Greece history and prospects of thasos oil reserves

Eastern Macedonia and Thrace Institute of Technology

MSc in Oil & Gas Technology

“Oil Trading”

“Greece: History & Prospects of Thasos Oil Reserves”

E.P. Kosteroglou

B.Sc. Mathematics

E. Michailidi

B.Sc. Petroleum Engineer

A. Souvatzoglou


F. Zachopoulos


Supervisor: N. Kontinakis

January 2014

Eastern Macedonia and Thrace Institute of Technology MSc in Oil & Gas Technology Oil Trading

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Table of Contents

1. Introduction............................................................................................................................. 4

2. Oil & Gas Reserves .................................................................................................................. 5

2.1. Prinos Reserves ............................................................................................................... 5

2.2. Prinos North .................................................................................................................... 7

3. Investment Development ...................................................................................................... 10

4. Geopolitical Situation of Greece ........................................................................................... 13

5. Conclusions............................................................................................................................ 15

References ..................................................................................................................................... 16


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1. Introduction

Initially the interest of exploiting Hydrocarbons in the Greek Region was developed

between 1860 and 1903. Major companies were involved in drilling projects. Some

of the most important were London Oil Development, Pan-Israel, Hellis and

Deilman-Ilio. These projects concerned Exploration activities in Zante, Evros and the

NW Peloponnese. In early 1960’s companies focused in Western Greece mainly on

onshore and only were evidence of surface oil were discovered. Moving on to the

1970’s Major Oil and Gas Companies began to show interest in Greece’s potential

hydrocarbon reserves. The first Greek public body entitled to take decisions on

exploration matters was developed. It was a crucial step due to the continuous

approach of interested parties such as BP, ESSO, CHEVRON, TEXACO and other. In

the same period; over forty wells were drilled by Majors including both onshore and

offshore drilling. The country had become of great interest and was constantly

attracting possible investors. The most significant discovery at the given time was

made by OCEANIC in 1971 - 1974 and concerned two exploitable fields in northern

Greece. They were both offshore; characterizes as an oil-field near the island of

Thasos and a gas-field on the South of Kavala. Their production was terminated

relevantly soon in 1993 for the South Kavala field and in 1998 for the Prinos field.

Approaching our days several discoveries were made in the wider area. The

consortium was constantly changing. This lack of stability created a risky and often

unstable environment for stakeholders. Prinos area is still active and new

discoveries have created ground for long term sustainability. In March 2013

Energean O&G Company signed an Extension of Prinos Exploitation Rights for 25

years and furthermore a 6 year off take agreement signed with BP in February 2013.

The Oil production of Prinos fields in November 2013 increased from 850 bbls a day

to 2300 bbls a day. This increase was succeeded by successfully implementing an -

Infill Well- known as PB-34. Prinos Oil field is also closely connected with the

fertilizing industry of Kavala. There byproducts removed from the oil are used as a

raw material in Ammonia, Nitric Acid, Nitric Fertilizers, Sulfuric Acid, Phosphoric Acid


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and Compound Fertilizer Production Units. There the final products are produced

and further distributed into the markets via distribution centers located around the

country.

2. Oil & Gas Reserves

2.1. Prinos Reserves

Production

The Prinos Oil Field is the main structure in the Prinos-Kavala basin. It is located in the

Gulf of Kavala. About 8 km north-west of the island of Thasos and covers an area of 4

km2.

The first exploration well was drilled at the end of 1973 and resulted to the discovery of

Prinos field. Thereafter, the field further developed between the years 1974-1980.

Production began in early 1981 with 8,000 to 10,000 barrels of crude oil per day. In

1985 the production of the field reached a maximum of 27,500 barrels per day and is

steadily declining since then.

Energean Oil & Gas has invested a great amount of money (€180 million) since 2007 and

achieved a consequential revival of Prinos field. On February 2011, the first infill well

(PA-35) started production with a rate of 1,000 bbls per day. Since August 2013, the

production reached the amount of 320,000 bbls.

A new investment program was implemented on July 2013 in order to achieve doubling

the production of the field. In September 2013 a new injection well was completed (PB-

23) followed by an infill well (PB-34) two months later. Thus, the production was

increased to 2,000 barrels per day in the first two months of 2014.

Initially, the reserves were estimated to 60,000,000 barrels. However, since 1981 the

production has reached 110,000,000 barrels.[1]


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Development

The field’s new reservoir model confirms considerable amounts of bypassed oil. That

fact was also confirmed by recent infill wells.

