Greece 'Neglects its Hydrocarbons': interview

NGE spoke to the executive vice-president of Flow Energy, Elias Konofagos. Flow is a multi-disciplinary environmental, economics, management services and trading company based in Athens. Before that he was the general director of Hellenic Petroleum’s upstream division.

Konofagos has been an influential and often outspoken voice in the Greek oil & gas sector for many years. It was as a result of this that he was appointed as personal advisor on energy to Greece’s former prime minister, Antonis Samaras.

Dr Konofagos, you have always spoken your mind and for a long time now you have been making the case that potentially Greece can be a major, world class, oil & gas province. What do you base this on?

Indeed, I firmly believe that Greece is sitting on major hydrocarbon resources south and southwest offshore Crete, even though these are still largely under-explored. I base this on volumes of geological evidence and seismic data amassed over the last three decades, and which I had the privilege to access and study. I also worked closely with international leaders in the field of oil & gas E&P in order to bring forward this information by publishing many joint papers presenting our findings.

Evaluation of geological and geochemical data acquired since 1985 by scientists working on the Libyan Sea indicate the possible existence of large hydrocarbon deposits, equivalent to the Levantine Basin combining the exclusive economic zones of Israel, Lebanon, Syria and Cyprus.

Can you elaborate?

This is an area dominated by the collision of the African and Aegean tectonic plates. The compressional forces generated are responsible for the formation of an underwater ridge, the so-called Mediterranean Ridge, with a large number of accretionary prisms (indicative of presence of hydrocarbons), starting from the western part of the island of Lefkas in the Ionian Sea, extending south of Crete and ending roughly south of the island of Kastellorizo. The area is characterized by two major anticlines, an abyssal plain and seven backstop basin-trenches, all indicative of possible hydrocarbon plays.

There is also a large number of mud-flow volcanoes. These have been emitting natural gas bubbles for more than a million years. Hydrocarbon analysis on mud samples around the mud-flow volcanoes indicate the presence of active, deep, hydrocarbon systems. Studies indicate that potentially strategically significant gas reserves may be present in Greek waters south of Crete in the range of 2-4 trillion m³, and possibly as much as 1.5-4bn barrels of oil. This is supported by US Geological Survey which estimated that the Mediterranean, east of Italy, may hold as much as 10 trillion m³ of gas.

So, clearly there are major prospects for Greece to become an important oil & gas player. Is this a new experience for Greece?

Oil deposits are nothing new in Greece. Herodotus wrote about them in the fifth century BC. “I have seen pitch drawn up out of a lake on the island of Zakynthos… They let down a pole into this lake, with a myrtle branch fastened to the end, and pull out the pitch that clings to the myrtle, which has the smell of asphalt,” he wrote in his Histories.

Few know that the country is an oil producer. During the 1980s Greece produced about 30,000 b/d – 12% of its consumption – from oil fields off the coast of Kavala, in the northern Aegean Sea. But now production is minimal, about 3,500 b/d.

You mentioned 1985 as the start of exploration south of Crete. With all these good indications and Greece’s dire need of an economic miracle why hasn’t much been done yet to convert these prospects into producing assets?

It is indeed a most important goal that over the last few years Greek governments have set as priority, including the development of an appropriate framework and plans to lead to offshore licensing and exploration. The energy strategy that Greece will pursue with regards to the “Cretan hydrocarbons” is bound to dictate its economic future. However, as you can imagine top priority now is dealing with the dire economic situation Greece is in. Hydrocarbon exploration is not receiving the attention I believe it deserves.

Seismic surveys were commissioned in 2012 and produced very promising results. In fact some giant structures were identified. Subsequently a licensing round was launched in October 2014, but, with no clear strategy, the response was poor. Two licenses were awarded west of Greece but none south of Crete. Even these were to Greek-led consortia. So far major international oil companies have stayed away.

What should Greece do to drive hydrocarbon E&P?

