14-08-02 Greece is an important potential transit site for energy exports from the Caspian/Caucasus regions, with limited energy reserves of its own.

Greece is among the smallest of the economies in the EU, but has enjoyed fairly strong growth over the past few years with relatively low inflation. In 2001, for instance, Greece's real gross domestic product (GDP) grew by an estimated 4.1 %, while consumer prices increased at a 3.4 % annual rate.
For 2002, Greece's real GDP is expected to grow by 2.9 %, while its inflation rate is forecast at 2.9 %. Greece's unemployment rate has been trending downwards in recent years, from 11.9 % in 1999 to 10.4 % in 2001. For 2002, unemployment is forecast at 9.9 %. Greece hopes to achieve long-term real GDP growth of 5.0 %-5.5 % over the next 15 years, but outside analysts believe that this is overly optimistic.
Greece's economic growth is being driven in part by infrastructure construction (and foreign investment) for the 2004 Olympic Games, which are to be held in Athens. Also, with Greece joining the "Eurozone" (its 12th member) in January 2001, the general government budget experienced a surplus in 2001 for the first time in over three decades, while interest rates have declined sharply.

Meanwhile, since the mid-1990s, Greece has embarked on a series of macroeconomic and structural reforms, including measures aimed at slashing bureaucracy and at attracting foreign investment. The International Monetary Fund (IMF) and OECD both have called for continued efforts in these areas.
Relations between Greece and Turkey have improved recently, allowing for discussion of economic and energy cooperation. In March 2002, Greece and Turkey began discussions on resolving a decades-long disagreement over Aegean Sea boundaries. The two countries also are increasing cooperation in the economic and energy areas.
Greece is a major investor in the former Yugoslavia and its energy infrastructure is being integrated with that of the Balkan states. Improved relations withneighbouring states could help Greece significantly in achieving its ambitious goal of becoming the major Balkan energy (oil, natural gas, electricity) hub by 2010 (at a cost of up to $ 14.5 bn).

Oil
Greece has limited oil reserves of 9 mm barrels. The country produces 8,992 bpd and is highly import reliant for its 406,000 bpd oil consumption (2001 estimate). Oil is Greece's most important fuel source, accounting for 63 % of total energy consumption in 2000, a percentage that has remained fairly stable since the mid-1980s.
Oil is imported primarily from Iran, Saudi Arabia, Russia, Libya and Egypt. The Middle East is expected to remain the major source of Greek oil supplies in coming years, although Russia could become more important as new pipelines are constructed.
Greece's oil industry is dominated by state-owned Hellenic Petroleum (HP), which was formed in 1998 from the former state oil company, Public Petroleum Corporation (DEP).
HP conducts oil exploration, imports crude and products, operates three large refineries (one in Macedonia), and distributes and markets oil products. HP has been partially privatised in stages, with the state holding 60.1 % at year-end 2000. HP's IPO was in June 1998, when 23 % of the company was sold, to a mixture of retail and institutional investors.

In August 2001, the Greek government announced its intention to sell another 30 % of HP. In July 2002, the Greek government announced that the sale of a 23.17 % stake in HP should be completed by the end of August 2002. A joint venture between Russia's LUKoil and Greece's Latsis Group -- which owns Greece's third-largest refiner Petrola -- has offered to pay $ 459 mm for the stake (in June 2002, Russia's Yukos and Austria's OMV withdrew from the bidding).
In early July 2002, a 15-day strike at HP by workers opposed to HP's privatisation came to an end after a Greek court ruled that the strike was illegal. Greece's oil production comes from the Prinos area in the Aegean Sea, off the coast of Kavala.The Prinos fields, which began production in 1996, are operated by the US, Greek, and Canadian North Aegean Petroleum Company (NAPC) consortium. In February 2001, a new oilfield was found offshore the Aegean island of Thasos (also near Kavala) by Kavala Oil, with production expected to be 7,000-7,500 bpd.
The oil will be sold to HP for refining. Greece's first oil exploration licensing round was held in 1996 and awarded six concessions. In May 2002, Greece announced that it would hold its second oil exploration licensing by early 2003. The round is to include both offshore and onshore areas in north-western and south-western Greece, plus unexplored blocks in the Ionian Sea.

