TRADE: Greek Energy Agenda Promises Business to Egypt

By Apostolis Fotiadis Reprint | | Print |

Apostolis Fotiadis

ATHENS, Aug 22 2007 (IPS) - Greece and Egypt are now making good on a two-year-old cooperation agreement to diversify trade relations that could reduce Greece&#39s dependence on traditional – but tenuous – energy supplies from European suppliers like Russia.

Greek development minister Dimitris Sioufas has characterised the partnership as "a historical agreement between the two countries that is laying the foundations for a new era, and opening new avenues in their energy ties."

The pact led a joint committee to assess the viability of transporting Egyptian natural gas to Greece, and from there to other European countries. "Greece is being transformed into a natural gas transportation channel for supplying countries into the wider region," Sioufas said.

The joint committee met for the first time in May. "This was a very early meeting to define how our cooperation could materialise," Argiro Papoulia, a consultant to the ministry of development told IPS.

"Among other issues, we touched upon the possibility of export of Egyptian liquefied natural gas (LNG) to Greece," she said.

Egypt has huge gas reserves, estimated at more than 2 trillion cubic metres. This can offer Greece the opportunity to diversify the source of its hydrocarbon needs.

New Russian initiatives are expected to increase its hydrocarbon market share in Western Europe. Greece holds 30 percent rights in one of them, the Burgas-Alexandrupoli pipeline project. The other, South Stream, is still in its initial development, and it is not clear whether its path will cross Greek territory. But both sides have expressed their confidence in cooperating over the new projects.

Greece&#39s dependency on Russia is a direct result of the Greek government&#39s policy to transform the country into an energy transit hub. Construction of new pipelines, and efforts to modernise older energy infrastructure, will inevitably lead to an increased importance of Russian supplies, since Greece is not included in any of Europe&#39s wider energy policy plans. At the moment, Russia is the only energy provider that can offer raw material immediately and at competitive prices.

Greece currently imports two-thirds of its natural gas from Russia. Lately a fall in production of lignite (a low-quality coal) in the Balkans has pushed Greece&#39s state-owned electricity company to import Russian lignite as well.

Greece is at present short of its energy dream. A poor transmission system threatens energy security and supply. Dependence on polluting raw material increases environmental cost. Domestic energy consumption depends substantially on oil and electricity, which is oil and lignite-fired, with a daily demand this summer surpassing 11,000 MW.

The state-owned ELPE (Hellenic Petroleum) and the Egyptian Ministry of Energy signed a deal in June to reduce reliance on old technology. ELPE was granted hydrocarbon exploration and exploitation rights in West Obayed.

The West Obayed region of the Western desert covers 1,841 square kilometres and borders the Obayed region where Shell is currently undertaking production in a gas field. ELPE has committed itself to a seven-year research period during which time it will attempt seismic surveys and five drillings at a cost of 26 million dollars.

ELPE&#39s first exploration will be in the Mesaha region, an enormous area of 56,930 square kilometres bordering Sudan – and about half of Greek territory.

ELPE holds 30 percent of the Mesaha joint venture, with Australian Oil Search Limited and Scottish Melrose Resources sharing another 30 percent and 40 percent respectively. The deal is awaiting approval from the Egyptian regulator.

The two deals have been a part of Egypt&#39s larger cooperation expansion with Western petroleum companies this summer.

Egyptian oil minister Sameh Fahmy announced Jul. 18 that Egypt has signed eight new deals for oil and natural gas exploration worth 660 million dollars with several foreign firms including BP, Austria&#39s OMV and Norway&#39s Statoil. The deals cover an area of 34,000 square kilometres, including offshore fields in the Mediterranean Sea, areas in the Nile delta and in the western desert.

"We will offer the management to people who have spent a long time with us already," ELPE&#39s director of corporate relations Dimitris Stranis told IPS. "Apart from this, the qualified and experienced personnel we are looking for exist inside Egypt, and we will be very happy to cooperate with them."

The sometimes unstable political situation in Egypt does not seem to have curbed the company&#39s optimism for exploration. "From our point of view, Northern Africa offers a safe environment for investment," said Stranis. "There is concern about the rise of the radical Islamic element and the impact it might have on investment prospects in the region, but the Egyptian government does its best to guarantee a safe business environment, and we are absolutely free from anxiety on these issues."