The 2014-2016 investment program was commenced in late 2014 and includes the

drilling of seven production wells in Prinos. Moreover, an extended reach well aiming to

drain the area in the South East of Prinos, is included. Four wells are also scheduled for

workovers to additionally perforate currently undrained sands. These wells are

expected to increase the production by 3,500 barrels per day. Additionally, small

recompletions and interventions are expected to lead to a further increase of 1,000

bbls/day.

The unexploited proved and probable reserves (2P) have been estimated 11,9 million

barrels of oil equivalent.

Zeta, discovered in 1976 during the Prinos field delineation, is located 1.75 km north of

Prinos field and covers an area of 1.59 km2. It is a fault bounded structure below the

Evaporitic sequence for which the conducted tests have shown a good oil recovery for

the field.[1]

Exploration

Both Prinos and Prinos North, in contrast with Zeta, have a very high percentage of H2S

concentration in the produced gas.

Stock-tank oil initially in place (STOIIP) is estimated at 25.4 million stock tank barrels

(MMstb) while gross prospective oil resources are estimated at 3.9 MMstb.

The Alpha prospect, located to the north of Prinos, is another fault block which

stratigraphically belongs to the Pre-Evaporitic Sequence. It is defined from the available

3D seismic data.

Although no drilling was conducted in Alpha, its proximity to the Prinos North indicates

similar rock characteristics. However, the exploration of Alpha is to be considered since


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Prinos North platform has been installed. Stock-tank oil initially in place (STOIIP) is

estimated at 17.57 million stock tank barrels (MMstb) while gross prospective oil

resources are estimated at 6.74 MMstb.[1]

Figure 1: Prinos Oil Field, Structural Map[1]

2.2. Prinos North

Production

Prinos North Oil Field is one of the satellite Fields within Prinos – Kavala Basin. It is

located approximately 5 km north of Prinos Oil Field and about 18 km south-west of the

mainland of North Greece. Prinos North Oil Field was discovered in 1994, when PN-2

well was drilled in the area. Well PNA-H1 and commenced production in mid-1996 at a

rate of over 3,000 barrels per day before a decline set in on water breakthrough in

1997. In late 1998, the well was producing 1,500 barrels per day, and the production


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was constantly declining until it reached a minimum of 300 barrels per day in 2004,

when it was closed.

Following the unsuccessful side-track in 2004, an extended reach well, PNA-H3, was

successfully drilled by Energean in 2009, through a challenging operation due to the

geological complexity of the targeted reservoir.

The well reached a total depth of 4,370 m, with a 358 m horizontal section into the

reservoir. The initial production rate was more than 1,500 barrels of oil per day. The

average oil production rate in 2014 was 220 stb/d of at a water cut of some 80 per cent.

The gross oil production is 3.9 MMstb.[2]

Development

An investment program of 40,000,000 euros has been planned in order to increase the

production from 200 bbls/day to 1,500 bbls/day. The program includes a GMC floating

tower and the opening of three new wells in a new area, northwest from the old

reservoir.

The Prinos North platform, will receive crude oil from Epsilon which will be mixed with

crude from Prinos North. The platform is located 3 km northwest of the Prinos Delta

and the crude will be transported, through the 10” NPS flow line, to Prinos Delta.

During the first development phase, three wells will be drilled; one into Zeta one into

Prinos North and a third into either Alpha or as a second development well into Prinos

North. As soon as the first well is brought into production, gas lift and H2O injection will

be required. The expected drilling time of the wells is approximately 40 days while

recoverable reserves (2P) are estimated to 3,400,000 barrels.[2]


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Figure 2: North Prinos Oil field, Structural Map[2]

Epsilon

The Epsilon Oil Field, is located 4.5 km NW of Prinos Oil Field within the Prinos-Kavala

Basin and covers an area of 2.5 km2. It was discovered in 2000 by the exploration well

E-1A. A second well (E-1As) followed.

An extended reach multi-lateral well (EA-H1) was completed in 2010; it length is 5,297

m with 450 m horizontal section of each leg. The well has produced 300,000 barrels

until now. The company has developed Field Development Plan for the Epsilon Field, in

which a floating GMC tower, tied to Prinos platforms, will be used (Q1 ’16).

