Greece Oil and Gas Report Q2 2012

BMI View: Near-term energy demand trends are uncertain, given the perilous economic outlook facing thecountry. Investment in infrastructure projects is clearly at risk and International Oil Companies (IOCs) arelosing interest in the Greek oil industry. Consolidation in the downstream is set to continue. In the upstream,although interest in the eastern Mediterranean is growing, Greece’s potential remains low. Longer-term,imports of both oil and gas are certain to rise significantly

The main trends and developments we highlight in the Greek oil and gas sector are:

The country’s energy ministry has released the tender for three blocks, two offshore (Gulf of Patra andKatakolo) and one onshore, located north of Ioannina. Total contingent resources in the three blocksare estimated to be between 250mn and 300mn barrels (bbl), with the vast majority, estimated to bearound 200mn bbl, in the offshore block in the western Gulf of Patra. Onshore, north of Ioannina, andup to the border with Albania, previous early estimates suggest contingent resources between 50mnand 80mn bbl, but at a depth of more than 4,000m. The smallest block in terms of resources is that ofKatakolo, where older surveys estimate contingent resources to be approximately 3mn bbl

Natural gas consumption, which has risen to an estimated 3.5bn cubic metres (bcm) in 2011, isexpected to continue increasing, with BMI forecasting this figure to rise to 3.9bcm by 2016 and4.4bcm by 2021. The dire state of the economy has slowed the rate of growth, but infrastructure willstill be developed for greater local use, while new power stations will be gas-fired and Greece issecuring sources of imported gas supply. The Caspian Sea region is seen as one potential majorsupplier, with Iran expected to sell large volumes of gas to Greece, piped via Turkey

In 2011, the country imported 2.0bcm of liquefied natural gas (LNG), according to BMI estimates

There are plans to import gas from Qatar via a new receiving terminal. By 2021, we believe Greececould be importing up to 4bcm of LNG

Although there is scope for medium- to long-term stability in domestic oil production, there isconsiderable uncertainty over the scale and the timing of any new field development. Meanwhile,beyond the expected energy market weakness in 2011/12, the country’s oil consumption continues torise and is expected to reach 368,000 barrels per day (b/d) in 2016 and 406,000 b/d by 2021

Royal Dutch Shell has concluded a US$300mn asset divestment deal with Motor Oil Hellas and soldits entire fuel retail network of around 700 petrol stations plus its business in commercial fuels,bitumen, chemicals, logistics and LPG. The merger of Hellenic Petroleum and Petrola has beenapproved by the government and will be carried out via the absorption of Petrola by ELPA

The 2016 oil import bill is likely to be US$12.47bn, rising to US$13.79bn by the end of our forecastperiod in 2021. With gas imports due to cost US$1.79bn in 2016, the total petroleum import cost in2016 is forecast at US$14.26bn. By 2021, gas imports are due to cost US$2.04bn, resulting in a totalpetroleum import cost of US$15.83bn

At the time of writing, we assume an OPEC basket oil price for 2012 of US$99.38/bbl, falling toUS$97.23/bbl in 2013. Global GDP in 2012 is forecast at 2.6%, up from an estimated 3.0% in 2011,reflecting a faltering recovery in the US and an uncertain eurozone debt situation. For 2013, growth isestimated at 3.3%