For over two years now, HellasFrappe has continuously published stories containing geological data and studies about Greece's natural reserves. We even went as far sometimes as saying that the reason our economy is in the mess it is in today is indirectly connected to our natural reserves and the ongoing US-Russian energy war, with Greece being right smack in the middle of it.
At times we even said that we believed that the reason the former government of Costas Karamanlis was toppled -or purposely discredited- was because of his belief that through pipeline diplomacy with Russia we would finally get away from all the vultures hovering over our country's natural wealth.
The reason we believe all of this so strongly is simple... we go through the news every single day and brake down the stories one by one. Also, we are convinced that when George Papandreou announced that Greece would join the EU mechanism from Kasterlorizo he was sending a clear message to all concerned that we would finally submit. (That was after all one of the tasks on a list of many that he was obligated to execute after being endorsed by the "system" to take over Greece's government).
In October, a study that was commissioned by Prime Minister Antonis Samaras only vindicates all our -so called conspiracy- theories about the immense wealth buried deep in our seas. Reuters published a report about this at the same time confirming this. Read more about this here - SPECIAL REPORT - Study Commissioned By Samaras Confirms Over 600 Billion In Natural Reserves Under Crete! - http://hellasfrappe.blogspot.gr/2012/10/special-report-study-commissioned-by.html
Also, read the following report titled "Economic and Geopolitical Importance of Eastern Mediterranean gas fields for Greece and the EU. Emphasis on the Probable Natural Gas Deposits Occurring in the Libyan Sea within the Exclusive Economic Zone of Greece", written by Alain Bruneton, Elias Konofagos and Anthony E. Foscolos, link http://www.mred.tuc.gr/home/foscolos/2011_foscolos_MW.pdf
- Professor of Emeritus Antonis Foskolos - from the Department of Mineral Resources and Engineering of the Technical University of Crete and energy counselor to the Canadian government as well as the only Greek scientist to be part of explorations near the North Pole
- Dr. Elias Konofagos - Executive Vice President of the Athens-based company Flow Energy, which informally advises the Greek government on energy strategies.
- Dr. Nikos Lygeros - A Greek geopolitical analyst, poet, artist, humanist, and a Greek man with highest IQ in the world (ranked at 189 on the Stanford Binet scale)
The amount of natural gas consumed every year by the European Union amounts to 500 bcm. Almost half of its consumption is imported from Russia, 160 bcm and 90 bcm are imported from North Africa especially Algeria & Libya (BP Statistical Review of World Energy 2010).
By 2020 the demand for natural gas in Europe will increase by 225 bcm. Hence, the total energy deficit (oil + gas) of EE, expressed in billion cubic metres of natural gas per year will reach 845 bcm. This demand in natural gas can not be satisfied by either Russia, (which has 44 trillion cubic meters of natural gas resources and an annual production of 600 billion cubic meters), because 2/3 of the reserves and the production are allocated for domestic uses, nor by Algeria and Libya because the reserves amount to 6.2 tcm (BP Statistical Review of World Energy 2010). However, this extra demand can be satisfied from the newly discovered and the expected natural gas resources in the East Mediterranean and the offshore south of Crete basins as estimated by the U.S.
Geological Service and BEICIP / FRANLAB -IFP, France.
According to USGS Technical Report 2010, besides the already discovered natural gas deposits in Egypt and Israel, which is around 3 tcm, there is a 50% potential to discover an additional 9.5 tcm of natural gas in the Nile Cone and in the Levantine Basin plus an amount of at least 1.3 tcm of natural gas offshore (Cyprus, Semb, 2009). This brings the grand total of proven and potential reserves, not counting the probable reserves in the Greek Herodotus Basin and those existing in offshore southern Crete, to over 14 tcm (494 trillion cubic feet) of natural gas. This amount is 12 times more than what Europe expects to have from Azerbaijan (1.2 tcm) via the Nabucco pipeline.
If we subtract 3 tcm in order to satisfy the internal needs of Egypt, Israel and Cyprus over the next 30 years, the remaining amount of 11 tcm could cover E.U. ever increasing needs by 2020 for 35 years.
The export of the southeastern Mediterranean natural gas surplus already found in the region is possible with ships that could carry compressed natural gas (CNG) loading it directly from offshore field floating production systems. The cargo can be unloaded either in Greece and then transfered towards the wider gas European market.
