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Greece's eyes on the prize

Greece's drive to attract investment to the hydrocarbons sector is gathering momentum

Tourism and the oil industry can make strange bedfellows. But Greece wants to bring the two into close proximity, both in terms of location and economic benefits, as the government seeks to expedite oil and gas exploration to build on a fledgling recovery after the country's disastrous debt crisis.

Some of its prospective hydrocarbons acreage lies adjacent to its most popular visitor destinations, notably in and around the Ionian Sea. A recent oil spill from a sunken tanker, which coated tourist beaches near Athens, was a reminder that development will need to be handled with care.

But Greece needs all the investment it can get and doesn't want to rely exclusively on its dominant industry, tourism, to provide it.

There has been a resulting flurry of approvals and investment pledges for the sector over the last year or so, both on or near shore, but also in deeper water, where exploration costs may be higher.

The first new production is likely to come from fairly close to shore and be relatively modest. In September, Energean Oil & Gas received approval from Hellenic Hydrocarbons Resources Management (HHRM)—the Greek government oil and gas agency—for a $50m field development plan (FDP) for the Katakolo field in the Ionian Sea, situated to the west of the Peloponnese. It was discovered in the 1980s, but has remained undeveloped since then.

An Environmental and Social Impact Assessment will be carried out for Katakolo, which will be submitted for approval in 2018. A final investment decision is due in 2019, with first oil expected in 2020. The field lies in water depths of 200-300m, while the reservoir lies at depths of 2,300-2,600m. The Katakolo Concession as a whole covers a 60 sq km area and is estimated to hold around 11m barrels of recoverable oil.

The company is already the operator of Greece's only producing oilfield in the Prinos Basin, in the northern Aegean Sea, which has output of 3,500 barrels a day. In March, the firm farmed out a 60% stake in its onshore Ioannina and Aitoloakarnania blocks to the north of Katokolo to Spain's Repsol. Energean was also recently given the green light by the Israeli authorities to implement its field development plan for the Karish and Tanin gasfields, offshore Israel, which have estimated 2C resources of 2.5 trillion cubic feet.

Repsol is just one of a number of larger foreign firms joining the smaller regional players—and they are looking well beyond rejuvenating near-stranded assets.

European interest

The potential for large-scale oil exploration took centre stage as an issue during a visit to Greece by French president Emmanuel Macron in September. European Union leaders are eager to encourage investment and economic recovery in Greece, whose survival within the bloc was at risk during the country's debt crisis and the energy sector is an obvious target.

Total's chief executive Patrick Pouyanné joined Macron on his visit, along with other French business leaders. His company is eager to boost its acreage in the Eastern Mediterranean region, mindful of big or promising discoveries—mainly of natural gas—in Egypt, Israel and also Cyprus, where Total is already drilling.

A consortium of Total, Greece's Hellenic Petroleum and Italy's Edison, were given the go-ahead in June to explore an offshore block in the Ionian Sea, while Hellenic Petroleum bid independently for two other blocks in the area. The geology of the region is similar to that in nearby Albania, Italy, and Croatia, where significant hydrocarbons finds have been made.

Total's Pouyanné said during the president's visit to Greece that ratification of the agreement by Greece's parliament was expected by year-end, after which work would commence.

The bigger prizes may yet prove to lie further south though. Greek waters to the southwest of Crete lie not far to the north of Egypt and Libya.

Total, ExxonMobil and Hellenic Petroleum have already said they would like to explore the area, which resulted in the government launching a tender offering up acreage.

Such rapid progress towards wider exploration in a country with limited known reserves does not, of course, guarantee Greece a place among the region's top producers. But it does represent notable progress for the sector.

Greece's 2014 licensing round—held while the debt crisis was still unfolding—resulted in 17 out of the 20 blocks tendered receiving no offers. That includes some of the acreage which is now being snapped up.

It's not purely about the hydrocarbons prospects. Political and strategic imperatives are at work too, as big investments from western oil companies could help balance the country's books and tie Greece more closely to its EU partners. Meanwhile, big gas finds would provide an opportunity for the continent to diversify supply. The prospect of tying in Greek gas supply with that from Egypt, Israel and Cyprus via a trans-Mediterranean pipeline is another potential attraction.

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