Tag Archives: greece

A Spotlight on Greece’s Energy Potential But Roadblocks Remain

As Athens struggles to find a viable path out of Greece’s current economic morass, the country’s oil and gas potential have come under scrutiny as possible keys to future growth. However, despite early reports detailing potential across the Eastern Mediterranean and Aegean seas, accessing those reserves may prove more difficult than government officials are letting on.

According to NBC News, Prime Minister Antonis Samaras released a study earlier this summer suggesting as much as $600 billion worth of offshore natural gas in waters accessible by Greece. The report pointed to 3.5 Tcm and the equivalent of 1.5 billion barrels of oil off the southern coast of Crete that might equal or surpass reserves found in the Eastern Mediterranean Levantine Basin. The Levantine Basin is currently the focus of a surge in activity and investment from Cyprus and Israel.

In hopes of replicating the Eastern Mediterranean natural gas rush, Athens has begun offering licensing rounds and seismic studies of the region to move forward with a sector that they feel could be a path towards erasing their debt and addressing the heavy costs of current energy imports. Greece currently spends about 5 percent of GDP on foreign oil and gas each year.

Despite such potential, reaching Greece’s reserves could be particularly challenging and unrealistic for short-term economic recovery efforts. Facing significant pressure from Brussels to reign in spending and address massive debt obligations, Athens has pursued a program of austerity that has done little to ensure political stability or investment confidence.

With little funding to spare and possible benefits years off, the idea of dedicating money to early hydrocarbon development appears increasingly impractical in the eyes of the country’s economically stressed population. The country’s licensing rounds offer one path forward, but it is still too early to tell whether foreign investors are willing to enter the still volatile Greek economy. Further, the country’s privatization push includes the sale of domestic natural gas provider DEPA and its transmission system operator, making the bridge between significant future hydrocarbon revenues and the state all the more unclear.

Still, Athens appears willing to move forward with the energy exploration effort and has also begun exploring the possibility of establishing themselves as a transmission hub for gas from the Levantine Basin when Cypriot and Israeli efforts begin to mature.

Image: Hellenext

Originally Posted: Newsbase EurOil Monitor

 

 

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Greece Eyes Options As Iranian Deadline Looms

Presenting a significant threat to Greece’s energy needs and overall economic well being, the looming EU-backed sanctions on Iranian crude has Athens struggling to find viable alternatives. Earlier this year, Greece joined countries like Spain and Italy in expressing their concern about the sanctions’ impact on their energy needs and were successful in winning a delay until this summer to find other producers. However, even with extra time, credit and production has presented a challenge to finding such options.

The country’s dependence on Iranian crude was highlighted in late February when state media outlets began reporting that a local refinery had been denied the delivery of 500,000 barrels. Ultimately, the reports were cast into doubt by government representatives, including Greece, Greek Environment, Energy and Climate Change Minister George Papaconstantinou who told Reuters that “we have contracts with Iran that are being executed normally.” However, with the July 1st sanctions deadline fast approaching, the reality of going without Iranian crude is becoming all the more pressing.

To make up for the coming crude deficit, leaders in Athens have begun openly exploring increasing deliveries from countries like Libya, though the exact of impact of such a shift has some worried. In the case of Libya, questions have emerged about Libya’s ability to overcome infrastructure deficits to reach pre-conflict goals for existing consumers, not to mention new ones.

For their part, Greek refiners have pointed to options in Russia, Iraq and Saudi Arabia as perfectly viable alternatives to Iranian oil, though funding might still be a stumbling block. Making up roughly a third of Greece’s energy needs, Iranian crude is currently sold under favorable credit circumstances; a situation Athens fears may change under new agreements, adding stress the country’s current economic standings. According to a Reuters report, concerns about access to credit have led some potential providers to avoid new agreements with Greek importers due to worries about national firms and their access to credit.

Reports from Eurostat have suggested a possible increase of Iranian imports ahead of the July 1st deadline, making the stockpiling of reserves ahead of such a significant drop off a possibility.