Conclusions: The existing hydrocarbon resources and exploration activities in the Eastern Mediterranean particularly in the Nile Cone and offshore Israel and Cyprus has been presented. Further exploration and production opportunities, could follow in offshore areas between Cyprus and Israel, Cyprus and Lebanon, Syria, Egypt, Libya and Crete.
The Eastern Mediterranean is attracting international interest in hydrocarbon exploration and production investments based on recent giant natural gas discoveries of about 3 Tcm. According to 2010 USGS reports, an additional 9.5 tcm possible natural gas reserves in the Nile Cone and Levant Basin could be present along with another potential of 1,3 tcm offshore Cyprus (Semp, 2009).
Due to the recent natural gas findings by Shell and BP in areas adjacent to the Greek portion of the Herodotus Basin and the active exploration taking place in the Cypriot portion of the Herodotus basin, as well as the recent publication by Krois et. al., 2009, where cross sections inside the Greek Herodotus basin indicate the presence of hydrocarbon reservoirs, the Greek government should investigate its potential by acquiring from TGS-NOPEC all the geophysical survey lines, tagged as GR lines.
The existence of active mud volcanoes in southern offshore Crete is a very serious indication of hydrocarbons presence and possible petroleum systems in this region. This is the case throughout the world eg. the Caspian Sea, Gulf of Mexico, Western African Basin, Trinidad-Tobago and the Nile Cone where active mud volcanoes are strongly correlated with the presence of hydrocarbon deposits. The acquisition of exploration data south and around the island of Crete is absolutely necessary and urgent in order to further evaluate the presence of a working petroleum system with reservoirs, seals and structures in the region.
The necessity to export surplus natural gas to Europe requires either the building of CNG or LNG ships or the construction of a pipeline(s) which will start from Haifa, Israel or Limassol Cyprus (Transeuropean Natural Gas Pipeline). Due to the expected possible enormous quantities of natural gas to be discovered in Eastern Mediterranean this pipeline(s) could be more economical than the proposed Nabucco pipeline which will carry Azeri natural gas, (around 1 tcm), to Europe.
This development will benefit Greece immensely and could open the way for starting hydrocarbon exploration in Southern Crete, the Western Greece and the Ionian Sea.
Natural Gas Pricing And its future - Europe as the Battleground
Whoever controls the gas... also controls the price of energy...
In a separate report titled "Natural Gas Pricing And its future - Europe as the Battleground", by Anthony J. Melling published for the Carnegie Endowment Foundation for International Peace, we read that Europe’s gas industry is facing major challenges with profound implications for how gas will be priced and traded internationally in the future. The international gas trade is dominated by a reference pricing mechanism - oil indexation- that originated in Europe in the 1960s but is under growing pressure there, bringing into question how natural gas may be priced in the future, not only in Europe, but in Asia and beyond.
Historically, international trade in gas was quite limited, as gas was produced and consumed locally or regionally. Pricing mechanisms ranged from regulated prices set by governments, prices indexed to competing fuels, or spot1 market pricing in competitive markets. Contracting structures in each of the major market areas evolved independently of the others and there was little reason for the pricing structures to be linked because gas was not a fungible international commodity like oil.
The practice of indexing gas prices to competing fuels -specifically oil products- gained favor early on in Europe and thereafter in Asia. Th e very growth of these markets rested on increasing international trade in natural gas that was contractually based on linking gas prices to oil product prices for both pipeline gas and its liquefied natural gas (LNG) counterpart. Th e United States, by contrast, pioneered commodity markets based on hub trading.
1 Throughout the report, “spot markets” and “spot prices” are used in their broadest sense to cover the wide range of gas commodity markets and dynamic pricing systems that include: formal and informal quotes, spot and futures trades, virtual and physical trades, and over the counter and bilateral contracts. Specifi c markets will be referred to individually where necessary.
The landscape began to change in Europe in the 1990s. Th e United Kingdom decided to introduce a liberalized market in natural gas and the industry began developing traded markets based loosely on the U.S. model. And in 1998, the UK gas network was linked to Belgium, causing commodity markets to spread into continental Europe. Th e European gas market split, with oil indexation dominating the continent while competitive hub pricing - centered in the UK- made inroads into northwestern Europe.
