Exploration for hydrocarbons is not for the faint-hearted. With remote area or offshore drilling potentially running into the tens of millions of dollars, it’s risky and expensive.
Not surprisingly, with finite supplies and the top three gas and oil producers (Saudi Arabia, Russia, and Iran) able to dictate the terms of engagement, competition is fierce. For those who strike it lucky though, the rewards are equally as high, not only financially but also politically.
With dwindling indigenous European gas production – expected to fall by as much as 60% by 2040 – and the block’s increasing reliance on gas imports, Southeastern Europe has, as of late, entered the international radar as a potential new frontier for hydrocarbon resources. Following milestone gas discoveries made in the Eastern Mediterranean, Greece is now back chasing the hydrocarbon dragon. If successful, not only would this bode well for the future of the country’s economy, it could make Greece an exporter of energy to the rest of Europe.
In 2014, the Greek Parliament gave a green light for hydrocarbon exploration of both on, and offshore blocks in the Ioannina, West Patraikos Gulf, and Katakolon areas. These areas had been explored previously. with offshore success in the Katakolon oil field, and natural gas in Epanomi, but many more fell away as a result of technical difficulties, or were deemed uneconomic.
Today, with technological advances in exploration and extraction, many regions are being revisited, as well as new potential areas identified.
In February of this year, the Greek Parliament ratified four lease agreements, paving the way for energy heavyweights, including France’s Total and Italy’s Edison, to undertake exploratory drilling in the Western part of the country. In 2014, the Total-led consortium – which also includes Greece’s leading oil refiner Hellenic Petroleum -was awarded an offshore block in the Ionian Sea.
The latter block was originally offered up in 2014, together with 19 others in Greece’s second international licensing round – the first of which took place in 1996. However, international interest was limited, and only three blocks were acquired. Hellenic Petroleum took two, with the Total-led consortium taking the third.
A further onshore block in Ioannina was also acquired in 2014 by Energean, which is in fact the only company that currently produces hydrocarbons in the country. A substantial part (60%) was subsequently farmed out to Spain’s Repsol three years later.
While the response to the 2014 bidding round was somewhat underwhelming, it should be remembered that oil prices had dropped considerably, and Greece was in the grip of a deep economic recession.
The picture today, however, is entirely different. Oil prices increased by more than 20 per cent in the first half of 2018, reaching a four-year high in October of this year. Greece, having exited the EU’s economic adjustment programme in August, is on the comeback trail with positive economic growth since 2017, coupled with consecutive upgrades of its international credit rating. Perhaps, what is most important, is the addition of the Zohr effect to the equation.
Discovered in 2015 off the coast of Egypt, Zohr overtook Leviathan in Israel as the largest gas field in the Mediterranean basin. With similarities in rock formations to those found to the south and west of Crete, despite the area’s unknown status, the super majors were willing to listen – and invest.
Responsible for an overview of the whole project, and providing an interface between major international oil companies (IOC’s) and the Greek government, is Hellenic Hydrocarbon Resource Management (HHRM).
If Greece is to have a future in this highly competitive sector, HHRM’s role as an enabler is crucial. Playing a pivotal role in marketing the country’s attractiveness to potential partners, and providing comprehensive and highly technical data are, therefore, at the top of their agenda.
Although in existence since 2011, it wasn’t until five years later that people began to take notice of HHRM when Yannis Bassias took the helm as President and CEO. With 25 years of experience in private sector gas and oil exploration, along with a professorial background in geology, Bassias’ combination of hands-on and technical expertise, was exactly what was needed.
“You must realize,” says Bassias, “that the company existed mostly on paper, and my first job was to form a team. This was most important because they had to be highly skilled, technically.”
“When you negotiate with international gas and oil companies and attract them to Greece, you don’t do it with a full stop and a comma,” he said confidently. “You have to know exactly what they’re looking for, be clear about what you want, and be ready and available to discuss all the issues on an equal basis.”