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Energy Firms Included in Debt Reduction Efforts

As European Union pressure forces both member governments and banks to distance themselves from debt burdens to help build confidence in their ability to weather the storm of the Union’s financial crisis, some energy actors are finding themselves at the center of the conversation. This confidence has emerged as pivotal to ensuring bailout funds from the IMF and European Union.

For governments, this has meant unloading anything they can to raise available capital and reduce costly endeavors. For Brussels, this has meant pushing to strengthen EU banks’ core Tier 1 ratios, a measure of a bank’s ability to weather financial shocks, to 9 percent by June, according to the Wall Street Journal. The pressure and deadline has sent many banks and governments to their books in search of viable options for cuts.

Ultimately, it is the government actions that will have the most impact on energy actors in the region, as banks have found their greatest burden to come in the form of bad real estate debt. In the last few weeks alone, governments in Portugal and even Greece have laid out new or revised privatization plans that will see energy firms removed from the public sphere. Last week, Portugal’s treasury secretary

Announced that China’s State Grid International Development Ltd. and Oman Oil Co. would purchase a 40 percent stake in power grid and natural gas pipeline operator Redes Energeticas Nacionais (REN) for 592.2 million euros. Oman Oil has agreed to buy additional stakes. The announcement comes after a December purchase of 21 percent interest in EDP-Energias de Portugal SA by China’s Three Gorges Corp.

The REN sale is a part of the cuts required to guarantee a 78 billion bailout request by Portugal and will be followed by the sale of seven percent of the country’s oil firm, Galp. According to Bloomberg, these sales will be followed up with additional privatization efforts later in the year, though no specifics were offered.

In Greece, EU and investor pressure has forced a privatization campaign that will include the country’s natural gas state monopoly and state oil refiner, among many other public utilities. These will need to be removed from the government roster within the first six months of this year, despite being large sources of revenue for the government.

Image: pedrasilva.com

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The Narrative Starts to Take: Greece is Out

Amid all the back and forth about Greece’s path back from fiscal oblivion, a frustrated narrative has begun to emerge in Athens – all of this is for naught because ultimately the EU and leaders in Brussels and Berlin never had any intention of keeping the beleaguered economy in the union. Sounding a bit hurt and a tiny bit paranoid at first, this take on the situation has gained steam as what appeared to be a finish line for promised cuts and assurances that Athens would indeed play ball, regardless of how painful it was or how little actual support they had from their citizens, kept changing. Frustration turned to outright allegations yesterday as the proposal was floated that any aid package would be held in limbo until after the country’s national elections were held. The response first came with charges that the troika was trying to use the package to manipulate the country’s elections to support the success of a new government that would ensure the further austerity they hoped for, but has now devolved into a discussion of whether the whole process is just a thinly veiled attempt to squeeze Greece out of the union completely.

“There are many in the eurozone who don’t want us any more,” Greek Finance Minister Evangelos Venizelos said during a meeting with President Karolos Papoulias, according to The Guardian. “We are constantly being given new terms and conditions.”

The discussion about Greek’s future has never been particularly pleasant, but recently, the atmosphere has grown toxic and days like yesterday hardly help the matter. With Greece facing down €14.5 billion ($19 billion) in debt set to mature within a month, its no wonder pressure has begun running especially high but if a solution is to be found – if all parties really want to find one – tempers need to calm and they need to do so fast.

Image: Economia

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Greece, Trust and the Inevitable

It’s been difficult to keep track of the back and forth on Greece’s chances to secure a bailout package in time for the country’s March deadlines. As soon as solutions are found and touted, someone finds a way to dash all hope with fresh demands or new criteria for acceptance. In the course of a single day, the bailout package can go from assuredly approved to dead in the water and back again. Its debatable which side has been guiltier of delaying or moving the finish line, but ultimately, the consequences are severe for both sides.