Exploration in the Aegean Sea is complicated by lack of agreement between Greece and Turkey delineating continental shelf boundaries. HP is developing a $ 100-mm, 143-mile pipeline to carry crude oil from the northern port city of Thessaloniki to HP's newly-acquired Okta refinery near Skopje, in the Former Yugoslav Republic of Macedonia (FYROM).
Construction of the pipeline by HP's subsidiary El Pet Balkaniki began in November 1999. This pipeline will have the capacity to carry about 50,200 bpd. The pipeline will be managed in partnership with the FYROM, and will carry crude that currently is shipped by rail from Thessaloniki to Okta.
In January 1997, Greece, Bulgaria and Russia agreed on a plan to build an oil pipeline linking the Bulgarian Black Sea port of Burgas with Alexandropoulis on the Mediterranean coast of Greece. The proposed 178-mile, underground, Trans Balkan pipeline would allow Russia to export oil through the Black Sea while bypassing Turkey's Bosporus and Dardanelles Straits.
However, the $ 600-$ 800 mm project has been stalled by a wide range of technical and economic disputes. Russia has affirmed that the pipeline, with proposed capacity ranging from 600,000 bpd to 800,000 bpd, will work at least at 50 % of its capacity, and Russian oil major Yukos has expressed its interest in the project, which may ease concerns over filling the pipeline.

Greece also has discussed with Kazakhstan the possibility of shipping oil through the pipeline. In May 2002, Bulgaria said that it hoped an agreement on the pipeline could be signed by the end of 2002, with the main outstanding issue being the % stake that each country will take in the project.
Downstream HP owns about half of Greek refining capacity, which totalled 406,500 bpd as of January 1, 2002. HP's Aspropyrgos facility refines about 140,000 bpd, while the Thessaloniki refinery has a 66,500-bpd capacity. Two private refineries, owned by Motor Oil Corinth Refineries and Petrola Hellas, are export-oriented, selling only limited volumes to the national market.
Motor Oil, which had been majority-owned by Saudi Aramco, was partially sold off to Petroventure of Jersey in July 2001, a joint venture of Aramco and Vardinoyannis, which separately each own 16.4 % of Motor Oil. HP also is the largest player in the Greek retail oil market at a 26 % market share. US-based Texaco and British-Dutch Shell decided in 2000 to trade Texaco's Greek retail assets for some of Shell's United Kingdom retail assets.

Natural gas
With natural gas reserves of only 18 bn cf, Greece produces negligible amounts of natural gas. Consumption, however, has increased significantly over the past few years, increasing from only 1 bn cf in 1996 to 72 bn cf in 2000. Consumption is expected to continue increasing, possibly tripling over the next ten years. About 80 % of Greece's natural gas imports currently come from Russia, and 20 % from Algeria.
The Greek natural gas industry is controlled by the state-owned Greek Public Gas Company (DEPA), which was created in 1988 in an attempt to diversify the primary energy supply by increasing the role of natural gas. DEPA is 35 % owned by HP, with the Greek government owning the rest. In April 2002, plans were announced to sell off 35 % of the government's share of DEPA, with possible buyers including Russia's Gazprom, Germany's Ruhrgas, and Algeria's Sonatrach. Eventually, the plan is for DEPA to be only minority-owned by the state.
DEPA began importing natural gas from Russia via Bulgaria in July 1997 through a Bulgarian pipeline (Greece's only operational gas pipeline), and the company has contracts to supply natural gas to electric utilities and industrial companies. In March 2001, DEPA and Gazexport (part of Gazprom of Russia) agreed on an importation deal for 2002 which includes a 5 % price increase.

Under the EU Gas Directive, 20 % of Greece's natural gas market was to have been opened to competition by August 2000, but Greece was granted extra time. Under current Greek law, companies other than DEPA can only import gas to generate electric power destined for export.
Recent improvements in Greek-Turkish relations are facilitating discussions of energy cooperation. For instance, Greece and Turkey agreed in July 2000 to work together to develop connections between their natural gas networks.
This commitment was reaffirmed at "The EU and Black Sea economic cooperation conference" in September 2001 by the Turkish officials at the conference. Senior Greek and Turkish officials have signed an agreement at EU headquarters to study how best to develop natural gas connections.
The two countries have agreed to work with the EU-sponsored Interstate Oil Gas Transport to Europe (INOGATE) project, which provides technical assistance to modernize oil and gas transport in central Europe and Asia in order to work toward European pipeline linkage to Caucasus and Asian oil and gas. In March 2001, Greece signed an agreement with Armenia and Iran to strengthen economic and energy cooperation.
Discussions included the possibility of an EU-subsidized natural gas pipeline from Iran through either Armenia and Ukraine or Turkey and Greece. Greece received its first LNG shipment in November 1999, beginning a 21-year contractual agreement between Algeria and Greece under which DEPA will purchase gas from Algeria's Sonatrach.

