Oil firms hope debt will spur projects in Spain, Greece

Wed Sep 12, 2012 9:16am EDT

Related Topics

* Greece and Cyprus bidding rounds attract wide interest

* Cairn hopes to drill offshore Spain by 2015

* Territorial disputes and environmental risks remain

By Emma Farge

GENEVA, Sept 12 (Reuters) - Small to mid-sized oil firms are stepping up exploration off Greece and Spain as the indebted governments look to their own offshore territory in the Mediterranean to cut dependence on expensive imports, executives said.

A huge gas find off Cyprus last year has raised hopes for further discoveries in other little-explored parts of the Mediterranean at a time when oil prices near $115 a barrel are hurting European importers.

Environmental concerns and simmering territorial disputes between countries along the sea's eastern coast may have put off investors in the past, said executives at an oil conference organised by Global Pacific & Partners on Tuesday.

But the Euro zone debt crisis has made governments have another look at the oil potentially lurking in their own backyards.

"It's an open discussion whether there should be any drilling in the Mediterranean, but there are policy decisions being made because when the economy starts to look fragile natural resources are a very good answer," said Rob Jones, head of Mediterranean assets at Cairn Energy.

Cairn acquired five blocks to explore in the Gulf of Valencia near the Spanish island of Ibiza last year and Jones said he was hopeful the company would obtain environmental licences to begin drilling by 2015.

The interest in the Mediterranean is also being driven by security concerns further afield - particularly the potential threat to global supplies by Iran's dispute with world powers over its nuclear programme, said firms at the conference.

"Countries are now developing their little garden plots instead of driving all the way to the supermarket," said Janusz Wojtek Gorniewicz, Geneva-based director for business development at private oil and gas producer and explorer Geopetrol International Holding, which is currently scouting for opportunities in the region.

"It's cheaper for them and more secure should a situation arise like if Iran shuts the Straits of Hormuz," he added.

"GREECE IS OPENING UP"

Spain spends around $130 million a day on crude oil imports based on the current Brent price.

Greece, which imports nearly all its oil and natural gas and spends 5 percent of its GDP on the purchases, has also accelerated the development of its offshore resources.

Eleven firms including UK-based Chariot Oil and Gas and Schlumberger submitted bids for oil and natural gas in three blocks in the western part of the country this summer and seismic tests are being carried out to pave the way for an oil and gas drilling round in 2014.

"Greece is opening up. It's an under-explored area and you have a government that is taking all the right steps to encourage investment," said Mathios Rigas, Chief Executive of Energean Oil & Gas which is already pumping oil at the country's Prinos field.

Drilling to the east of Greece in the Aegean Sea might prove more difficult because of a territorial dispute with Turkey. Still, Cyprus in May drew 15 bids for nine offshore oil blocks even though its Nicosia government is not recognised by Turkey.

Surveys suggest more than 100 trillion cubic feet (2.831 trillion cubic metres) of reserves lie untapped in the eastern Mediterranean basin between Cyprus and Israel - almost equal to the world's total annual consumption of natural gas.

Israel's offshore Leviathan field, the biggest offshore find in the past decade, is currently being developed although executives said the lack of a sub-sea border with Lebanon could deter future investors.

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