New international hydrocarbons offshore tenders launched for Crete and Ionian Sea
Overview
During the past few years, the Greek hydrocarbons regulatory sector (prospection, exploration and
exploitation) has undergone significant changes resulting from an attempt to improve the existing
legal framework. Law 4001/2011 revised the Hydrocarbons Law (2289/1995), which transposed EU
Directive 94/22/EC on the conditions for granting and using authorisations for the prospection,
exploration and production of hydrocarbons. The 2011 law sought to:
- provide for a new investment-friendly policy;
- adopt best international practices; and
- establish a state authority – namely, the Hellenic Hydrocarbons Resources Management SA
(HHRM) – whose main responsibility is to manage the Greek hydrocarbon resources. The
establishment of the HHRM was set out in Presidential Decree 14/2012.
The Hellenic Republic grants exploration and exploitation rights for onshore or offshore block areas
(over which the Greek state has sovereign rights) via a lease agreement or a production sharing
agreement between private investors and the HHRM on behalf of the Greek state. In practice, a lease
agreement is usually preferred. The process of awarding exploration and exploitation rights takes
place through:
- a tender invitation to interested investors via an international licensing round;
- an application by interested investors which, on approval, is followed by an invitation to
tender; or - an open invitation (open door) for expressions of interest.
Any tender invitation is published in both the Government Gazette and in the Official Journal of the
European Union and the deadline to submit bids is at least 90 days following publication in the latter.
Further, the tender invitation describes the areas of interest, the eligibility criteria and all other
respective issues (eg, bank guarantee, royalties, minimum exploration works, the time limit for
granting the respective licence and signature and production bonuses). Notably, the chosen
preferred investor may be vetoed by the minister of environment and energy where no submitted
offers are considered advantageous for the Greek state. The execution of such lease agreements with
HHRM is subject to the minister’s approval; otherwise, they are deemed to be null and void.
The duration of the exploration stage cannot exceed seven years for onshore areas and eight years
for offshore ones. The aforementioned stage is divided into three phases: each refers to a separate
work programme that leads either to the next phase or the withdrawal from further commitments at
the end of each phase. The possibility of extension is open up to 50% of the initial period under
specific terms and conditions, as described in the agreement. On a declaration of commerciality, the
lease moves on to the exploitation phase. From that date onwards, the lessee holds exploitation
rights over a 25-year period, with the possibility of two five-year extension periods each.
Termination of the lease agreement where the minimum work programme is not fulfilled is subject to
compensation amounting to the minimum expenditure obligation.
Recent tenders
In 2014 Greece initiated its process for hydrocarbons offshore tenders exploration in 20 block areas
in the Ionian Sea and Crete. An evaluation committee was appointed by the minister of environment
and energy in order to examine the received offers. The evaluation for Blocks 2 and 10 was finalised
and the preferred bidders were announced:
l for Block 2: Total Greece as the operator, Edison International and the Hellenic Petroleum;
and
l for Block 10: Hellenic Petroleum.
In order for the Greek state to make the investment more attractive, a substantial decrease in its
corporate tax rate from 40% to 25% has been made. This 25% consists of a 20% income tax and a 5%
regional tax.
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