Greece has one LNG terminal at Revithoussa, near Athens, with a capacity of 23 bn cf per year. A feasibility study is underway to determine whether to construct an underwater gas pipeline connecting Italy and Greece; if this pipeline does not come to fruition, it is possible that another LNG terminal will be constructed in Greece or that the terminal at Revithoussa will be expanded.
On December 15, 1997, Russia and Turkey signed a 25-year deal under which the Russian gas company, Gazprom, would construct a new natural gas export pipeline (called "Blue Stream") to Turkey for delivery capacity of around 565 bn cf annually, with initial deliveries possibly starting in 2002.
The $ 3 bn, 758-mile dual pipeline is slated to run from Izobilnoye in southern Russia, to Dzhugba on the Black Sea, then under the Black Sea for about 247 miles to the Turkish port of Samsun, and on to Ankara. Natural gas supplies through the Blue Stream pipeline are slated to begin in October 2002, with Russia scheduled to deliver 70.6 bn cf of natural gas to Turkey via the pipeline this year.
By 2009, Blue Stream is expected to reach peak capacity of 565 bn cf per year. Over the course of the 25-year agreement, Turkey will import 14.1 tcf of natural gas from Russia via Blue Stream. Eventually, the Blue Stream project could be extended onwards to other Mediterranean countries, including Greece.

Along these lines, Greece and Turkey signed an agreement on March 28, 2002 which calls for extending the natural gas pipeline from Iran to Turkey into Greece. Reportedly, the 175-mile-long pipeline (125 miles in Turkey, 50 miles in Greece), expected to be completed by 2005, would connect Ankara to Alexandroupolis in northern Greece at a cost $ 300 mm.
The pipeline initially will transport around 17.7 bn cf of natural gas per year. Eventually, natural gas could be transported to Europe via Bulgaria or via an undersea pipeline to Italy, where gas demand -- especially for electric power generation -- is expected to grow rapidly in coming years. A deep water option could be extremely expensive, however, making an overland route more likely. Also, in April 2002, Azerbaijan said that it could start supplying Greece with natural gas in 2006-2007 through the Baku-Tbilisi-Erzurum pipeline and the Turkey-Greece pipeline extension.

Coal
Lignite ("brown coal"), a brownish-black coal of low quality used almost exclusively for steam-electric power generation, is Greece's only significant fossil fuel source. Greece's lignite reserves total 3,168 mm short tons. The largest deposits are at Ptolemais and Amintaio, in northern Greece.
The country has no hard coal reserves, and imports hard coal from South Africa, Russia, Venezuela, and Colombia. Domestic production has been partly opened to private companies, but the Public Power corporation is still the largest producer, as well as consumer.

Electricity
In 2000, Greece generated 49.6 bn kWh of electricity, around 90 % of which was thermal, 10 % hydropower, and 1 % solar ( percentages do not equal 100 % due to rounding). Most of the thermal is lignite-fired, with some oil-fired plants. New plants will be gas-fired for the most part. Electricity demand has been growing steadily -- around 3.4 % per year -- meaning (according to the Energy Regulatory Authority, RAE) that some 6,000 MW of additional capacity will be needed to guarantee supply through 2015.
Greek authorities are concerned that electrical generation capacity will be insufficient for the 2004 Olympic Games in Athens. Natural gas will become an important fuel for electricity generation as planned gas-fired plants are constructed.
Greece's Public Power Corporation (I.PPC) is a state-owned monopoly that controls electric production, transmission, and distribution in the country. A flotation of 10 %-15 % of I.PPC is planned by the end of 2002. In February 2001, with the partial liberalization of Greece's power market (35 % was opened to competition) in accordance with the EU's Electricity Directive, I.PPC lost its legal monopoly on electricity generation but remains the sole distributor.