Most troubling about this back and forth, is what it means for the little remaining trust that exists between the Greek government, the general population and the country’s many creditors. The people are suspicious of the parliament and technocrat government, the country’s political leaders are wary of anything that resembles intervention from outside and the EU and IMF don’t appear to trust a word coming out of Athens. No one, it seems, thinks the other is acting in their interest. Today hardly helped that process as a few pivotal EU leaders presented a plan that would push any bailout package back to April, following Greece’s national elections. The move, pushing any distribution past the March bond deadlines, appears to critics as a move to either force default or influence the election outcome by hinging approval on a government that would be sure to institute what the Union leaders want most – more cuts.

Leaving aside the argument of whether austerity is really the best approach to getting Athens out of the ditch – that will come in a later post – its difficult to see what the purpose of this proposal actually is. Greece appears close to the edge for so many reasons, with Iran’s oil cuts adding to the list today, why would EU leaders add more stress to the situation if they really wanted it to succeed?

This question goes back months to when Angela Merkel appeared to offer little hope for certain countries to rebound, sewing doubt where one would think she would offer a bit more optimism. Since then, she has been a voice of reason but also one of cautious doom, keeping the process moving but without much confidence that it would lead anywhere or really even be seen through. From the Greek side of things, I can see how the pessimism, added to the actual, real-life pressures they are dealing with, is starting to grow heavy. Are the country’s creditors actually doing something to solve the problems – to find a solution – or just staving off the inevitable? Would an outside plan work, even if complete control was handed over to Germany? Is it preferable just to face the obvious sooner than later or is there really a viable path forward that does not mean giving up any sense of control or autonomy?

Image: The Financial Post

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Something Very Wrong in Athens

Two days before a scheduled vote on a long-delayed vote on the spending plan needed so that Greece can receive enough money to pay its creditors, an enormous wrench has been thrown into the whole process, named George Karatzaferis. While members of all parties voiced strong opposition to the amount in cuts demanded by the troika (the European Union, the IMF and the European Central Bank), none had gone so far as to state that they would not ultimately support the effort. After all, the long delays have brought Greece precariously close to defaulting on billions owed to foreign creditors – at least no one that had really mattered. However, today, after the agreement appeared poised for a painful but ultimately successful passage on Sunday, Laos party leader, Karatzaferis declared to the masses that he would not be voting for the measure. According to a Wall Street Journal report from the 8th, the measure would include the following:

“minimum wages will be slashed by more than a fifth–by 22% for most wage earners, and up to 35% for young people–while wage hikes based on seniority will be frozen until Greece’s now soaring unemployment rate comes down to 10%. The document emerged as Greece’s political party leaders were locked in a meeting with Prime Minister Lucas Papademos late Wednesday to discuss the painful reforms the country must undertake to secure a fresh EUR130 billion aid package from its European partners and the International Monetary Fund. According to the draft of that loan deal, Greece will also continue to slim down its public sector by 150,000 workers through 2015, and pare back supplemental pension benefits paid to retirees. Other measures call for steep cuts in pharmaceutical expenses on the order of 0.4% of gross domestic product.”

While the debt repayment arrangements had few actual fans, it was the austerity measures that really stuck in the throat of Athens’ political class, especially those facing re-election in the near future. Still, it was not really until Karatzaferis’ announcement today that something like a true roadblock took form. It wasn’t that just that Karatzaferis’ declaration meant the package would not pass on Sunday – it still might. But it did appear to give way to a quick avalanche of vocal protest in the parliament, some rather expected firebombs in the streets, a 48-hour general strike and a now lengthy list of cabinet and government resignations. The package may pass, but it will not pass with the support or even presence of a number of members of the government. This is a pill that an increasing number of Greeks will not swallow. So what does this mean in terms of actual effect? For now, it means a cabinet shake-up, no matter how the vote on the package turns out. Reports this evening state that it will come on Monday, after the final vote. For opponents of the package and really any further EU intervention, this means a fresh boost of confidence that striking the package down is possible – a possibility that could actually be framed as a chosen exit from the European Union by Athens. At least that is how some are seeing it, going so far as to suggest that this would be a welcome conclusion to the whole mess by Merkel. The Guardian noted this afternoon,

“If Greece decided to quit the euro of its own volition, she could say she had done all she could to keep the single currency intact but, in the end, the Greeks themselves had decided it was time to go. The caveat is, of course, that a Greek departure would be orderly rather than disruptive.”

