Greece remains the third most unexplored country in the East Mediterranean with promising prospects of energy discoveries that are documented in 3-D seismic surveys conducted by the seismic vessel “Nordic Explorer” of Norwegian company PGS in 2012-2013. Estimates by petroleum geologists, engineers and energy economists indicate that a possible volume of 10 trillion cubic feet of gas lies in the sea area south of the Greek island of Crete, and in other areas mostly located in deep and ultra-deep Greek sea waters.
It is in this context that Greece supports development of indigenous maritime blocks and land areas that can produce investment revenues and royalties associated to hydrocarbon volumes. Revenues and royalties are explicitly specified in contracts signed between the Greek state and consortia of companies like the consortium of Hellenic Petroleum, American Exxon Mobil and French Total for oil and gas exploration in maritime areas west and southwest of Crete. According to this contract, if oil and gas is discovered, “the Greek state stands to gain 40% of the total investment revenues, broken down as follows: 20% as income tax plus 5% as regional tax, with the rest being income on royalties based on a rising scale linked to hydrocarbon volume”.
The coronavirus pandemic has slightly delayed plans for the development of new fields. For example, the three-member consortium that has taken over the development of two maritime blocks in west and southwest of Crete rescheduled the conduct of seismic surveys for 2022 instead of 2021.From a hydrocarbon exploration point of view, offshore Crete represents a frontier area. The maritime area of Crete however faces two major challenges, namely a combination of complex geological history and ultra-deep waters exceeding three thousand meters in most of the area. Geologic similarities with Egypt’s Zohr gas field, however, raise prospects for significant hydrocarbon discoveries.
The Hellenic Hydrocarbon Resources Management Authority has identified more than 30 maritime blocks with a total estimated quantity of recoverable gas ranging between 2 and 2.5 trillion cubic meters. This surfaces the need for the declaration of a new international licensing round that can likely be digital following the steps of neighboring Egypt that declared in late February the first digital international bid round for energy exploration and production (E&P) operations in 24 Blocks at the Gulf of Suez, Western Desert, and the East Mediterranean.
The pandemic prompted Egypt to adopt certain policies to overcome energy challenges such as energy oversupply attributed to the economic slow-down, and the reduction of energy exports. The Egyptian government reduced energy prices for industrial users from $5.50 million British Thermal Units (mmbtu) to $4.50 mmbtu and cut the tax on company dividends to soften the economic impact of the pandemic on the energy sector. Egypt’s renewable sector has also been affected forcing the Egyptian Electric Utility and Consumer Protection Regulatory Agency to impose caps on the quantity of solar energy that private companies and independent producers can generate. The regulatory authority’s interference is expected to slow down investment in renewables for the next two years and the Egyptian government delays tenders for solar parks until energy supply-demand dynamics play in the latter’s favor.
But throughout 2020, the Petroleum sector achieved major accomplishments and prospects for the exploration of gas fields in Egypt have been quite promising. Prime petroleum industry projects include but are not limited to the octane production expansion project of Alexandria National Refining and Petrochemical Company; the inauguration of the petroleum refinery of Egyptian Refining Company (ERC) in Mostorod that is expected to produce some 2.3 million tons of diesel fuel and 860 thousand tons of high-octane fuel annually; and, the completion of drilling operations of Ahmed Hamdy Tunnel 2, a transportation link under the Suez Canal that will connect the Sinai Peninsula to the main land of Egypt.
Despite the pandemic, Cairo signed 22 exploration and production agreements in 2020 for the development of offshore blocks in the Red Sea and the East Mediterranean with international oil majors like American Exxon Mobil, British Shell and BP, Italian ENI, French Total and others. Greek medium sized energy company Energean Oil & Gas has taken over full ownership of the Egyptian Abu Qir concession located in West Nile Delta that is one of the largest gas producing hubs. The Greek energy company took a final investment decision recently on the North El Amriya and North Idku concession that contains the Yazzi and Python gas fields that will be developed as satellite fields to the Abu Qir offshore and onshore infrastructure.
