Turnout for Crete, Ionian Sea blocks lower than expected

The turnout by petroleum firms for an international tender offering hydrocarbon exploration and exploitation rights to three offshore blocks off Crete and in the Ionian Sea was lower than had been anticipated by Greek authorities. The deadline for offers expired Monday.

Without a doubt, the stature of participating consortiums – Total, Exxon and Mobil, Hellenic Petroleum (ELPE) as well as Repsol-ELPE – which submitted respective offers for the Crete and Ionian Sea blocks, cannot be disputed, but the early interest expressed by other players expressed was not followed through.

The reduced competition is expected to subdue the price level of offers made. Had more than one consortium submitted offers for each of the blocks on offer, higher bids, as well as revenues for the Greek State, would have been generated.

Total, Exxon Mobil and ELPE submitted bids for the two Cretan blocks, west and southwest of the island, while ELPE – Repsol delivered a bid for the one Ionian Sea block offered.

The early interest of Total, Exxon Mobil and ELPE in the Cretan offshore area prompted EDEY, the Greek Hydrocarbon Management Company, to stage the tender for the Crete blocks.

Energean Oil & Gas, whose preliminary interest in the Ionian Sea prompted the Ionian block tender, did not turn up. Sources attributed this absence to two factors – the petroleum firm’s focus on Israel, where it has assumed development of the Karish and Tanin fields, as well as a 500 million-dollar equity raising endeavor, through a premium listing on the London Stock Exchange’s Main Market, to support its Karish and Tanin projects.

Other noteable absentees included Italy’s Eni, Israel’s Delek, as well as US firm Noble. The geological risk of the areas offered – especially the Cretan blocks, categorized as unexplored deep-sea frontier areas – was cited as a factor. So, too, was the relatively low price of oil (63 dollars per barrel), which cannot justify the required investment costs. The lack of any major deposit discovery in Greece, such as the Aphrodite hydrocarbon field in Cyprus and the Zohr field in Egypt, has also been cited as a contributing factor behind the subdued turnout.

The problems encountered by Eni in the Cypriot EEZ as a result of the interruption of a drilling attempt by Turkish naval forces at a license held by the Italian firm, is believed to have kept it away from the tender offering Cretan and Ionian Sea blocks.