ELPE Upstream

ELPE leaves onshore licenses, upstream stagnancy deepening

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Hellenic Petroleum (ELPE) has announced a decision to withdraw from two onshore licenses, Arta-Preveza, in Greece’s northwest, and Northwest Peloponnese, adding to a series of recent negative developments for the country’s hydrocarbon aspirations, increasingly stagnant.

The ELPE decision is a result of the country’s ongoing energy transition towards a low-emissions economy, reflecting the upstream industry’s global contraction.

ELPE is striving for a 30 percent carbon emissions reduction by 2030 and becoming carbon-neutral by the end of the decade.

Like most upstream companies around the world, ELPE is turning its business interests to the RES sector and repositioning to reduce its exposure to CO2 emissions.

The ELPE decision to surrender its two onshore block licenses follows a recent decision by Spain’s Repsol, with Energean, to return to the Greek State exploration and production rights to an Etoloakarnania block, in the country’s northwest.

Repsol, seeking to limit its upstream exposure, has decided to withdraw from its hydrocarbon interests in Greece, as well as a further 13 countries of 28 in which the company is active.

Repsol has also left its interests in an Ioannina onshore block, in the northwest, leaving Energean alone in this venture, the country’s sole onshore license. Repsol also withdrew from its offshore Ionian Sea block, a 50-50 venture with ELPE.

 

Greece is ‘hydrocarbon-promising, strategically located’

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By Mr. Tassos Vlassopoulos

CEO of Hellenic Petroleum (ELPE) Upstream

Greece has an old connection with hydrocarbons. More than 2,500 years ago, Herodotus mentioned the famous oil seep in Keri Zakynthos that still brings oil to the surface.

However, this connection is not only ancient. Besides the still producing Prinos Oil field and the verified West Katakolo Oil and Gas field, recent exploration activity has generated interest in the Greek hydrocarbons sector.

Oil and gas exploration began prior to the 2nd World War and intensified in late 70s to late 90s. A new turn was taken after 2015, as the collection of some new data was completed, prompting the proposal of new ideas.  International oil companies (e.g. TOTAL, ExxonMobil, Repsol, Edison), proceeded in several ventures in Greece and ELPE Upstream became an attractive partner.

Greece’s west, both onshore and offshore, seems to share many similarities with well-established Albanian and Italian hydrocarbon areas. In addition, following recent discoveries in our broader region, blocks around Crete were carved out. Total, Exxon and Hellenic Petroleum will be exploring their deep waters.

Greece is still considered an under-explored area despite the fact that more than 70,000 km of 2D and 2,000 km2 of 3D seismic lines have been acquired in addition to about 100 wells that have been drilled. However, recent technological developments enable feasible exploration of deeper waters, assuming the prospects are promising.

Greece, apart from being a hydrocarbons-promising area, is also strategically located in the middle of Mediterranean. The country is situated at the crossroads for transporting gas, from the current or future producing fields in the Caspian and the Eastern Mediterranean, to Western Europe. IGB (Gas Interconnector to link Greece with Bulgaria), Poseidon, TAP and East-Med are at different stages of development, They will link Greece and Europe’s west with all producing regions in proximity and provide potential leverage for potential developments in the regions of western Greece and Crete.

Oil and gas remains a key element of the energy mix, though the discussion on climate change continues and renewable energy solution costs have been declining. Natural gas is the transitional fuel, as we move away from coal and trend towards renewables. Electric vehicles are penetrating selected markets but not yet on a large scale, globally. Oil remains the main fuel for all other modes of transportation and petrochemicals have no real alternatives in the foreseeable future.

Joint operation agreements for continued ELPE license efforts

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All texts concerning the change of shareholder status at ELPE Upstream, a new ELPE (Hellenic Petroleum) subsidiary that has taken on all of the parent company’s hydrocarbon exploration and production rights ahead of the group’s nearing privatization, have been completed, according to the TAIPED privatization fund’s annual development plan.

ELPE will proceed with a capital increase to facilitate the transfer of a 50.1 percent stake of ELPE Upstream to the Greek State, leaving a 49.9 percent stake of the subsidiary for the corporate group.

Potential buyers are preparing to submit binding bids to a sale offering 50.1 percent of the ELPE group. A deadline has yet to be set but a date within the first ten days of March is possible.

Joint Operation Agreements have been prepared to ensure the continuation of activities at ELPE’s various licenses even if the prospective ELPE majority shareholder decides to pursue a different exploration and production strategy.

The Joint Operation Agreements will enable existing shareholders of ELPE’s SPVs to increase or decrease stakes. ELPE has established various SPVs with partners for licenses at the Gulf of Patras, the Ionian Sea, western Greece and Crete.

