- Oil & Gas
- Key View
- Fitch Solutions
Greece Oil & Gas Key View
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.
Key View: The Greek government’s main preoccupations currently are ensuring adequate supplies of gas through the winter as EU countries gradually wean themselves off Russian imports. This will be achieved mainly through LNG imports, particularly once the Alexandroupolis FRSU installation gets up and running, but the Greek government is also in talks with Italy to establish gas storage facilities in the country. Meanwhile, the Greek government remains committed to attracting investment in exploration, aiming to produce first gas by 2028.
Headline Forecasts (Greece 2020-2026)
|Indicator ||2020e ||2021e ||2022f ||2023f ||2024f ||2025f ||2026f |
|Crude, NGPL & other liquids prod, 000b/d ||5.5 ||5.2 ||8.7 ||9.5 ||10.4 ||10.3 ||10.2 |
|Dry natural gas production, bcm ||0.0 ||0.0 ||0.0 ||0.0 ||0.0 ||0.0 ||0.0 |
|Dry natural gas consumption, bcm ||5.8 ||5.9 ||6.1 ||6.2 ||6.3 ||6.4 ||6.6 |
|Refined products production, 000b/d ||549.5 ||550.0 ||550.0 ||550.0 ||550.0 ||550.0 ||550.0 |
|Refined products consumption & ethanol, 000b/d ||254.2 ||272.3 ||276.8 ||281.3 ||287.0 ||292.3 ||296.7 |
|Brent, USD/bbl ||43.21 ||70.95 ||105.00 ||100.00 ||88.00 ||88.00 ||85.00 |
|e/f = Fitch Solutions estimate/forecast. Source: National sources, Energean, Hellenic Petroleum, Fitch Solutions |
Latest Updates And Key Forecasts
- In August 2022, Hellenic Petroleum said that following the withdrawal of TotalEnergies, it and ExxonMobil had increased their acreage in west and southwest of Crete. The 40% interest previously held by TotalEnergies were transferred to ExxonMobil, which increased its stake to 70% and Hellenic Petroleum to 30%.
- As part of EU plans to cut buying gas from Russia, Greece was successful in its request to the EU of basing its 15% consumption cut on data from 2021 to 2022, rather than an average of the last few years. This means its cut was kept to a maximum of 15%, or 7.5 terawatt-hours, as opposed to the 24% reduction that would have been necessary according to the calculation using a five-year average.
- In July 2022, the project company for the Interconnector Greece-Bulgaria (ICGB) which will transport Azerbaijani gas to Bulgaria was granted a licence for the natural gas system for the territory of Greece, according to the Green Regulatory Authority for Energy. The licence lasts for a 50-year period.
- Announced in mid-June 2022, the USD365mn Mediterranean Gas Project aims to be on line by Q124, with a throughout of 4.6bn cubic metres per year and will be connected to the mainland through an underwater pipeline of 340m.
- Greece has been in talks with Italy to agree on storage of gas in the country to guard against shortages during the winter. Greece currently has one facility which can store 225,000 cubic metres of LNG and regasify it.
- In April 2022, Greek Prime Minister Kyriakos Mitsotakis said that the government plans to accelerate the pace of exploration, including completing its first test drilling in two decades at the end of 2023, to cut the country’s reliance on Russian imports. The plan includes completing an initial round of seismic surveys to identify gas fields on one onshore and five offshore areas in Western Greece and around Crete by March 2023. Five of the six exploration blocks are owned by Hellenic Petroleum (ELPE), including two blocks west and southwest of Crete, jointly with TotalEnergies and ExxonMobil. The EU plans to reduce its reliance on Russian energy by two-thirds in 2022 and completely end it by 2030. Greece’s medium-term strategy aims to confirm economic figures for exploitable deposits within three to four years (2025-2026), starting gas production in six to seven years (2028-2029).
- In January 2022, the Black Sea Trade and Development Bank said it was providing a loan of up to EUR90.5mn to Energean to fund the company’s investment plans to develop the Epsilon and Prinos fields, as well as to support the company’s capital needs. In March 2022, Energean said it had resumed work on field development following agreement on the funding package. The programme includes completion of the Lamda platform, tieback to the Prinos complex and completion of three wells that were pre-drilled in 2019. In May 2021, Energean said it will move ahead with a revised shallow-water tieback development on the Epsilon field, offshore Western Greece, subject to confirmation of the funding package from the Greek government. Estimated phase one capital expenditure for the work is USD70mn, including construction of the Lamda platform and completion of three re-drilled production wells. With the approval of the European Commission (EC), Greece’s government has agreed to supply funds for the development. Production should start in 15 months, reaching more than 10,000b/d at peak production.
- In March 2022, ELPE said about 15% of its imported crude in the second half of 2021 came from Russia, but that this would be replaced with similar grades mainly from the Middle East. ELPE signed an initial deal to obtain initial supplies of crude from Saudi Arabia in March 2022.