Greece and Egypt managed to become two of the few countries in the East Mediterranean that ensured promising oil and gas investment prospects. Most important, the two countries through coordinated policies have determined the region’s unfolding energy geopolitics.
Athens and Cairo signed an agreement on the partial delimitation of their respective EEZs largely invalidating the Libyan Memorandum of Understanding on the delineation of maritime boundaries. The agreement demarcates a maritime area that extends from the 26th Meridian that meets the eastern part of Crete up to the 28th Meridian that meets the Greek island of Rhodes granting 55% of divided maritime zones to Egypt and 45% to Greece. The partial delimitation agreement is outcome of 15-year negotiations, and it recognizes all the rights of coastal states in their maritime zones, in accordance with the United Nations Convention on the Law of the Sea (UNCLOS). The agreement practically nullifies the argument of Turkey that Greek islands do not have an Exclusive Economic Zone. The partial delimitation agreement also foresees that both countries work together to set up a joint venture to explore and develop natural resources extending to their EEZs.
Greece, Egypt and the region is expected to reap benefits from the delimitation agreement that include but are not limited to the attraction of international investment for oil and gas exploration in demarcated maritime areas; prevention of the Turkish State Energy company (TPAO) to proceed with drilling activities in Libyan maritime zones that extend to Egyptian waters; execution of regional energy infrastructure projects like the East Mediterranean Gas Pipeline that will transport gas from Israel and Cyprus to Europe via Greece; and, execution of the EuroAfrica Interconnector that will link the power grids of Egypt, Cyprus and Greece through the Greek island of Crete.
Driven by a broad regional commitment to enhanced security and energy cooperation, Greece and Egypt are among the founding members of the Eastern Mediterranean Gas Forum whose charter was signed in September 2020. The forum headquartered in Cairo is a regional cooperation organization whose prime objective is to maximize the benefits of the East Mediterranean’s energy wealth through joint integration and use of existing infrastructure or construction of new one. The forum provides a platform of dialogue between governments and aims to ensure communication between states and the energy industry for upstream and downstream issues.
As a result of promising gas discoveries in the East Mediterranean, Greece and Egypt have taken steps to transform into regional energy trading hubs. Greece has executed energy infrastructure projects with the aim to serve as a gateway for regional gas supplies to Europe. For example, Athens upgraded twice the Revithoussa LNG onshore terminal located southwest of Athens to manage bigger LNG volumes and maintain increased LNG gasification capacity. In addition, the swift construction of the offshore Floating Storage and Regasification Unit (FSRU) in the city of Alexandroupolis in northeast Greece for the transfer of LNG to the Balkans and Southeast Europe has attracted American and European support. The reason is that the FSRU on northeast Greece enhances the diversification of Europe’s energy resources and the funneling of American LNG to the wider region.
For its part, Egypt signed an agreement with Cyprus for the construction of an undersea pipeline that will transport gas from the Aphrodite field to Egypt’s liquefaction plants for re-export to third markets. An additional agreement was signed for transportation of Israeli gas from the Leviathan field via pipeline to Egypt and another deal between the Egyptian Natural Gas Holding Authority (EGAS),Consolidated Contractors Company (CCC), and the Palestinian Investment Fund for the development of the Gaza Marine gas field. For the latter agreement, exploitation plans see the transportation of Palestinian gas through a new pipeline to Egypt for liquefaction and export to Europe.
Unquestionably, Greece and Egypt are two uniquely positioned countries that adopt consistent policies that center not only on the development of indigenous energy resources and their transformation into trading hubs but also on the demarcation of maritime boundaries. Both countries pursue active diplomacy and coalition building, which has lit the engines of energy cooperation, and has invigorated regional mechanisms for the benefit of their economies, peoples and future generations.