ELPE bidders given exemption right for ELPE Upstream costs

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Potential buyers participating in a sale offering a controlling 50.1 percent stake in ELPE (Hellenic Petroleum) will be given the option of being exempted from hydrocarbon exploration-related expenses concerning ELPE Upstream, a separate division holding ELPE’s hydrocarbon exploration and concession rights.

A 51 percent stake of ELPE Upstream will remain under the control of the state. Potential buyers will have the right to refuse to partake in ELPE Upstream’s investment activities, given the minority stake they will hold in this venture.

This cost exemption option appears to have satisfied potential buyers of ELPE’s 50.1 percent, preparing to submit binding bids, possibly within the first ten days of March. A deadline has yet to be set.

Head representatives, including Sonatrach boss Abdelmoumene Ould Kaddou, have spent time in Athens over the past couple of weeks for meetings with Greek state privatization fund TAIPED officials. No objections appear to have been raised.

Sonatrach recently entered the ELPE sale, joining Vitol as a partner. American firm Carlyle, the other new entry, has joined forces with Glencore for this sale.

All of ELPE’s current exploration and production licenses have been transferred to ELPE Upstream.

ELPE sale’s binding offers in late February, early March

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The binding bids deadline of a sale offering a controlling 50.1 percent stake in ELPE (Hellenic Petroleum) is expected to be set for late February or early March, sources closely monitoring the privatization’s developments have informed.

This one-and-a-half month period should provide enough time for the sale’s new entries, American firm Carlyle and Algeria’s Sonatrach – who have established respective partnerships with the procedure’s two existing candidates, Glencore and Vitol – to appraise ELPE.

No other pending issues remain other than a response from the prospective buyers on the privatization’s plan for ELPE Upstream. Holding Hellenic Petroleum’s hydrocarbon exploration and concession rights, ELPE Upstream will remain under the control of the state with a 51 percent stake.

The entire portfolio of ELPE’s current hydrocarbon exploration and concession rights has been incorporated into ELPE Upstream. Future concession rights are also planned to be added to this holding company.

The state will reserve the right to appoint ELPE Upstream’s managing director, while, according to sources, the holding company’s minority shareholder will have the right to decide on investment decisions and presumably exercise veto rights.

ELPE’s details were uploaded into a virtual data room last week for investors to study as they prepare to shape their offers.

Glencore joined by Carlyle, Vitol by Sonatrach in ELPE sale

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Two new participants, US firm Carlyle and Algeria’s Sonatrach, have entered the ELPE (Hellenic Petroleum) sale offering a 50.1 percent stake by establishing respective partnerships with the privatization’s list of two existing candidates, Switzerland’s Glencore and Dutch company Vitol.

Though not yet officially announced, the Glencore-Carlyle and Vitol-Sonatrach pairings have apparently cemented, sources in contact with these players have told energypress.

The ELPE sale’s new arrivals can be expected to raise hopes for higher offers when binding bids are submitted at a still-unspecified date within January.

Carlyle’s entry into the sale had been rumored prior to the procedure’s first round of non-binding bids, along with a list of other major players, including Italian petroleum firm Eni.

In a related development, the Greek State appears to have finalized a decision to participate with a 51 percent stake in a new hydrocarbon holding company referred to as ELPE Upstream. This means the winning bidding team of the ELPE sale will also acquire a 49 percent stake of the holding company. This, however, will depend on the approval of ELPE’s existing shareholders and, most crucially, prospective buyers.

All of ELPE’s exploration and production licenses have been transferred to this holding company as separate ventures. Though the Greek State will hold the right to appoint the holding company’s chief executive, the minority shareholder will decide on investment decisions through a veto right.

ELPE Upstream seeking earlier start for Gulf of Patras drilling

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ELPE Upstream, a new division established by the ELPE petroleum group, aims to begin drilling at its license in the Gulf of Patras, western Greece, sooner than originally planned, probably in autumn next year, if related licensing procedures and studies are completed ahead of municipal and regional elections next May.

Hydrocarbon exploration and production remains a priority for ELPE despite the petroleum group’s ongoing privatization, a complex and challenging procedure offering a 50.1 percent stake.

The Greek State, selling 20.5 percent of its 35.5 percent stake in ELPE, is expected to maintain a strong presence in ELPE Upstream. Paneuropean, ELPE’s main shareholder owning 45.47 percent, is selling 30.47 percent.

The Gulf of Patras offshore license, covering 1,900 square kilometers, was awarded to ELPE through an open-door tender launched in 2012 and completed in 2014. Potential recoverable hydrocarbon reserves at this license have been estimated at 100,000,000 barrels.

ELPE also has ambitious exploration and production plans for offshore licenses in the Ionian Sea and off Crete.