The East Mediterranean can play an increased role in Europe’s energy security as several resources in the region could be unlocked taking into consideration the ongoing war on Ukraine and the EU strategy to reduce reliance on Russian energy.
Greece is a country that has some promising energy discoveries that are documented in 3-D seismic surveys conducted by seismic vessel “Nordic Explorer”. The seismic vessel collected geological data into the Greek Exclusive Economic Zone (EEZ) from a total area of 225 thousand square kilometres in the Ionian Sea and in South and Southwest Greece in 2013. Estimates by petroleum geologists, engineers and energy economists indicate that a possible volume of 10 trillion cubic feet (tcf) 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.
The war on Ukraine triggered a Greek government decision for an action plan that centres on the completion of seismic surveys and drilling at the offshore blocks in the Ionian Sea and southwest of Crete. Notably, the basic strategy in Europe on energy transition has not changed. Thus, the lifespan of the hydrocarbons in the energy mix remains limited. That said, the Hellenic Hydrocarbon Resources Management company (EDEY) estimates that there is enough time for the development of the natural gas industry in Greece, having as a guide the precedent of the Zohr gas field in Egypt. The Egyptian field’s commercial utilization took less than two-and-a-half years after the completion of the seismic surveys. In addition, the geological structures in fields west and southwest of Crete resemble to those of the super-giant Egyptian Zohr and the Israeli Leviathan gas fields.
The decision of French Total, member of the consortium of American Exxon Mobil and Hellenic Petroleum (HELPE) that acquired exploration and development rights for maritime fields in west and southwest Crete, to withdraw from these blocks after the completion of surveys in specified areas has not impacted plans for their development. In fact, Exxon Mobil and HELPE agreed, after intensive negotiations, to take over Total’s share in the two contracts signed with the Greek state for oil and gas exploration. American Exxon has become the operator and owner of 70% of the rights off the island of Crete, and HELPE has taken over the remaining 30%.
Greece supports development of indigenous oil and gas fields not only to enhance the energy security of Europe but also to produce investment revenues and royalties associated to hydrocarbon volumes. According to contracts signed between the consortium and the Greek state for hydrocarbon exploration and development in west and southwest Crete, 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 volumes”.
Greece becomes an Energy Hub
Greece is an EU member state closest to the Caspian Sea’s gas reserves and the gate for Israeli, Egyptian and Cypriot gas to continental Europe. With the deterioration of EU-Russian relations due to the war on Ukraine, Greece is the main entrance of alternative gas to Europe. TAP, the European part of the pipeline that brings the Azeri gas to the EU, travels through Greece and is a prime project that brings energy to consumers. Concurrently, Greece works with regional countries on ways to bring Leviathan and Aphrodite gas reserves to Europe.
Alternative solutions also centre on the Revithousa LNG Terminal, located southwest of Athens. It has been upgraded to manage bigger LNG volumes and to maintain increased LNG gasification capacity with the aim of turning Greece into a natural gas hub and reinforcing security of the gas supply for the country and the extended region. Specifically, a newly installed floating storage unit at the terminal has enhanced capacity by 70%, from 225 thousand cubic meters to 380 thousand cubic meters, allowing traders and suppliers to plan LNG imports for 2023. The terminal already receives American and other LNG shipments, highlighting the prospect of Greece becoming a bigger LNG importer than pipe-gas importer in accordance with the ongoing transformation of global LNG markets. It has to be noted that increased LNG loads arriving at the Revithoussa terminal have sustained the Bulgarian market since late April when Gazprom turned off the tap and deprived it of 90% of its gas needs. Bulgaria now receives quantities of 90,000-100,000 megawatt hours of natural gas through Greece. Of these quantities, 10,000 MWh is Azeri gas funnelled through the TAP, and the existing Greek-Bulgarian pipeline.
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 because it enhances the diversification of Europe’s and the broader region’s energy resources. Works on Alexandroupolis terminal officially launched in early May 2022; the terminal is expected to be operational in December 2023. The Alexandroupolis floating LNG terminal will provide 5.5 bcm of gas annually to the markets of Greece, Bulgaria, Serbia, and North Macedonia. The new infrastructure is tied to other interconnection projects, like the Gas Interconnector Greece-Bulgaria (IGB) that has become operational in September 2022, and the gas links between Bulgaria, North Macedonia, and Serbia. Through this project, the four countries will practically diversify their routes and sources of supply and thus be able to reduce their dependence on Russian gas. Overall, these infrastructure projects can enhance regional cooperation, alter the energy map of Europe, and render Greece a regional energy hub.
