Mining Greece – Hydrocarbons: The next big bet in Greece

MINING GREECE – HYDROGARBONS - 001Can Greece become… Norway thanks to hydrocarbons? 

The exploitation of hydrocarbons is not only a great opportunity to boost economic growth but also to lay the foundations for a Greek oil industry.

Will Greece one day become Norway? The estimations for rich mineral deposits in ours seas and the forthcoming first round of call for proposals for the concession of twenty potential oil fields pose once again the question “Can Greece become Norway of the Mediterranean by 2030?”

The answer may take time to be given and we expect the results from the tenders and the researches that will follow. But even if Greece will never be able to become like the Scandinavian country, the presumptive deposits represent a great opportunity. How to make advantage of this opportunity is all about.

The Norwegian model in the hydrocarbons sector that seems to be attractive to the Greek government is the country’s largest industry and consists of three pillars: financing the country’s insurance system by the hydrocarbons revenues, creating an industry that produces and exports know-how, such as the case of Petroleum Geo-Services (PGS) which conducted researches in Greek seas and provided the world market with experts from its universities.

Former Minister of Environment and Energy Giannis Maniatis referred constantly to his model by which the revised legal framework for oils was influenced. What is more, the PGS company that conducted hydrocarbon exploration in the Ionian Sea and South of Crete was Norwegian as well as the model on which the establishment of the National Fund of Social Solidarity was based.

This Fund will receive 75% of the future public revenues from hydrocarbons, namely dividends, rights and taxes that will be paid to the State by the companies that will undertake research and exploitation in Greece.

So how much Greek can the Scandinavian oil model become?

The expected revenues, the anticipated investments in the industry as well as the research and the new jobs could form a basis for comparison.

According to former Prime Minister, Antonis Samaras, the hydrocarbon fields in areas of Western Greece, Epirus and Ionian Sea could generate up to 150 billion euros in the next 25-30 years form the taxes paid by the companies that will undertake the exploitation of the deposits.

There is not information on corresponding revenues from South Crete since they are uncharted waters. However, scientists, such as the chemical engineer Elias Konofagos who works for the company Flow Energy, do not hesitate, citing foreign institutes, to talk about revenues ranging from 90 to 270 billion dollars! Nationwide, they estimate that the minimum revenues could amount to 180 billion dollars and the maximum to 360 billion dollars in the long term (25-30 year period).

Suppose that these estimates are reasonable. Making a comparison with the revenues of the Government Pension Fund which receives the taxes paid by the companies that exploit the deposits of Norway and then they are invested to create a secure financial future for next generations, will convince us that the figures are dissimilar. In late 2013, the total value of the Pension Fund was 853.9 billion dollars and it owns over 1 percent of all global stocks. In addition, it is the largest stock owner in Europe with about 1.78 percent of European stocks. Moreover, the Norwegians not only exploit their oil but they created also their own industry. This included research vessels for hydrocarbons, such as the “Nordic Explorer” which carried out researches in the Greek seas along with the accompanying ones «Romulus» and «Thor Chaser», and researches in universities with training programs that develop specialist scientists.

And at this point Greece is trying to emulate the Scandinavians. As Mr. Maniatis had said in May last year, the Greek universities would have for the first time in September 2014 three postgraduate programs in research and exploitation of hydrocarbons. A common element of the two countries is that they have the largest tanker fleets in the world.

But where we bear no resemblance to the Norwegians is the issue with the economic zones, the so called Exclusive Economic Zones (EEZ). Oslo has long been settled this matter with its neighboring countries (Britain, Denmark, and Germany) and we have not yet signed agreements with Egypt and Libya, while the agreement with Albania was annulled by the Constitutional Court of Tirana. As for Italy, we are in consultation with them in order to expand upon the current Greek-Italian agreement from 1977, with the aim to establish boundaries of all the maritime zones between the two countries.

Concerning the investments and the new jobs that will be created in a decade from now, there will be about 15-20 drilling rigs in Greece. Each one of them is estimated that corresponds to 200-300 new jobs. Other estimates are even more ambitious talking about 107,000 direct and 340,000 indirect new jobs in the next 25-30 years.  In Norway, the oil industry already employs more than 200,000 people (figures of 2009).

The four pillars of the Norwegian model:

1. The Government Pension Fund receives tax revenues from the companies that are engaged in the research and exploitation of hydrocarbons.

2. The findings from the deposits laid the foundations for the creation of an entire industry (the Statoil, the Institute of Oil Directorate) controlled by the State.

3. Many related industries were created: port management companies, companies carrying out seismic surveys with vessels, engineering research and development companies.

4. There was a development in the technical know-how regarding the natural gas pipelines thanks to the interconnection with Germany, UK etc.

[SOURCE: http://www.tanea.gr/, Giorgos Fintikakis]

Εnergean: Greece is an attractive destination for hydrocarbon investments

“Greece is still an attractive destination for hydrocarbon investments, particularly in research and production of hydrocarbons. Investments in this sector are long term and are more affected by the fall in oil prices rather than the political developments”. 