View from the Other Side
Yannis Bassias’ track record on the opposite side of the table is, he believes, the driving factor that first made him want to take up the position. “When you know the other side of the business,” he said earnestly, “it’s much easier to talk, and most importantly, negotiate. Without knowing the factors that make a deal mutually beneficial, no-one would come.”
In a country that produced one-and-a-half times as much olive oil as crude oil in 2017, Greece’s track record as a hydrocarbon hotspot has been slow off the mark. Only the Prinos field in the Gulf of Kavala, run by Energean, is producing oil at the moment, at around 4,200 barrels per day.
However, despite Bassias’ honesty about the country still being an unknown frontier, his team is doing incredibly well. “In the new blocks we are opening up, especially to the south and west of Crete, there are no wells, no discoveries, so yes, it is a frontier,” he admits. “But this is where the expertise of my team comes in.” he said proudly. “We can point out the similarities in rock types, structure, and geology, between successful areas and us [Greece’s exploratory blocks], as well as the undoubted geographical potential of Greece as a future [energy transit] hub.”
To date, Bassias’ scientific team have accumulated subsurface survey data of 32,000 square miles of Greek seabed, which he adds, allows him to say, “in all honesty ‘yes’, it will probably work here, let’s try it.”
Super Majors Step-Up
And ‘try it’ they shall. To date, the HHRM team has successfully negotiated with a consortium including ExxonMobil, Total, and Hellenic Petroleum, to take exploratory steps off the Greek coast. The three Super Majors formed a consortium to search for hydrocarbons, and won the largest blocks up for tender off the south and west coast of Crete. A tender was launched last year, following an expression of interest that was submitted by the Exxon-led consortium, for the offshore blocks in May, 2017.
Greek-owned Energean were also awarded blocks in Ioannina and Katakolon, with Repsol sharing the Aitoloakarnania block.
With the winning bids announced by Energy Minister George Stathakis in July of this year, and concession agreements subsequently signed in late September, between the Ministry, HHRM, and the IOCs, the green light is well and truly lit.
While agreements still need to be approved by the Greek parliament, what shouldn’t be overlooked is the impressing timeframe of the whole process.
Navigating both bidder and government through the several phases of the process, normally takes two and a half years, which is undoubtedly another significant factor of the HHRM’s success. Bassias is, nevertheless, mindful that in the hydrocarbon exploration sector, you have to be in it for the long-run.
Playing the Long Game
“We are not expecting any results for at least 5-6 years,” said Bassias stoically. “From the point of discovery, however, and if volumes indicate a break-even or profit potential, things will happen very fast. Potentially within seven years, we could well see big offshore production platforms off western Greece and southwestern Crete.” ‘The most important thing though,” he adds, is that “in 2019 two exploratory wells will start in Greece, and we can say here, it has kicked off, it is done.”
Obviously, both offshore and onshore exploration is not without difficulty. The sea in both Cretan blocks runs to an average depth of around 3,200 meters, with areas that reach 4,000. At these kinds of depths, the problem, says Bassias, is one of stability, “we just haven’t got the drilling ships with the technology to handle it yet.” However, according to Bassias, both Exxon and Total are working flat out on the problem. With seismic studies due to run for at least three years, and the same period again set aside for 3D seismic studies in phase two, drilling is still some time away.
Greece currently produces only a fraction of its daily oil consumption, meaning significant hydrocarbon discoveries could have a transformational effect on the country’s growth plan. Moreover, the country is in the midst of an array of midstream projects, entailing the development of key energy infrastructure – ranging from the TransAdriatic Pipeline, to the IGB Interconnector, or the potential EastMed pipeline. Placing Greece at the forefront in terms of European gas supply. Ultimately making it a potential energy transfer hub for the wider region. This, says Bassias, means “it is the first time that we can talk about not coincidence, but conjunction, between Midstream, the pipes and upstream. Who as an investor will consider that this is not good? “
With HHRM’s drive to push the sector forward, and the right conditions in place, it seems Greece’s ambitions to enter the hydrocarbon race are closer to becoming a reality than they’ve ever been before.