Other EU member countries had to open up their electricity markets by February 1999, but Greece was granted a two-year waiver in recognition of its unique situation: it borders no other member state, and much of its territory is comprised of islands that cannot be linked into the national grid.
Given the lead time on construction of new power plants, it will be a while before competing generators are functioning, so I.PPC still has an effective production monopoly. The OECD has urged Greece to break up I.PPC, and plans are for the Greek power sector to be completely liberalized by 2005. Management of the Greek power liberalization process is the responsibility of RAE, the Greek regulating authority.
Greece's power network currently is connected with the networks of Albania, the Former Yugoslav Republic of Macedonia (FYROM), and Bulgaria, allowing Greece to export electricity to Kosovo in Yugoslavia, through Albania and FYROM (although transmission problems in those countries have sometimes prevented much of this electricity from reaching its intended recipients).
In June 2001, energy ministers from Albania, Bosnia and Herzegovina, Bulgaria, Greece, FYROM, and Romania signed a memorandum for the creation of a competitive energy market in the Balkans. Greece would like to upgrade its link with Bulgaria and to Europe via Croatia and Bosnia.

Greece is involved in a number of projects to link its electric grid with neighbouring countries. In July 2002, Greece and Italy completed work on a 500-MW cable (in both directions) under the Ionian Sea to link their national power grids. The 102-mile cable links Otranto, Italy, and Aetos, Greece. The project is a joint venture between ENEL (75 %) and PPC (25 %).
Improved Greek-Turkish relations also are affecting the Greek electricity sector. In January 2000, a Greek-Turkish-US (Copelouzos-Gama-ExxonMobil) consortium announced plans to construct a gas-fired power plant in Greece. The plant will have a capacity between 400 MW and 600 MW and will be used to export electricity to Turkey in addition to helping supply increasing Greek domestic demand.
Electricity will be exported via the new 400-kV transmission line to be constructed between Filippoi (Greece) and Hamidabad (Turkey). Greece and Turkey also hope to reach agreement by 2006 on linking the two countries' power grids. Renewable electricity generation projects are on the rise in Greece, and the government has established the Centre for Renewable Energy Sources (CRES), under the Development Ministry, to promote renewable energy.
CRES estimates that 15 % of the country's electricity needs can be produced by wind farms, with installed wind-power capacity possibly expanding from 270 MW at present to 2,000 MW by 2010. The EU requires that member states produce 12 % of their electricity from renewable sources by 2010, and this appears easily achievable for Greece -- assuming that regulatory hurdles and technical problems (i.e., the need to extend Greece's power grid to the islands where wind power is generated) can be overcome. Already, wind farms exist on a number of Greek islands (Crete, Evia, Andros, Samos, etc.) and 20 % of households use solar water heaters.

Islands in the western part of Greece are connected to the mainland system by submarine cables. The use of solar power in Greece reduces the need for conventionally generated energy by about 1.4 bn kWh per year. A 50-MW parabolic trough-type solar power plant is under construction in Crete. DEH is planning a 100-kW photovoltaic (PV) park for Gavdos island, in addition to already-existing PV capability on the island.
Energy Photovoltaics (a German-Italian-American consortium) announced in July 2001 that it will build a $ 22 mm solar plant in Kilkis with power generation capacity of 5 MW. In February 2002, a report by Merrill Lynch estimated that wind power capacity additions in Greece would be 26 MW in 2002, 19 MW in 2003, 54 MW in 2004, and 56 MW in both 2005 and 2006.
In June 2001, Gemesa of Spain signed an agreement with Hellenic Energy and Development Company to invest 420 mm euros to develop wind power plants with a total capacity of 460 MW by 2005. Windforce of the UK plans to develop $ 800 mm of projects in the EU, including three wind farms in Greece (at Makronisos, Kilkis, and Lakonia) with a total capacity of 650 MW.

Country overview
President: Konstantinos "Kostis" Stephanopoulos; since May 5, 1995 Prime Minister: Konstandinos Simitis (Panhellenic Socialist Movement-Pasok); since January 19, 1996
Independence: 1829 (from the Ottoman Empire)
Population (7/01E): 10.6 mm
Location/size: Southern Europe, bordering the Aegean, Ionian and Mediterranean Seas/131,940 sq km. (51,146 sq miles) ; roughly the size of Alabama
Major cities: Athens (capital), Thessaloniki, Piraeus, Patras
Languages: Greek (official), English, French
Ethnic groups: Greek (98 %); other (2 %)
Religion: Greek Orthodox (98 %), Muslim (1.3 %), other (0.7 %)
Defence (8/98): Army (116,000), Navy (19,500), Air Force (33,000), Conscripts (112,700)

