Cyprus Mail
Cyprus Energy

Cyprus –based oil firm sues Greek government

Katakolon is an oil field off the coast of western Greece

By Elias Hazou

A CYPRUS-BASED oil and gas exploration and production company is taking the Greek government to court after failing in its bid to secure acreage in a licensing round.

Grekoil Energy Ventures Ltd, a special-purpose vehicle established to bid for the exploration license for Katakolon, an oil field off the coast of western Greece, has initiated litigation against Greece’s ministry of the environment, energy and climate change.

The case has been filed with Council of State – Greece’s supreme administrative court – and the first hearing has been scheduled for September 22.

The filing calls on the court to cancel the award of the Katakolon license to Energean Oil & Gas, a Greece-based corporation, on the grounds the decision is detrimental to the public interest.

Speaking with the Mail at his Nicosia office, Grekoil director Kapo Simonian called the whole affair «a singular disaster.»

Comtrack Ventures Ltd, of which Simonian is also director, was the founder shareholder of Grekoil, but during 2013 Comtrack reduced its shareholding to 35 per cent, with Viking Energy Group – a Norwegian outfit – now owning 65 per cent of the shares.

Initially two separate bids were submitted for the Katakolon license: one from Grekoil, the other from Energean. Greek authorities subsequently decided on a “forced marriage” between the two competing bidders, whereby they would submit a joint bid. The reason given was that the bids complemented each other and combining them would be in the interest of the Greek public.

The venture filed a joint bid in August 2013.

But from the outset, the arrangement was beset with problems, primarily due to disagreements among the parties over the work programme on the acreage.

Under its initial separate bid – worth some €3.3m for the first phase of the work programme – Grekoil proposed that it obtain new three-dimensional data for the exploration site.

As Simonian explains, the 3D surveys for Katakolon available at the time dated back to the 1980s, and the company wanted fresher, more accurate data in order to be able to deliver a better job.

Energean meanwhile saw no need for new 3D seismic data, which is a costly process. Instead, it proposed re-processing the older data. Energean’s bid is believed to have been around €300,000.

With Energean insisting on this point, the joint venture struck a compromise, whereby they would make the obtaining of new 3Dseimic data contingent, but would submit an improved bid. The final joint bid submitted to the ministry was worth €600,000.

In December, Energean informed Grekoil it was pulling out of the joint venture, citing concerns that Viking, Grekoil’s senior partner, had no money and would be unable to finance the project – an allegation which Simonian calls preposterous.

The claim lacks any credibility due to a simple fact, says Simonian: only two months earlier Energean had secretly approached Viking and tried to get them to ditch Grekoil and set up a new joint venture. Viking turned Energean down, and reported the overtures to Grekoil.

In early March of this year – and following a string of reports in the Greek press alleging that Viking was involved in gun-running and other dodgy dealings – the ministry announced that it had awarded the contract to Energean, on the grounds that Grekoil’s bid did not meet certain specifications.

This is also extremely suspect, says Simonian, as he has strong reason to believe that the evaluation committee had deemed Grekoil’s to be the superior bid.

And despite having itself called for the ‘forced marriage’, the ministry did not proceed to scrap the joint-bid process and invite new bids.

Comtrack had also sought to get involved in the second hydrocarbons licensing round launched by Cyprus, forming an “embryonic partnership” with Petrobras, but the deal did not “work out”, says Simonian.

The businessman, who’s been involved in several projects across the globe, says he has never encountered a similar experience in his 40-year career as the one in Greece.

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