2014-01-23 16:17:45 - Recently published research from Business Monitor International, "Greece Oil & Gas Report Q1 2014", is now available at Fast Market Research
We foresee a steep learning curve for the Greek authorities as they attempt to establish Greece as a destination for exploration and production (E&P) investments. The multi-month delays (on account of fiscal and taxation issues) in the finalisation of the open-door licences in Ioannina and the Gulf of Patras and the nebulous arrangements of the Katakolo licence, along with an ongoing 20-month delay in appointing the statutory hydrocarbons supervisory and management agency (EDEY AE), testify to the inexperience of the Greek authorities to move through the process (even of this small licensing round) in a timely manner - a negative precursor to the government's aspirations for an international licensing round. The absence of a declared and demarcated Exclusive Economic Zone
(EEZ) is a further obstacle that will cause delays. This, in conjunction with an anaemic institutional infrastructure as well as the absence of solid and stable fiscal and tax regimes to govern the upstream sector, represents the main hindrances to Greece's E&P aspirations. We note some upside risks to our forecasts for Greek hydrocarbons production towards the end of our forecast period; however, for the time being, we cannot factor in a change to our forecast scenario, which suggests very limited upstream activity in the country.
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The key trends and developments in the Greek oil and gas sector are:
Greece has selected two consortia led by domestic players Energean Oil and Hellenic Petroleum to explore for hydrocarbons in two blocks: one off the west coast in the Gulf of Patras and one in the northwest at Ioannina. To date, a winner has not been finalised for the licence for the third block offshore the western Peloponnese at Katakolo. The licence agreements for Patras and the Ioannina blocks were expected to be signed by end-2013, following 24 months of delays.
Petroleum Geo-Services (PGS) will announce its findings from its 2D multi-client seismic surveys offshore western Greece and south of Crete in early 2014. A total of 35,000km have been mapped, of which 12,000km are brand new data, while the rest are redeveloped older seismic data. It is the first seismic survey of this scale and scope to assess the prospectivity of Greece's offshore, and if promising, the government is hoping to attract the interest of international majors.
On the privatisations front, the sale of a 66% stake in natural gas transmission network operator DESFA was agreed in late December 2013. Azerbaijan's state-owned State Oil Company Of Azerbaijan Republic (SOCAR) was the top bidder in the tender in June 2013 and took the stake with an offer of EUR400mn. Though the DESFA divestment was successful, the last-minute failure of the sale of parent DEPA, Greece's state-owned natural gas company, to Russia's Gazprom was a major blow to the process and the government's budgetary planning. It was hoped DEPA would achieve a selling price of EUR900mn. In December 2013 Prime Minister Antonis Samaras confirmed that the sale of DEPA is off the table for the time being.
In the midstream sector, the announcement of the Trans-Adriatic Pipeline (TAP) as the preferred export route to market for Azeri gas is a great boost for Greece's position as a transit country. The 800km pipeline will run through Turkey, northern Greece and southern Albania before travelling sub-sea to Italy. This is significant news for the development of Greece as an energy hub, but also for the economic benefits it will bring to the country during its construction and 50-year operation phase.
In the downstream segment, the expertise of Greek refiners and the country's place as a regional refining hub has made Greece one of the pre-eminent downstream markets in Europe. Upgrades of refineries, coinciding with a depression in domestic fuels demand, means that Greece is now a significant fuels exporter.
The 2014 crude oil net import bill is forecast to come in at US$18.7bn, reflecting the demand from refineries, with net crude oil imports reaching 502,000 barrels per day (b/d). The significant crude oil import cost will be offset by net fuels exports of nearly 230,000b/d, valued at US$9.3bn. Gas imports are likely to be US$2.4bn in 2014, rising to US$2.7bn by 2017. At the time of writing we assumed a Brent basket oil price for 2014 of US$102.8/bbl, falling to US$102/bbl in 2015.
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