While dancing dangerously close to conspiracy theorists who believed that much of the rhetoric coming out of Brussels and Berlin has been a thinly veiled attempt to squeeze Athens out of the EU, the theory certainly seems more and more plausible with each passing day. And if it proves to be true, you can bet politicos in Madrid, Rome and Lisbon are going to be getting a lot more nervous.

Image: The Guardian

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Europe’s Old Guard Pushes Back, Pt. 1: Trial and Treason

Over the last few months, there have been countless stories demonstrating the difficulty much of the Northern Mediterranean faces when it comes to introducing and actually implementing political, economic and cultural change. At the heart of too many of these stories is the region’s aging population, not because they may be more politically conservative and less eager to embrace necessary change – though they very well might. Instead, it seems they are the ones with the largest slices of the populations invested in the past – those with the most to lose should existing systems be scrapped in favor of more efficient but ultimately unfavorable solutions or those whose egos would be most called into question if national governments finally confessed that they were misguided or simply unsustainable. It can be difficult to admit that you got it wrong and in top-heavy countries like Spain, Italy, Greece and even Germany, getting some momentum behind questioning the status quo can be downright impossible. Recently, there have been a few stories coming to light that do well to demonstrate this challenge, as countries’ old guard have begun pushing back against reform efforts, occasionally in transparently desperate ways.

In Athens, amid loud charges that any call for greater oversight or financial transparency is a conspiracy by EU powers to consolidate power in Brussels, this push back has even resulted in charges of treason. Brought into the Greek government to provide a semblance of order after the country’s deficit was found to be double original reports, Andreas Georgiou set about trying to create what he hoped would be a functional, honest and ultimately boring Hellenic Statistical Authority or ELSTAT. Once the head of the International Monetary Fund, Georgiou was offered up as a technocratic solution to investor worries about the validity of Greek economic information, meant to calm nerves by offering the clearest picture of Athens’ fiscal standing and how much help was actually needed.

Once in place, Georgiou found the task to be far more difficult than first thought but after some effort, he was able to present a firm deficit number with 15.8 percent of GDP, up from the 13.4 percent the statistics office had previously offered up. Sure it was higher than what was expected but it provided a firm place to start working. The reaction from the country’s old guard – namely the ones who had previously and erroneously reported the rate to be around 6 percent – was not what he expected, but possibly should have. According to a Planet Money report, the office first demanded that the report should have been subject to a vote by a statistics department board and union, suggesting perhaps that the figure was up for discussion. Following a possible hacking of his computer, Georgiou was informed that he would face treason charges for actions against the state and could face life imprisonment. For providing a figure that called into question the absolute authority of a body already shown to have provided dangerously faulty economic statistics, Georgiou could face a lengthy stint in prison.

For some the charges fit into a larger narrative of EU overreach, with the new figure meant to allow for greater oversight from Brussels and forced, painful austerity measures but the message of the charges was clear – despite being at the helm when the country got into this mess – when these grand mistakes were made – we are not to be questioned.

Not relegated to financial problems, this old-guard push back can be seen in Spain with the on-going trial of Judge Baltazar Garzon. The controversially crusading judge, who has previously gone after Augusto Pinochet, members of Galician drug smugglers and the Basque separatist group ETA, finally pushed too far when he aligned himself with family rights groups intent on pursing investigations into disappearances during the years under Francisco Franco. First joining with the groups in 2008 as a part of a push to excavate mass graves believed to exist from the Franco period, Garzon immediately ran into resistance from members of the government who pointed to mass immunity agreements passed during Spain’s transition to parliamentary democracy in the late 1970s. Not only that, these campaigns would be chasing ghosts as many, if not most of the perpetrators in question were long since dead.