There is an urgent need to develop a national hydrocarbons strategy, including delineation and if possible declaration of Greece’s exclusive economic zone (EEZ), and carry out more 3-D seismic surveys. It also needs to overhaul its hydrocarbons law to cater for deep and ultra-deep offshore rights. This is needed to attract international E&P companies, which in turn requires political will, credibility and transparency. Greece has the potential but to realise it, it has to give the sector the attention it deserves. The wealth it can create can eventually bring the country back to its feet.

While Greece has been struggling to find its way, both economically and in terms of hydrocarbon exploration, in your recent presentations you have been excited by the discovery of Zohr and its wider implications in terms of eastern Mediterranean hydrocarbons. Can you tell us about it?

The Zohr gas-field discovery is not only a commercial achievement, but also a scientific one, in the sense that it has shown us the potential presence of further new giant exploration biogenic gas targets in the eastern Mediterranean. Eni has stressed that from a geological point of view this kind of giant biogenic gas discovery trapped into a karstified limestone (reef) reservoir, is a new play for the Mediterranean Sea.

These specific geological formations were created in paleo-lagoons during the Miocene age. Such lagoons existed south of Cyprus but also south of Crete and there are reasonable chances that they may contain more Zohr-type reservoirs, meriting further exploration. Reassessment of seismic data has identified multiple potential targets of Zohr-type gas-fields in Cyprus EEZ in areas now included in the newly-declared third offshore licensing round.

Such reservoirs have significant advantages. For example, Zohr covers an area of ​​100 km² containing 30 trillion ft³. In Cyprus the Aphrodite gas-field reservoir is in a sandstone formation and even though it is covering a similar area its recoverable reserves are six times smaller, about 4.5 trillion ft³. High gas productivity per well is another important factor for this type of reservoir, due to high porosity, with much improved economics and commerciality.

These discoveries have created opportunities but also challenges for the producer countries of the eastern Mediterranean. How do you see gas-field monetization progressing?

The question of whether the discovered reserves can find their way to the domestic and international markets in a timely manner requires careful examination. First, meeting domestic demand and creating surplus for exports necessitates the development of the discovered fields, ie, converting reserves into production capacity.

Companies will carry out costly exploration and field development only if they can rely on the ability to commercialize their discoveries with a favourable rate of return. In this sense, much will depend on the gas price the governments will be prepared to pay for the domestic market, the stability of the countries’ regulatory, fiscal and gas policies, and the political atmosphere.

Unfortunately, the countries in the region haven’t yet developed comprehensive and successful energy policies that take into account these challenges along with the region’s geopolitical changes. In the absence of clear export options within effective policy schemes, not only will it be hard to attract companies for exploration and production, but the development of the discovered resources may be seriously delayed. This brings us to the future export potential of the countries in the region. The future of the whole eastern Mediterranean region's gas exports depends greatly on the expected evolution in the global market and gas prices. Over the next few years this will continue to be a major challenge.

So what are your suggestions for Greece?

The most unexplored country in the eastern Mediterranean remains Greece. A new Greek exploration strategy must be created as soon as possible, taking into account the new discoveries in the region, both in the Levantine Basin and Zohr.

Greece should give priority to the creation of mineral wealth as a way to assist recovery of its economy. It is about time for the new Greek government to give priority to this sector and attract the international oil companies needed to develop it. But this requires careful planning and preparation based on long-term attractive technical, commercial and legal E&P incentives. In the medium term production infrastructure once established in Israel, Cyprus and Egypt could lead to regional synergies minimizing technical production costs of future Greek offshore developments.

The most promising area for discovering new significant gas reserves in Greece is south of Crete, where major geological biogenic accumulation targets, similar to that of the supergiant Zohr gas-field, could be discovered. But this requires exploration and drilling. Once found, the gas has a ready-made market waiting for it: Europe.

Dr Konofagos, thank you very much

Dr Charles Ellinas, @CharlesEllinas

Nonresident Senior Fellow, Eurasian Energy Futures Initiative, Atlantic Council