Potential Dormant In Troubled Waters

BMI View : While exploration in the recently-licensed blocks in western Greece could see success, the bulk of Greece's potential oil and gas resources are more likely to be located off the country's southern and south eastern coast. The government could offer offshore blocks in the east at a later point, though its ability to do so is still limited by territorial disputes with Turkey over claims to their respective Exclusive Economic Zone (EEZ) in the Aegean and Mediterranean Seas.

Greece is hopeful that exploration w ould pick up with new licences given for o il and gas exploration . The Greek energy ministry announced that it has awarded two licences within the western areas of Ioannina and Patraikos to two separate consortiums respectively led by Hellenic Petroleum and Energean Oil . These blocks were offered in the country's 2012 licensing round.

  • Gulf of Patraikos (offshore): The licence for this has been awarded to Hellenic Petroleum and its partners Edison International and Petroceltic (which took over Melrose Resources). Information provided by the ministry suggests that there are 'interesting oil prone' structures in this block and recoverable resources are estimated at around 200mn barrels (bbl). However, it also stated that this area 'is considered difficult' and no drilling has taken place on similar areas.

  • Ioannina (onshore): This large onshore licence has been given to Energean Oil and its partners Petra Petroleum. Oilfield services giant Schlumberger will be Energean's 'Strategic Technical Partner' on the field. Available data from the energy ministry estimates that there could be about 50 to 80mn bbl of recoverable oil in this area, though oil are likely located in deep targets in a mountainous terrain. It could also 'require a high cost of seismic and drilling activities' at the exploration stage.

Another block in Katakolo, southwest of the country, was also offered but the ministry did not announce a winner for it for unknown reasons. A consortium between Thome Group and Viking Energy Holdings is competing against Energean Oil for the concession.

Other firms that had showed interest in the three blocks put up are Trajan Oil & Gas, Arctic Hunter Energy, K.O. Enterprises, Chariot Oil and Gas and Grekoil Energy Ventures, according to a September 2012 report on Bloomberg.


Energy minister Yannis Maniatis is optimistic that this helps to 'open a new page of the Greek market' and expects that exploration can bring about 'an increase in government revenue' a nd 'the creation of new jobs'. However, it could take time before exploration bears fruit and leads to commercial production of oil, given that the licences awarded appear to be relatively challenging to drill in.

Also, reception to the licensing round suggests that the industry is cautious about Greece's o il and gas potential. Most of the bidders were either Greek companies, firms focused on the Mediterranean and/or southern Europe, or frontier-focused companies looking at underexplored areas. This contrasts with Cyprus ' most recent licensing round , which saw interest from major firms such as Eni , Total and Gazprom , despite the latter's lack of proven oil and gas reserves.

However, it should also be pointed out that the location of the blocks offere d played a role in this result. Better prospects are likely to lie offshore further south of the country. Petroleum Geo-Services (PGS), commissioned by the Greek government, is conducting a seismic survey off the west and southern coasts of Greece in the Ionian Sea. The energy ministry expects 'positive results' when PGS completes its study in late 2013/early 2014. Estimates by Greek geologists also suggest that the underexplored and offshore region near Crete in the Greek exclusive economic zone (EEZ) could hold up to 1.68trn cubic metres (tcm) of gas-in-place for Greece. Local media had reported that it is this region that major oil companies such as Total, ExxonMobil and Shell are interested in.

In the near future, Greece may open up this area for exploration in a bid to boost its oil and gas reserves. At present, the net energy importer only has about 10mn bbl of proven oil and less than 1bn cubic metres (bcm) of proven gas reserves. Oil and gas consumption was about 313,200 barrels per day (b/d) - or approximately 114mn bbl altogether - and 4.3bcm in 2012. Developing potential hydrocarbons lying beneath its waters could help Greece lower its long-term energy bills and support its economic rehabilitation.

Poor Production Prospects Leave Greece In Need Of Imports (I)
Greece Oil Production & Consumption, 2007-2017 ('000b/d)
Poor Production Prospects Leave Greece In Need Of Imports (II)
Greece Gas Production & Consumption, 2007-2017 (bcm)

Despite this potential, Greece's ongoing dispute with Turkey over maritime claims presents a downside risk to the ability of Greece to tap its potential. Although some of the maritime territory off the country's east coast is in Greece's proclaimed exclusive economic zone (EEZ), this has not been recognised by Turkey. In early 2013, tensions between the two countries threatened to flare up after Greece raised an objection to Turkey's grant of an exploration licence in disputed waters. Turkey had also vowed to retaliate with 'counter measures' if Greece starts exploring in claimed areas in the Aegean Sea.

This article is tagged to:
Sector: Oil & Gas
Geography: Greece

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