At first persuaded against continuing thanks to political pressure in 2008, Garzon again took up the mantle and opened an investigation into the death of 114,000 people during the Franco period. As an investigating magistrate, Gazon can initiate cases rather than just oversee them. In response, the political pressure has evolved into charges out outright abuse of power, perverting the course of justice and most recently, of accepting bribes while on sabbatical at New York University. The message seems clear – do not question the actions of our recent past – there are to many with investments in keeping the past where it belongs.

I know it may strike some as a stretch to connect these stories but I believe that both demonstrate an unwillingness by the old guard to face up to the questionable actions of some to the detriment of the country. If these events are not addressed, is it fair to expect them to be avoided again in the future? And should that old guard retain the ability to bury those events firmly in the past?

Image: Baltazar Garzon in El Mundo

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EU Embargo Weighs Heavily on Med States

As European Union officials gear up for the expected passage of an embargo on oil imports from Iran in response to the country’s continued push to develop a nuclear program, some states are struggling to find alternatives for when the deliveries finally stop.

Under pressure from the United States, which halted all energy imports from Iran in 1979, EU actors have signaled their intent to introduce the sanctions following a meeting scheduled for the 23rd of January. According to Reuters, the embargo would prohibit member states from concluding new oil contracts with Iran or renewing any that are due to expire. The halt in energy imports is expected to impact both the Iranian economy and the European energy market, with many states relying on product from Iran despite a steady easing of trade agreements in recent years. However, despite strong support from the UK, France and Germany to implement the embargo, some states are seeking alternative approaches, especially those already reeling from weakened economies and threats to energy trading partners.

Among those, three of these states have launched efforts to delay, curtail or customize the actual implemented embargo to allow for more time to find alternative resources or protect amounts owed by Iran to domestic firms. In addition to targeted delays of application, states have sought the approval to keep receiving payments related to existing debts. According to EU data provided by Reuters, Italy, Greece and Spain take in about 500,000 bpd our of the 600,000 total coming into the European Union from Iran. Weighed down by dour growth estimates for the new year and massive spending cuts to meet EU demands, these three countries would stand to suffer most from any decrease in available energy products.

So far, the three countries have won approval to at least escape the embargo for the first six months of this year to allow them to seek out product alternatives, including increased input from Saudi Arabia. However, any such cooperation is likely to enflame the already tense relationship between OPEC members.

 

 

 

 

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Greece’s Natural Gas Gambit

Despite facing significant cuts to government spending amid a debilitating economic crisis in Greece, government officials in Athens are pushing forward with plans to establish the country as an energy hub and transport center in the coming years. With plans to host three pipeline projects meant to transport natural gas to the European marketplace, Greece has been working to strengthen working ties with regional partners, promising support and completion despite worries regarding where project funding will come from.

Last week, Environment, Energy and Climate Change Minister Giorgos Papakonstantinou travelled to Jerusalem to discuss the role Greece could play in transporting natural gas from wells in the Eastern Mediterranean to European customers, pledging support for the Israeli offshore efforts in conjunction with Cyprus. The first member of the new Greek government to visit Israel, Papakonstantinou’s comments were welcomed in the capital but could put him at odds with another pipeline partner, Turkey. Officials in Ankara have insisted that the Israeli-Cyprus drilling efforts are illegal and should be halted and reviewed. However, this has not stopped Athens from suggesting there was no problem with supporting both the Israeli effort and the ongoing ITGI pipeline, which partners Greece and Turkey, or any other joint projects to transport natural gas from the Aegean Sea.

