing upstream gas suppliers from accessing the Greek transmission system, in order to reduce competition on the upstream wholesale gas market in Greece, EC said.

The merged entity could restrict its competitors’ access to the Greek gas transmission network by strategically limiting investments in future expansions of the import capacity including an expansion of the LNG terminal and an interconnection between TAP and DESFA’s network, according to the statement.

In addition, the merged entity could restrict inflows of gas into Greece by managing the gas transmission network in a discriminatory way favouring SOCAR’s supplies over its competitors. The preliminary investigation also suggested that SOCAR may have the incentive to shut out competitors from access to the network, because it would be profitable for SOCAR. Moreover, the Greek regulatory framework would be unlikely to deter the merged entity from doing so. This could reduce the number of current and potential suppliers and the amount of natural gas in Greece and lead to higher gas prices for clients.

The commission will now investigate the proposed transaction in-depth in order to determine whether or not these initial concerns are confirmed.

Azairbaijan’s SOCAR said in a statement that it will continue to cooperate with the commission to complete the $501 million takeover within the earliest possible period.

 

LNG World News Staff; Image: DESFA