- In early May 2022, Greece and Bulgaria launched construction of a LNG import terminal near the northern Greek port of Alexandroupolis, as part of plans to reduce reliance on imported Russian gas. The terminal which will be operational by the end of 2023 will triple Greece’s regasification capacity. In late April, Russia halted gas exports to Bulgaria, as well as to Poland, because they did not pay for gas in rubles. In January 2022, Greece said it will add two more LNG terminals for storage and gasification. In 2021, the EC has approved the Greek government’s plans for EUR166.7mn of government support for the construction of the new LNG terminal at Alexandroupolis. In January 2022, Bulgarian gas transmission system operator Bulgartransgaz said final investment decision had been made for the project. The Greek government has said the LNG terminal will be able to use hydrogen and will be a cleaner alternative than coal. Slated to start operations in 2023, the project will consist of an LNG Floating Storage and Regeneration Unit with a storage capacity of 170,000cu m of LNG and a regasification capacity of at least 5.5bcm per year.
- Greece is reliant on Russia for 40% of its gas imports. It also receives gas from Azerbaijan as well as regasified LNG via the Green LNG terminal at Revithoussa. In early February 2022, there were discussions between Greece, Serbia and North Macedonia to create a single gas market for the three countries.
- In December 2021, ICGB said that it had received the third tranche of financing from the European Investment Bank of EUR30mn. The final tranche (EUR19.9mn) is expected to be received in Q222. the agreement for the interconnection was signed at the end of 2019 for four tranches worth EUR110mn.
- Greece has said it will ban sale of new gasoline and diesel cars from 2030, as part of the country’s first Climate Law, which should be adopted by the end of 2021. The country’s climate law will also include efforts to cut greenhouse gas emissions by 80% by 2040.
- In September 2021, Greece’s privatisation agency HRADF named Italgas as preferred bidder in a tender for the sale of state controlled gas distribution network DEPA Infrastructure. The Greek government is in the process of selling its 65% stake in the network, with ELPE also divesting its 35% shareholding. Italgas outbid Czech investor EP Investment Advisors. The company's bid includes an upfront fee of EUR733mn (USD866mn).
- The low oil price, caused by suppressed demand for oil globally in light of the Covid-19 pandemic, means there will be limited capital expenditure for investment in exploration in the coming years, which will weigh heavily on our exploration and production forecasts for Greece over the medium term.
- We expect to see steady growth through our long-term forecast period (2022 to 2031) in Greece’s proved reserves, driven by the government’s commitment to exploration. We forecast an increase in proved reserves from 0.3bn bbl in 2022 to 0.4bn bbl in 2031. However, we expect lower exploration expenditure to weigh on growth in the early part of our forecast, at least, given the low oil price.
- In 2022, crude production increased by 5.1% to an average of 16,999b/d, a significant increase on 2021’s 16,136b/d. Over the medium term, through to 2026, we see Greece’s output rising to a high of 18,670b/d, representing an increase of 5% y-o-y. This will be driven by the government’s plans to accelerate its exploration plans in the short term. Over our long-term forecast period, we see crude output declining, decreasing at a rate of 1.0% to 2031. We expect Greece’s crude output to stand at 18,306b/d in 2031.
- Greece’s crude oil distillation capacity stands at 526,000b/d. There are no current plans to increase this and as such, we see Greece’s refining capacity remaining at this level over the rest of our forecast period through to 2031. Greece’s downstream utilisation rate is very high, in 2022 standing at 104.6%. We expect it to stay at this level through the remainder of our long-term forecast through to 2031.
- Greek refined fuel consumption increased to 272,28064,110b/d in 2022, equivalent to a 1.96% increase on 2021’s 259,24068,020b/d. In general, Greece is experiencing an upward trend with regards to its fuel consumption, with demand growing by 1.0% between 2022 to 2031, when we forecast consumption of 29089887,813b/d.
- We forecast 2.0% growth in natural gas consumption in 2022, with demand growing to 6.1bcm from 5.9bcm in 2021. Through our long-term forecast to 2031, we are forecasting an average increase of just under 2.0% y-o-y, rising from 6.1bcm in 2022 to 7.3bcm in 2031.
- We forecast negative growth across our 10-year forecast period, with imports decreasing to 540,040b/d in 2031, from 541,330b/d in 2022.
- We forecast Greece exporting 281,870b/d of refined products in 2022, a 5.0% decrease on 2021’s 286,929b/d. Through our 10-year forecast period, we see Greek exports of refined petroleum products declining at a year-on-year rate of 1.1%, to 256,890b/d in 2031.
- Greece is a net importer of natural gas. In 2022, we forecast net imports of 6.1bcm, a 2.0% increase on the 5.9bcm Greece imported in 2021. Through our long-term forecast period, between 2022 and 2031, we see imports growing at an average year-on-year rate of just under 2.0%. This will see gas imports increasing to 7.2bcm by 2031.
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