The above are pointed out by the CEO of Energean Oil & Gas, Mathios Rigas, with respect to the investment plans of the company in the sea area of Kavala, the conduct of research activities in Ioannina and Katakolon and its participation in the tender for the areas of Etoloakarnania and Preveza. According to him, the fall in oil prices and its impact concern the company much more than the change in the government, since the new political leadership in the competent Ministry has stated its intention not to intervene in those tendering processes that are in progress.

With respect to the impact of the fall in oil prices, he mentioned that despite the small production of 2,000 barrels per day of the oil deposits in Kavala (Prinos, North Prinos), the company is able to continue on its course and proceed with the planned investments for the exploitation of the deposits of 30 million barrels that there are in the three known fields (Prinos, North Prinos, Epsilon).

The company aims to increase the daily production of 2,000 barrels to 10,000 barrels by 2016, and given that it has the appropriate production facilities (terrestrial and marine) to produce 30,000 barrels per day, owns its own vessel and drilling rig, it will be able to afford oil prices up to 30 dollars a barrel.

Mr. Rigas referred to the $225 million dollar investment plan of Energean and said that it will start in the next few months, with a total of 15 wells that will be performed by the proprietary drillship of the company Energean Force. The first ones will take place in Prinos field to increase its production and then the investment in “E” field will follow.

However, due to the fact that the construction of a new maritime platform is required for the exploitation of this deposit, this program absorbs currently small amounts for pre-development studies, environmental and construction ones. Upon completion of the entire program, Mr. Rigas estimates that the oil exploitation in the Kavala Gulf which began in the 1970s will be extended for another 15 years from now.

Lastly, Mr. Rigas pointed out that the fall in oil prices has some positive effects except the negative ones. There is a greater availability of personnel, while the suppliers of goods and services have reduced their prices and this helps to reduce the production cost. In any case, he concluded “we invest in the period of low prices so that when prices return to higher levels we will have the maximum production”.

[SOURCE: euro2day.gr, http://kavala-portal.gr/]

Submission of two bids in the open tender for hydrocarbon exploration rights in western Greece 

Two bids were submitted in the tender that opened in August for hydrocarbon exploration in the areas of Arta, Etoloakarnania and northwestern Peloponnese, by Hellenic Petroleum S.A. (ELPE) and Energean Oil & Gas.

The Italian power company Enel did not participate in the tendering process, despite the fact that the tender was launched at the initiative of this company which expressed its interest in the three areas (in accordance with the current legislation, in the event that there is an expression of interest for research in a particular area, then a tender is launched for interested parties to submit their proposals).

According to information provided, Enel was involved in discussion with ELPE for a possible joint bid but it withdrew its interest invoking the change in tax rates that might take place. However, according to market sources, the collapse of international oil prices played an important role in its decision.

Energean expressed its interest in 2 of the 3 land blocks (Arta and Etoloakarnania, covering an area of 4762.9 km2 and 4360.3 km2 respectively) which is a continuation of the Ioannina block for the exploration and exploitation of which has recently signed a License Agreement with the Greek Sate. Eneregan has already been awarded the exploration and exploitation rights for the deposits in Prinos and has also undertaken the conduct of researches in Katakolon.

ELPE has already been awarded the exploration and exploitation rights in the Gulf of Patras and has submitted bids for the areas of Arta-Preveza and northwestern Peloponnese.

Later in this year it is expected the expression of interest in the tender that will be launched with the aim to explore the existence of hydrocarbons in 20 offshore areas in the Ionian Sea and in Southern Crete.

As stated by the Minister Panagiotis Lafazanis, the terms of the tender will be reviewed in order to better serve the public interest and there might be an extension of the deadline for submission of proposals that expires in May.

Energean announced that “its bid stands as actual proof of its support for the Greek government’s effort aiming at production reconstruction and a return to growth for the Greek economy” as well as that “the presence of the American investment fund “Third Point”, which manages funds of over $ 12 billion worldwide and is a strategic shareholder of our company, highlights the confidence of the international investment community to the growth prospects of the domestic hydrocarbon sector and Greek economy in general”.

ELPE is interested in the Hydrocarbon Exploration and Production Prospects in Greece and added that “all decisions and operations are subject to a thorough technical and economic analysis and assessment, and the progress of research works and investments is determined by purely technical and business criteria”.

Lafazanis has announced the review of 20 sea blocks

The Minister of Reconstruction of Production, Environment and Energy, Panagiotis Lafazanis, had stated that the tender for hydrocarbon exploration in the three land blocks in western Greece, the deadline for which expired on February 6, will proceed normally.

During his meeting with the head of EDEYA, Sophia Stamataki, Mr. Lafazanis pointed out that there will be no interference from the leadership of the ministry in view of the completion of the international tender for exploration and exploitation of hydrocarbons in the three land areas of Western Greece (Arta – Preveza, Etoloakarnania and NW Peloponnese), which according to the initial timetable, was completed today.

However, the Minister had announced the review of the large round of concessions for hydrocarbon exploration and production, on the basis of national interest and the maximum effect for our country, in 20 sea blocks in the Ionian Sea and south of Crete.

[SOURCE: http://newpost.gr/ ]

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