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Cash Strapped Greek Government Hopes for Rising Oil Output

The dire state of the Greek economy is well known to its European Union partners. Further hammering the economy are Greece’s massive oil imports. According to the U.S. government’s Energy Information Administration, in 2012 Greece produced only 7,500 barrels per day, while consuming 313,240 bpd, heavily impacting the country’s payments for imports.

And by any yardstick, the Greek economy is in bad shape, with unemployment topping 26 percent. The short-term prospects are equally dire, with the Institute for Economic and Industrial Research  projecting in its quarterly report issued on 9 July that the Greek economy is expected to shrink by 4.8-5.0 pct this year, slightly higher than its initial estimates for 2013, noting that its estimate was slightly higher compared with recent estimates made by the European Union and the IMF (-4.2 percent) and the OECD (-4.8 percent). Employment is expected to suffer later in the year with workers’ dismissals in the public sector as envisaged in a medium-term framework of Greece’s fiscal strategy for 2013-2016, with unemployment projected to rise to 27.8 pct of the workforce by the end of the year.

Accordingly, Athens is seeking to ameliorate its fiscal situation via its energy sector, first by ramping up the country’s oil and natural gas production and secondly, establishing the country as a transit nation.

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There is some slight hope for increasing Greek oil production, as on 10 July Greece’s Energean Oil and Gas firm announced that it was to begin a new offshore drilling program in the Prinos oil field in the in the northern Aegean Sea, between the island of Thasos and city of Kavala on the mainland in an effort to double its output there. The Prinos Oil Field was discovered in 1971. Developed by Energean Oil and Gas, it began production four years later. The Prinos oil field proven reserves are estimated at around 90 million barrels.

Energean Oil and Gas chairman and CEO of Mathios Rigas said that the new drilling investment program will cost approximately $60 million and that the "four new wells in the existing deposit will double the daily production. We are encouraged by the fact that the price of oil is consistently above $100 a barrel. Right now our daily output is 1,600-1,800 barrels, but we are optimistic that this amount can be doubled."

Energean Oil and Gas also operates a second oil field in the Aegean. The Epsilon oil field was discovered in 2000 and began production in 2010. The total proven reserves of the Epsilon oil field are roughly 30 million barrels and it now produces around 2,000 bpd.

Rigas added that his company was not limiting itself to offshore production, noting that Energean Oil and Gas has formed a joint venture with Petra Petroleum to begin onshore exploration in the Ioannina region, but that while the possibility of finding natural gas and oil reserves in the region are high, exploration activity would face significant difficulties because of the terrain, noting, "If we find something in Ioannina, it will be something very big, larger than Prinos. I do not want to talk numbers. But we are talking about a region of 4,000 square kilometers, while the field in Prinos covers an area of 600 square kilometers."

Nor is Energean Oil and Gas the only company betting on Greece’s energy future. Norwegian-based PGS stated last week on a preliminary assessment of its seismological exploration in Ionian Sea and the area south of the island of Crete that both regions are promising in terms of hydrocarbon research. PGS surveyed 12,500 kilometers of seismic lines, while another 6,000 kilometers have been covered in previous explorations.

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PGS presented its results to the Environment Ministry, adding that a report on the in-depth processing of the data collected would be ready by the end of the year, adding that the company’s purpose in conducting the research was to understand the structure of the seabed and locate oil beds ahead of Greece offering tenders for research next year, providing oil companies sufficient data to decide whether they were interested in conducting further research for oil and gas, and whether it would be in their interest to submit tenders for drilling licenses.

In a further leap of faith, the Greek government did not provide funds for the PGS research, but it will receive 10- 50 percent of PGS's revenues from the sale of data to oil companies, depending on the volume of data made available.

Needless to say, there are many in both the Greek government and Brussels keeping their fingers crossed that both Energean Oil and Gas and PGS are wildly successful.

By. John C.K. Daly of Oilprice.com




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