The 75 million euros investment program consists of 2 appraisal wells and 4 injection -5

producers or 2 injection – 3 producers, subject to the result of the appraisal wells. Initial


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production rates & plateau are estimated at 3,000 bbls per day, and recoverable

reserves are 14,2 mmboe.[3]

Figure 3: Epsilon Field, Structural Map[3]

3. Investment Development

The first step that ever took place in order to create the foundations for Hydrocarbon

exploration in Greece was in December 1969. It was initiated by the “Execution of the

Agreement for the Exploration and Development of Liquid and Gaseous Hydrocarbons

in the Sea of Thrace”. The parties involved were the following “Kingdom of Greece and

Oceanic Exploration Co”[4]. The Prinos basin is the only area exploited for hydrocarbons

in Greece until our days. The first consortium was formed by “Oceanic 50%, Colorado


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12.5%, Hellenic 12.5%, Fundamental 12.5%, White Shield 12.5%” in 1970-1971[4]. After

these two events where completed, Seismic and Exploration development began.

Several attempts were abandoned from 1971- 1973 due to no discovery or condensate

reservoirs. Those failures led Colorado in 1973 to turn over their 12.5% interest to

Wintershall A.G. The discovery of Oceanic in 1974 that confirmed the existence of crude

oil reserves in Prinos basin, led to a further change of interests within the Consortium.

Oceanic held then 68.75%, Fundamental past over all its interests to Oceanic, White

Shield remained with 6.25% after passing over the rest as well; Wintershall and Hellenic

maintained the 12.5%. This discovery was responsible for the establishment of the

“Public Oil Company (DEP S.A.) In 1975”[5], this “first public body oriented to

hydrocarbon prospecting, exploration/exploitation”[6]. At the same period the first

Greek law on Hydrocarbon Exploration was voted, this law is known as L. 468/76.

Although Prinos Oil Field was discovered in late 1973 and South Kavala Gas Field was

discovered in 1972 exploitation didn’t begin until 1979 and 1980 respectively. In the

meantime there were further developments of the consortium. In “1976 Denison Mines

took over the 68.75% interest of Oceanic”, later in the same year “North Aegean

Petroleum Co EPE was founded as operator for the Consortium’s activities in Greece”. In

the mid of 1981 all facilities including onshore and offshore were in full operation. A

year later “The Prinos field produces 25000 bpd crude oil as per design”[4]. In “1985

Public Petroleum Corporation (DEP) created a subsidiary known as Petroleum

Corporation-Exploration and Exploitation of Hydrocarbons (DEP EKY)”[6] and “became an

equal member of the consortium”[4]. The exploitation activities continue successfully in

the following years. In 1998 production begins to drop, due to this production decline

that is followed with a drop in the price of oil the consortium collapses. The Greek State

takes the full responsibility and “assigns the maintenance and security to Eurotech

Services S.A.”[4]. Kavala Oil consisted from Eurotech Services that held 67% of the

interest and the Association of Employees 33%. “In 1995, the law 2289, which adopted

EC Directive 94/22/EC comes into effect”[6], and in 1999 the Greek state ratified the

agreement with Kavala Oil “Agreement 2779/99”. The following ten year consist as a

struggle in order to survive. Some positive signs were given from the Epsilon field in the


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very beginning of the 21st century. Regal Petroleum plc, becomes the holder the 86.7%

previously owned by Eurotech Services. Although this change took place due to the

company’s commitment “to implement a big investment and development program in

the exploitation region”, they finally failed to achieve the initial goal. This failure

resulted in 2005 for the company to be managed only by the Association of Employees.

In 2007 a new era is then begging for Prino’s basin. It’s the first appearance of Aegean

Energy. “Aegean Energy acquires Eurotech shares from Regal Petroleum and takes

control of 66.6% Kavala Oil common shares and 95% of Kavala Oil Preference Shares”. A

number of agreement and accomplishments are successfully carried out for the

upcoming years. In 2009 an “initial daily production rate of 2000 bbls/day” is reported

from Prinos North field. . According to YPEKA in 2011 Energean stated an incensement of

their income comparing to the year 2010. This fact is slightly controversial comparing to that

“Greece imports nearly all the oil and natural gas it consumes, annually spending about 5% of

GDP and KAVALA OIL SA (Subsidiary of Energean Oil & Gas) is the only company extracting oil

and natural gas in Greece”[7] while the company increased its income by 19.5 million €

Energean in 2013 achieved two major accomplishments. The first was the extension of

the Prinos License for 25 years and the second was the six year agreement with BP

concerning the off-take. This agreement extended its scope the following year as it now

refers to the “entire oil production from the fields in the Kavala Gulf”. According to CEO

Mathios Rigas “the partnership with an international business group such as BP enables us to

reboot our investment program totaling €150 million and involves three new drilling projects for

2014”[8]. The extenders of the agreement was not a random event within the 2013 -

2014 period, Energean gained “$100 million from third point investors”, while creating a

joint venture 50/50 with Ocean Rig and establishing OceanEnergean they also increased

production from 850 bbls a day to 2300 bbls in total[4]. In May 2014” Rigas said that his

company had invested US$200 million in Prinos during the past seven years.”[9]. The persistence

of Greece to declare its EEZ over the last year as well as the fact that the Greek state managed

to borrow seven billion Euros can consist as a strong to for development. Energean is currently

evaluating the option of financing its upcoming investment program through an international

bond issue, as stated by Mathios Rigas the company’s CEO.[9].