Economic overview

National Economy and Finance Minister: Nikos Khristodoulakis
Currency: Euro
Market exchange rate (8/8/02): $ 1 = 1.026 euro
Nominal Gross Domestic Product (GDP, 2000E): $ 113 bn
Real GDP growth rate (2001E): 4.1 % (2002F): 3.8 %
Unemployment rate (2000E): 11.4 % (2001F): 10.7 %
Inflation rate (2001E): 3.4 % (2002F): 2.9 %
Major trading partners: Germany, Italy, other OECD Europe
Major export products: Manufactures, food and beverages, petroleum products
Major import products: Manufactured consumer goods, capital goods, crude oil, food products
Merchandise exports (2000E): $ 15.8 bn (half to the EU, 6 % to the US)
Merchandise imports (2000E): $ 33.9 bn (two-thirds from the EU)
Current account deficit as a % of GDP (2001E): -6.2 % (2002F): -7.8 %
External debt (2000E): $ 57 bn

Energy overview
Minister of Development: Apostolos-Athanasios Tsokhatzopoulos
Proven oil reserves (1/1/02E): 9 mm barrels
Oil production (2001E): 8,992 bpd, of which 4,992 bpd is crude oil
Oil consumption (2001E): 406,000 bpd
Net oil imports (2001E): 397,008 bpd
Crude oil refining capacity (1/1/02E): 406,500 bpd
Major crude oil import sources: Persian Gulf, OPEC
Natural gas reserves (1/1/02E): 18 bn cf
Natural gas production (2000E): 0.1 bn cf
Natural gas consumption (2000E): 72 bn cf
Coal reserves (2000E): 3,168 mm short tons (all lignite)
Coal production (1999E): 67.2 mm short tons
Coal consumption (2000E): 70.5 mm short tons
Electric generation capacity (2000E): 10.1 GW
Electricity production (2000E): 49.6 bn kWh

Environmental overview
Minister of Environment, Town Planning, Public Works: Vasso Papandreou
Total energy consumption (2000E): 1.3 quadrillion Btu* (0.3 % of world total energy consumption)
Energy-related carbon emissions (2000E): 26.8 mm tons of carbon (0.4 % of world total carbon emissions)
Per capita energy consumption (2000E): 126.1 mm Btu (vs. US value of 351.0 mm Btu)Per capita carbon emissions (2000E): 2.5 tons of carbon (vs. US value of 5.6 tons of carbon)
Energy intensity (2000E): 9,653 Btu/ $ 1995 (vs. US value of 10,918 Btu/ $ 1995)** Carbon intensity (2000E): 0.19 tons of carbon/thousand $ 1995 (vs. US value of 0.17 tons/thousand $ 1995)**
Sectoral share of energy consumption (1998E): Industrial (34.5 %), transportation (35.2 %), residential (20.9 %), commercial (9.4 %)
Sectoral share of carbon emissions (1998E): Industrial (39.2 %), transportation (27.5 %), residential (21.5 %), commercial (11.8 %)
Fuel share of energy consumption (2000E): Oil (63.2 %), coal (27.8 %), natural gas (6.0 %)
Fuel share of carbon emissions (1999E): Oil (60.2 %), coal (36.8 %), natural gas (3.0 %)
Renewable energy consumption (1998E): 93 t Btu* (2 % decrease from 1997)
Number of people per motor vehicle (1998): 3.1 (vs. US value of 1.3)
Status in Climate Change Negotiations: Annex I country under the United Nations Framework Convention on Climate Change (ratified August 4th, 1994). Under the negotiated Kyoto Protocol (signed on April 29th, 1998, but not yet ratified), Greece has agreed to reduce greenhouse gases 8 % below 1990 levels by the 2008-2012 commitment period.
Major environmental issues: Air pollution and water pollution.
Major international environmental agreements: A party to Conventions on Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 94, Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94 and Wetlands. Has signed, but not ratified, Air Pollution-Persistent Organic Pollutants, Air Pollution-Volatile Organic Compounds.

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and waste electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2000.
Oil and gas industries
Organization: Hellenic Petroleum -- the state petroleum company; DEPA -- the state-controlled gas company; Public Power Corporation -- the state-owned utility
Major refineries (capacity-bpd, 1/1/02E): HP Aspropyrgos (140,000), Motor Oil Aghii Theodori (100,000), Petrolas Hellas Elefsis (100,000), HP Thessaloniki (66,500)
Major ports: Piraeus, Thessaloniki, Patras