Greece moves ahead with hydrocarbon exploration

As the Greek government is scrambling hard to avoid a looming default and eventual exit from the euro, the need for the state to raise much needed revenue, even on a long term basis, seems to have acted as a catalyst in its effort to accelerate plans for hydrocarbon exploration and production. Greece, which consumes some 380,000 barrels of oil daily, relies on crude imports for 99.5% of this quantity with the result that more than 5% of its GDP is spent on oil purchases. Therefore, the country has every incentive to want to reduce its import dependence and take advantage of its hydrocarbon deposits, which some experts say are not insignificant.
So far, Greece has been able to produce limited quantities of oil from its one and only oil field at Prinos, offshore from the coastal town of Kavalla and the island of Thassos in northern Greece. Prinos is currently producing some 3,000 barrels of oil per day with the prospect of this being increased to 5,000 barrels by the end of the year. Energean Oil, the current operator, is carrying out extensive drilling operations having since 2009 invested some $ 150 mln in improving reservoir output. Now in its 30th year of operation, Prinos has produced so far some 125 mln barrels of oil, which is way above the 35-40 mln originally estimated to hold.
Petroleum engineers argue that Prinos is typical of the type of hydrocarbon deposits to be found in Greece, which are not straight forward in their geological structure but may hold significant quantities of oil and gas in secondary basins, once the main reservoir has been depleted.
Although Greece remains one of the least explored countries in the Mediterranean, from a hydrocarbon potential point of view, there are a number of proven deposits of various sizes, which can be economically exploited.
According to Dr. Dinos Nikolaou, a well respected oil geologist, who has studied extensively Greece’s hydrocarbon potential over the last thirty years, there are eleven specific areas in different parts of the country which hold promising deposits. These are to be found mainly in the west of Greece, offshore in the Ionian Sea, onshore in Epirus, but also along the coastal area of northeast Greece. Until today, 175 exploratory drillings have been carried out in Greece but only 20-22 of them can be considered state of the art and have provided useful data which can be used to assess the region’s potential. Based on currently available data, it is difficult to make precise estimates concerning the country’s real hydrocarbon potential, but most geologists seem to agree that this varies between 2 to 4 bln of proven and probable reserves. In addition, there is also some calculated speculation that the offshore area south of Crete, known as the Herodotus basin, may hold as much as 2.5 trln cubic ft. of gas.
Based largely on the above information but also motivated by the steep rise in the price of oil over the last 12 months, which has meant a massive increase in the country’s oil account, the Greek government decided to press ahead with hydrocarbon exploration. So, two weeks ago, the Environment, Energy and Climate Change Ministry (YPEKA) issued an international invitation for expressions of interest for preliminary work for offshore exploration, that is, non- exclusive seismic and geophysical surveys, for the Ionian Sea and also to the west and south of Greece. The specialized geo survey companies that will win the tender will also assume the cost of the surveys.
According to Deputy Minister Yiannis Maniatis, the process of bidding will be completed over the next three months, while the aim is for the surveys to be ready in time for the second international round of hydrocarbon concessions for exploration, to be announced by the government before the end of next year.
According to Ministry sources, the objective of the planned seismic survey is to ensure data acquisition, processing and interpretation, including reprocessing and interpretation of existing data, in accordance to the highest present day oil and gas industry standards. These data will assist in the evaluation of the hydrocarbon potential of the area outlined in the maps released for the Ionian and Crete area and will also help in the promotion of the subsequent International Licensing Round for Hydrocarbon Exploration and Exploitation which is targeted for 2012.
The Ministry’s personnel will work closely with the successful petroleum company in the planning of the survey, the selection of acquisition and processing parameters and the interpretation/ evaluation of all available data.
The process of non- exclusive seismic surveys is a method that enables specialist companies to explore broad areas fast and effectively with the use of state-of-the-art technology, obtained deep imaging of geological structures and deposits. The results from this process will be handed to the government, while the surveying companies will retain the right to make the data available at a cost to prospecting oil companies for a specific period. The government also expects to raise revenue from the sale of research data, but the most important source of projected income will be the granting of concessions in the second oil round now under preparation.
Although it is difficult at this stage to estimate the amount of money that Greece could earn from oil and gas production, it is safe to calculate the state’s income from taxes alone in the area of 1 to 1.5 bln dollars per year on the basis of a daily production of some 100,000 to 120,000 barels per day and assuming a steady price of oil at $75 per barrel, note energy economists in Athens familiar with Greek oil law provisions.