Hellenic Petroleum is planning to upgrade and modernize

Already a leading player in southeastern Europe, Hellenic Petroleum aims to become an international competitor

N important potential transit route for energy exports from the emerging Caspian and Caucasus region, Greece is reshaping its market to make the most of future opportunities.

The government is currently revising the institutional framework to promote a more competitive environment for the energy sector to operate, as well as opening up state companies to private sector investors.

“Greece is developing an important intermediary role in transporting oil and natural gas from Central Asia and the Caspian to the large European market,” says Dimitrios G. Sioufas (INTERVIEW), Minister of Development. He highlights the cross-border gas pipeline taking shape between Turkey, Greece ,and Italy as evidence of the country’s rising prominence in the regional energy market.

While Greece has limited hydrocarbons reserves of its own—producing around 6,400 barrels of oil a day in 2003—it has a sophisticated energy infrastructure incorporating import terminals, refineries, and an extensive distribution and retailing network. Most imported oil comes from the Middle East, although Russia is becoming increasingly prominent as pipelines are constructed connecting Bulgaria with Greece.

A proposed 178-mile trans-Balkan pipeline linking the Bulgarian Black Sea port of Burgas with Alexandroupolis on the Mediterranean coast would allow Russia to bypass Turkey and pump oil straight through to Greece.

The industry is dominated by Hellenic Petroleum (HP) formed in 1998 from the former state oil company, Public Petroleum Corporation. HP is active across all parts of the energy chain including exploration and production, importing, refining, distribution, and marketing. Its Eko subsidiary is one of the top marketing firms in the country, while its petrochemicals division exports a range of manufactured products to the likes of Turkey, Italy, and Spain.

Panos E. Cavoulacos, HP’s Chief Executive, is tasked with transforming the company into an international competitor. Already a leading player in southeastern Europe, with a refinery in Macedonia and downstream assets throughout the Balkans, the company is eager to move up to the next level.

“My challenge is first to upgrade and modernize the way we work,” says Mr. Cavoulacos. “We need to make the company more competitive in the international environment.”

DIMITRIOS G. SIOUFAS Minister of Development INTERVIEW	PANOS E. CAVOULACOS Chief Executive of Hellenic Petroleum

He sees parallels in the way other European states transformed their public energy holdings—Elf in France and ENI/Agip in Italy—into global heavyweights. “We may not become a $10 billion company, but we are going to be a much more profitable company,” he says.

HP has been progressively privatized in recent years with the government lowering its stake to just 35%. Around a third is now held by the local Latsis Group, with the rest in the hands of some 16,000 shareholders, including large financial institutions.
One of the main challenges facing Mr. Cavoulacos and his team is the rationalization of HP’s extensive overseas portfolio. The plan is to improve the company’s position in key markets and possibly withdraw from others. “I will probably be more interested in having a medium-sized presence in two or three markets where we are strong, well organized, and profitable rather than having a dispersed position.”

Although exploration and production has been a fairly low key activity in recent years, there are plans to move up a gear. As well as prospects abroad, there is untapped potential at home. In September 2004, Regal Petroleum announced that the Greater Kallirachi field in the North Aegean Sea held up to one billion barrels of light crude oil. Exploration has been held up in the past due to border differences between Greece and Turkey.