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4. Geopolitical Situation of Greece

Greece’s geopolitical position and its sovereign and sovereignty rights declared by the

United Nations Law of The Sea in 1982 have caused threats from Turkish neighbors.

Specifically, the Convention supports the exploration and exploitation of the sea at a

distance up to 200 nautical miles[10]. It contains Article 76 which states the continental

shelf as “the sea-bed and subsoil of the submarine areas that extend beyond its

territorial sea throughout the natural prolongation of its land territory to the outer edge

of the continental margin, or to a distance of 200 nautical miles from the baselines from

which the breadth of the territorial sea is measured where the outer edge of the

continental margin does not extend up to that distance”[11]. In the case of Aegean,

“approximately 3000 islands”[12] are scattered. As a result Greece’s continental shelf

“overlaps” the Turkish, meaning that all mineral resources and wealth, would belong to

the Greek state, except those reserves found beneath the “Turkish territorial sea”[11].

Another fact troubling Turkey which has not ratified the Conventions, is that Aegean

becomes a “Greek lake” with the support of the United Nations and safe sea passage

becomes an issue for the opposite country[10].

Historically, the two countries have experienced war and conflicts that culminated to

the “savage war” from 1920- 1922. New found reserves in the early 1970’s and

emerging oil prices due to the Middle East embargo, triggered the Turkish spite, as

Greece has all the rights for their exploitation, granted from relevant conventions that

dated back to the “Paris Treaty” of World war II. [11]

Throughout the years, Greece supported the delimitation of the continental shelf; in

line with United Nations’ position regarding the dispute, while Turkey insisted on the

implementation of “equitable principles”[11], due to the “special circumstances” driven

and underlined by the Turkish government. United Nations efforts to resolve the

problem have unfortunately failed so far and although there are potential oil reserves in

the area of Aegean, the continuation of the dispute is a deadlock for all exploitation

activities.


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Currently, United Nations efforts to resolve the problem have unfortunately failed and

although there are potential oil reserves in the area of Aegean, the continuation of the

Turkish claimed “casus belli” is a deadlock for all exploitation activities. Aegean

territorial sea exceeds up to six nautical miles, while twelve are ratified by the 1995

UNCLOS leaving Greece with “35% share” of the Aegean and Turkey with a “7.6%”. If

that would not be the case, Greece would hold up to “64%” leaving out neighbor with

only “8.8%” and no right to a continental shelf.[13]

Although the triggering topic of the continental shelf, “dates back to November 1973“

[10], when the Turkish government gave permission to a “national petroleum company”

to explore west of the Aegean islands[14], the same scenario is maintained with the

Turkish side engaging lever to the Greek state.

Several propositions have been made in the past, for the resolution of the Aegean

conflict and the peaceful yet beneficial exploitation of the natural marine resources.

“Bilateral negotiations” and the division of the “Aegean continental shelf” are a couple

of these, although they would actually result in a devaluation of the Greek claimed and

stated rights. Another important event that would contribute to an efficient agreement

between the two countries under EU supervision, would be “Turkish accession to the

EU” as it is still an open issue since Turkish first application in 1959[11].

All the above are facts and information that result to an everlasting race for survival

regarding Greece, in times when the State should benefit from its natural advantages,

be able to sustain its position and invest on development and growth. Geopolitically,

the position of Greece has maintained a dominant role for global political interests but

it can also be considered as a curse, for challenges always emerge. National rights must

be protected and promoted, on behalf of the people, for a promising future and a

sustainable economic growth.


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5. Conclusions

Prinos basin could be considered an excellent opportunity while in the meantime an attracting

example. It proved through the last forty years that in good and bad times there is always a way

to gain the most; by just being persistent, while believing in the value of an operation. Patience

and hard work was required so that in our days infrastructure and know how is available and

appealing for foreign investors.