Exploring Hydrogen Options
Greece aims to position itself as one of the key hydrogen hubs in Europe. The “White Dragon”, a cluster of projects, falls in this category and is planned to use large-scale renewable electricity for production of green hydrogen in western Macedonia through solar energy electrolysis, while distribution will take place through the TAP pipeline. “White Dragon” has been recognized by the European Commission as an Important Project of Common European Interest (IPCEI). Top-class companies participate in the cluster namely the Public Gas Corporation, Advent Technologies, Copelouzos Group (DAMCO ENERGY SA), Corinth Pipelines SA, TAP AG, DESFA, Terna Energy, Motor Oil and PPC.
Yet another geopolitical assessment with Greece at its epicenter is supported by Saudi Arabia. This assessment lies in the massive imports of hydrogen from the Middle East and North Africa to Europe via Greece taking into consideration the EU’s statement that, as the Ukraine war goes on, the European intention is to import 10 million tons of renewable hydrogen annually until 2030. Admittedly, from today’s perspective, this share is expected to increase further.
The first major hydrogen project that meets demands of industrial production has already been launched in the NEOM region, north-west of Saudi Arabia, that is authorized as an exclusive renewable and hydrogen zone. Significant production volumes are expected in 2024, and large-scale production of renewable hydrogen will commence in 2026. The best way to transport hydrogen is via pipelines but, in the transition period until the relevant infrastructure is set in place, Greece is expected to play a central transportation role with its large merchant fleet. The framework of cooperation between Greece and Saudi Arabia in the fields of renewable energy, clean hydrogen and its transfer to Europe was set in an MoU that was signed during the July official visit of the Saudi Crown Prince to Athens.
Energean in Israel’s Energy Landscape
Greece develops its indigenous energy resources, promotes its renewable energy potential, and has managed, through Greek medium sized energy company Energean Oil & Gas (Energean), to penetrate the Israeli energy landscape. Energean has been pivotal in the development of Israel’s gas; it currently holds eight exploration blocks offshore Israel and has facilitated competition in the Israeli market. Karish and Karish North were discovered in 2013 and 2019 respectively and are jointly developed with four wells tied to a new-built Floating Production Storage Offloading (FPSO), called the ‘Energean Power’. The FPSO is the first ever to operate in the East Mediterranean constituting a flexible infrastructure solution with an 8 Bcm/per annum gas treatment capacity and an 800 thousand bbls liquids storage capacity.
Energean’s recent discovery in Athena exploration well, located in an area that lies between the Karish and Tanin fields, has indicated that the well contains recoverable gas volumes of 8 bcm on a standalone basis. Athena can thus enhance the profitability of the Karish-Tanin development that can reach its full potential thanks to the historic Israel-Lebanon agreement on maritime borders. As known, Lebanon previously claimed a maritime area that encompasses part of the Israeli Karish gas field, developed by the Greek energy company. Reportedly, the Israel-Lebanon agreement delineates the Exclusive Economic Zone of the two countries and allows the unimpeded development of the Karish field that falls under full control by Israel.
In addition, findings in Hermes well that lies within block 31, offshore Israel, are promising with preliminary estimates of 15 bcm, thus de-risking the nearby structures of Poseidon and Orpheus. Concurrently, Zeus well, located in block 12, is estimated to contain 10-12 bcm enabling the company to collect resource estimates across the entire Olympus area; the overall estimates are approximately 58 bcm of recoverable gas.
Energean actively pursues development options for the commercialization of the blocks under its ownership. The energy company centers on further domestic Israeli gas sales, for example spot sales, and on enhancing export options. For example, in order to meet the latter, an MoU signed between Energean and the Egyptian Natural Gas Holding Company (EGAS) for the supply of up to 3 bcm/yr for a 10-year period is intended to turn into a binding agreement. The company also looks into exports to other regional and European markets via pipeline and LNG via Cyprus. Specifically, Energean proposes to construct a pipeline from its gas fields in Israel to Cyprus for liquefaction using a FLNG at Vasilikos and then export to Europe. It is deemed as a bankable project as there is access to natural gas and liquefaction facilities and an off-taker, Vitol – the world’s largest independent oil, gas, and commodities trader – to trade and market the LNG.
A Final Note
The war on Ukraine and political risks in the region seem to escalate, but a group of countries are determined to stay in the way of stability and growth. Greece belongs to this group and endeavours to play a constructive role in mitigating the energy supply risks of Europe and in containing the accumulated instability. The development of gas fields and the execution of energy infrastructure projects though synergies of Greece with regional and international partners demonstrate their joint determination to lock the East Mediterranean into a European energy strategy that provides a win-win situation by which cooperation benefits all.