Other efforts to establish Greece as a transport and pricing hub include the completion of the long-delayed Burgas–Alexandroupoli pipeline in conjunction with Bulgaria and the construction of an LNG regassification plant in the north of the country. Doubts about the country’s ability to pay for any of these efforts due to widespread cuts to government spending have been addressed with pledges of foreign partnerships and earnings from a privatization campaign, which is to begin before the end of the year. If available, Greece could also benefit from support from European Union member states as the country’s role as a transport hub could aid in the planned reduction in dependence on Russian natural gas.

Domestically, Greece’s energy potential remains limited though exploratory efforts have been launched to test the country’s potential reserves. In addition to seismic studies off the western coast and around Crete, the Greek government also ordered the local Institute of Geology and Mineral Exploitation to begin studies into the country’s shale potential. However, even if shale deposits are found in Greek territories, the high initial costs associated with shale extraction could restrict any efforts to access the reserves without substantial contributions from foreign project partners.

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The Cost of Inaction – Southern Edition

Returning to a theme of an earlier post, I remain at a loss as to why Euro leaders in France and especially Germany seem so timid about pursuing financial stability programs or what almost seem like inevitable steps towards greater economic integration among EU members states. Merkel has remained firm even though the costs of letting certain members of the community slide into default and/or leaving the Euro to collapse would leave Germany with far more of a burden than even a flat bailout of Greece, Ireland and Portugal – much, much more, it seems.

“One thing UBS notes is that it would be much, much cheaper for Germany to simply bail out Greece, Ireland, and Portugal outright (that would cost about 1,000 euros for every German man, woman and child in one swoop) than it would be for Germany to exit the euro zone (which would cost the average German 8,000 euros the first year and 4,500 euros thereafter).” -Washington Post

The actions called for seem like inevitable steps towards an EU economic integration so why beat around the bush as the markets continue to punish countries already struggling? Furthermore, as the punishing and insecurity spread to normally stable financial situations, what exactly is causing the delay?

Still, the inaction in this equation is hardly one-sided, though I am starting to see a strong narrative emerging to suggest otherwise in Spain, Italy and Greece. ‘Europe wants to shove reforms down our throats’, the story goes. ‘Look how they’ve installed new leadership in Athens and Rome’ or ‘Look how they’ve wiped the slate clear of left of center heads of state in favor of right wing politicians who are sure to be more obedient to the demands of an over-bearing Europe’. Leaving aside the political leanings of the outgoing Berlusconi and likelihood that France’s right of center Sarkozy faces a substantial challenge in next year’s election (my take is that anyone caught holding the bag come election time is sure to face as much), I am not sure I understand the argument here. Countries need funds to stay afloat due to a wider economic slowdown but more so because of irresponsible or outdated borrowing and spending practices. So, the idea that those entities asked to put forth said funds would ask for some behavioral change seems like a logical next step, both because they are the lenders and what responsible lenders in the world would distribute funds without some sense of where the money was going or how it was going to be spent and because its the next logical step in Europe’s planned economic integration. This was the plan, wasn’t it? Getting everyone on the same page economically? That sort of operation requires much from all those taking part, including the richer countries helping to stabilize those less fortunate and those with antiquated or unsustainable systems adjusting their practices to better reflect the system they had chosen to take part in. So if this was the plan and these were the changes needed, why are figures on all sides fighting so hard against it? Is it  theater, pride or are some deciding they’d no longer like to be on board this particular train?

To be clear,despite his obvious and public distaste for the EU,  Silvio Berlusconi was not tossed aside because he ran afoul of Merkel and Sarkozy as he led a noble campaign to rescue his country from an economic collapse. He was tossed out because he did little to spur actual growth or help ready his country for participation in the continental and global community he had chosen to be a part of, made all the worse by the fact that he kept being caught with his attention elsewhere as Rome burned. And to be clear, Merkel’s grandstanding is not for the benefit of the country as I believe deep down that she understands the real costs of letting this European experiment dissolve with her at the helm. Both sides need to put pride and worries about political futures aside and realize the wave is coming whether they act or not – its how they prepare for its arrival that will matter.

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