Prinos is the only petroleum producing area within the Greek region, offering development

opportunities and significant exploration activities in Northern Greece. It is a promising area for

high potential hydrocarbon exploration activities.

Kavala basin offers an under-explored area with oil reservoirs distributed in several locations

(Prinos, Prinos North), proven active petroleum systems and a field producing over the last

three decades.


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References

1. Energean Oil & Gas, Operations - Prinos, 12/01/2015; http://www.energean.com/Prinos?la=en. 2. Energean Oil & Gas, Operations - Prinos North, 12/01/2015; http://www.energean.com/Prinos-North?la=en. 3. Energean Oil & Gas, Operations - Epsilon, 12/01/2015; http://www.energean.com/Epsilon?la=en. 4. Energean Oil & Gas, History, 12/01/2015; http://www.energean.com/History?la=en. 5. Ministry of Environment Energy & Climate Change of Greece, Non Technical Summary - SEA Ioannina, 12/01/2014; http://www.ypeka.gr/LinkClick.aspx?fileticket=azf3ecdh5fM%3D&tabid=766&language=en-US. 6. Ministry of Environment Energy & Climate Change of Greece, Prospecting, Exploration and Exploitation of Hydrocarbons, 12/01/2014; http://www.ypeka.gr/Default.aspx?tabid=765&locale=en-US&language=el-GR. 7. Ministry of Environment Energy & Climate Change of Greece, Greek Mining/Metallurgical Industry. Review 2010-2011, 12/01/2014; http://www.ypeka.gr/LinkClick.aspx?fileticket=K6N4C4W4sL8%3D&tabid=294&language=el-GR. 8. Reporter, G., BP Buys Greek Oil Reserves, 12/01/2015; http://greece.greekreporter.com/2014/01/13/bp-buys-greek-oil-reserves/. 9. Gas, E. O., Energean: Rebooting Greek E&P 12/01/2015; http://www.energean.com/assets/files/Mathios%20Rigas%20interview%20%20NewsBase%20EurOil.pdf. 10. Studies, I. C., Disputing the Continental Shelf Region in the Aegean Sea: The Environmental Implications of the The Greek - Turkish Standoff, 12/1/2015; http://www1.american.edu/ted/ice/aegean.htm. 11. Vassalotti, J., Rough Seas: The Greek-Turkish Aegean Sea Dispute and Ideas for Resolution, Loy. L.A. Int'l & Comp. L, vol.33, no.3, 2011. 12. Lentza, I., The Delimitation of the Continental Shelf : The Aegean, 2011. 13. Greece, K. T., Turkey: Casus Belli against Greece remains in the Red Book, 12/1/2015; http://www.keeptalkinggreece.com/2010/10/29/turkey-casus-belli-against-greece-remains-in-the-red-book/. 14. Affairs, H. R.-M. o. F., Greek-Turkish dispute over the delimitation of the continental shelf, 12/01/2015; http://www.mfa.gr/en/issues-of-greek-turkish-relations/relevant-documents/delimitation-of-the-continental-shelf.html.

http://www.energean.com/Prinos?la=en

http://www.energean.com/Prinos-North?la=en

http://www.energean.com/Epsilon?la=en

http://www.energean.com/History?la=en

http://www.ypeka.gr/LinkClick.aspx?fileticket=azf3ecdh5fM%3D&tabid=766&language=en-US

http://www.ypeka.gr/Default.aspx?tabid=765&locale=en-US&language=el-GR

http://www.ypeka.gr/LinkClick.aspx?fileticket=K6N4C4W4sL8%3D&tabid=294&language=el-GR

http://greece.greekreporter.com/2014/01/13/bp-buys-greek-oil-reserves/

http://www.energean.com/assets/files/Mathios%20Rigas%20interview%20%20NewsBase%20EurOil.pdf

http://www.energean.com/assets/files/Mathios%20Rigas%20interview%20%20NewsBase%20EurOil.pdf

http://www1.american.edu/ted/ice/aegean.htm

http://www.keeptalkinggreece.com/2010/10/29/turkey-casus-belli-against-greece-remains-in-the-red-book/

http://www.keeptalkinggreece.com/2010/10/29/turkey-casus-belli-against-greece-remains-in-the-red-book/

http://www.mfa.gr/en/issues-of-greek-turkish-relations/relevant-documents/delimitation-of-the-continental-shelf.html

http://www.mfa.gr/en/issues-of-greek-turkish-relations/relevant-documents/delimitation-of-the-continental-shelf.html

Greece history and prospects of thasos oil reserves

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