Enhanced interconnectivity was not restricted to Europe in the following decade. Isolated regional markets became increasingly interconnected both physically and commercially by LNG, which today comprises 28 percent of the international gas trade, and is nearing 10 percent of world gas supply. As a result, supply surpluses or shortfalls precipitate rapid shifts in LNG fl ows from one region to another—in pursuit of a higher price.
At fi rst, wholesalers skillfully exploited diff erences in long-term contract and spot prices, diverted LNG cargoes as needed, and eff ectively managed the market balance in Europe, using fl exibility embedded in their oil-indexed contracts. Starting in late 2008, however, a number of forces converged, undermining this balance.
Gas demand fell sharply due to recession just as gas supply availability increased, sharply intensifying competition between the two pricing systems. While spot market prices in Europe have traditionally hovered above oil-indexed prices, spot prices dropped well below oil-indexed prices and have remained there. Exploiting liberalized regulations governing the transportation of gas, market-priced gas surged onto the continent, stealing market share from wholesalers supplied with oil-indexed gas.
With European demand down an estimated 7 percent in 2009, LNG sales nevertheless increased dramatically at the expense of pipeline gas supplies under traditional oil-indexed contracts. Wholesalers under contract to purchase gas from producers at oil-indexed prices had too much overpriced gas, and competitors with access to market-priced supplies cherry-picked their customers. While major utilities faced billions of dollars in penalties for failure to take agreed amounts of gas, producers’ revenues fell sharply below expectations. Suddenly, gas exporters were pressured to reduce the oil-indexed prices in their long-term contracts with European wholesalers.
This dramatic collision of two industry cultures with competing pricing structures has persisted. In 2010, the downward spiral has been slowed with a moderate economic recovery, cold winter, and contract concessions by several gas exporters. But the prospect of continued nervous markets and relentless new gas supply has raised the prospect of radical change, including calls from traditionally conservative pro-oil indexation quarters for the “modernization” of existing contracts or decoupling of gas prices from oil.
The clash of the two pricing paradigms in Europe has created obvious winners and losers. Broadly speaking, there are three sets of players: incumbent wholesalers, second-tier buyers, and gas producers. Incumbent wholesalers, despite their enormous power to renegotiate prices, are the obvious losers as they are squeezed by lower demand, oversupply, and greater competition. Second-tier players, with a variety of supply options, and unencumbered by long-term oil-indexed contracts, are the principal beneficiaries as they can take advantage of diff erences in prices. And gas producers may benefit in the long term as they ultimately control the supply of gas.
What happens in Europe and which pricing system prevails will have broad repercussions for the gas industry in Europe and beyond, with more questions than answers clearly visible on the horizon. Will oil indexation attempt to reassert its primacy in Europe and reinforce its role in the international gas trade, or will this mechanism give way, slowly or suddenly, and when? Can oil indexation and hub pricing co-exist in Europe and the world?
If oil indexation is eclipsed in Europe, how will long-term contractual obligations valued at hundreds of billions of dollars between suppliers and wholesalers be sorted out? Is an international gas price benchmark decoupled from oil on the horizon and, if so, what are the alternatives and how will it work? Under those circumstances, how will oil-indexed Asia fit into the future international gas trade? With the gas pricing mechanism uncertain and future revenues clouded, will necessary investments to ensure supply and transit security be made? How will the power sector, which likely drives gas demand growth worldwide, respond to the opportunities and challenges of gas pricing uncertainty?
The price of gas in Europe -and the mechanism used to determine it- will not only impact European companies and customers, but also have profound implications for energy markets around the world. Energy security, geopolitics, and the shift to greener forms of fuel that will be critical for combating climate change will also depend on how gas pricing evolves. (Adnan Vatansever, Senior Associate, Energy and Climate Program, Carnegie Endowment for International Peace Link - http://www.carnegieendowment.org/files/gas_pricing_europe.pdf)
Read more about this topic by clicking here
SPECIAL REPORT - Subject Oil Exploration - Truth And Many Many Lies http://hellasfrappe.blogspot.gr/2012/05/special-report-subject-oil-exploration.html
SPECIAL REPORT - Serious evidence of 3.5 trillion cubic meters of natural gas under Crete http://hellasfrappe.blogspot.com/2011/09/special-report-serious-evidence-of-35.html
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