Hellenic Petroleum SA

17th km., Athens-Corinth National Road
GR-193 00 Aspropyrgos
Attikí
Greece
Telephone: ( +30) 210-55-33-000
Fax: ( +30) 210-55-39-298
Web site: http://www.hellenic-petroleum.gr

Public Company
Incorporated: 1988
Employees: 520
Sales: EUR 4.67 billion ($5.6 billion)(2003)
Stock Exchanges: Athens
Ticker Symbol: ELPE
NAIC: 424720 Petroleum and Petroleum Products Merchant Wholesalers (Except Bulk Stations and Terminals); 424710 Petroleum Bulk Stations and Terminals

Hellenic Petroleum SA is the largest company in Greece and the leading petroleum refiner both in that country and in nearby Macedonia. Hellenic Petroleum holds a 56 percent share of the market in Greece, where it operates two refineries, in Aspropyrgos and Thessaloniki. The acquisition of Petrola Hellas in 2003 helped consolidate the company's domestic position. In Macedonia, the company's refinery in Skopje controls 72 percent of that country's market. Petroleum refining contributes nearly 77 percent to Hellenic Petroleum's turnover, which topped EUR 5.29 billion in 2003. The second-largest activity of Hellenic Petroleum is its Petroleum Marketing division, which operates nearly 1,500 service stations throughout Greece as well as in Georgia, Albania, the former Yugoslav Republic of Macedonia, Cyprus—since its 2002 acquisition of the former BP Cyprus network—and Montenegro, where the company owns 54.34 percent of Yugopetrol Ad Kotor. Together, Hellenic Petroleum's marketing activities contribute more than 17 percent to the company's total turnover. Other operations include the operation of Greece's only petrochemicals complex, an activity that adds more than 9 percent to sales; Exploration and Production, which includes the exclusive license for the discovery and exploitation of oil reserves in Greece, adds 3.3 percent to sales. The company is also active in Engineering: its subsidiary Asprofos SA is the largest engineering company in Southeastern Europe. Formerly known as the government-owned Public Petrol Corporation (DEP), Hellenic Petroleum was privatized in 1998 through a public offering. The Greek government retains more than 58 percent of Hellenic Petroleum's stock.

State-Owned Petroleum Company in the 1970s

Like most countries in the 20th century, Greece hoped to discover and exploit petroleum deposits within its borders. For most of the century, however, the Greek government turned to foreign companies for the exploratory phase. The search for petroleum began as early as 1903, when the country awarded a drilling concession to the London Oil Development Co. for the island of Zakynthos. London Oil went on to drill two wells on the island. When these turned out to be dry, however, the company abandoned the effort. Others were to follow over the next decades, but no oil was discovered.

A renewed effort began in 1938, this time led by A.W. Chellis, a Greek-American. Chellis went on to spend more than two decades hunting for Greek oil, starting in western Thrace. Later, Chellis began exploring the Peloponnese Islands before making a new attempt to find petroleum in Zakynthos in the late 1950s.

The Greek government stepped into the exploration effort in the following decade. In 1960, the government, through the Ministry of Industry, joined with consultants from France's Petroleum Institute and Greece's own Geology and Subsoil Research Institute on a new and massive program to find oil reserves in Greece. The team took a more systematic approach, conducting geological and geophysical research operations and drilling extensively through the country. The team's operations focused on the Greek mainland, with particular emphasis on the regions of Thessaloniki, Epirus, Evyrtania, Central Macedonia, and the Ionian Islands.

These drillings, too, remained without result. As the decade progressed, the government stepped up its efforts to locate new fuel reserves. Part of the country's motivation was the largescale infrastructure and industrial development that were helping to transform the country from a relatively non-industrialized state at the end of World War II. Yet Greece's only native basic fuel source were its lignite coal deposits, which were unsuited for much of the country's industrial and transportation needs. Greece was forced to turn to imports to meet its growing fuel demands. A refinery was built in Aspropyrgos and began refining fuel from imported crude petroleum.

In the 1960s, concessions were awarded to a wide array of internationally operating companies, including British Petroleum, Esso, Safor, and RAP-Ilios. These companies and others began exploration operations on the Ionian Peloponnese and Dodecanaese Islands, as well as such areas as Thrace and Aitoloakarnania.

The development of new technologies permitting offshore exploration provided a new boost to the Greek effort, and in 1969 the government awarded a new range of concessions for its coastal waters to a range of companies, including Chevron, Texaco, Da Oil, An-Car Oil, C&K Petroleum, and Oceanic. While these companies searched the sea, the government continued to award concessions for mainland exploration, notably to Anshutz, which began exploring the regions around Tehssaloniki, Kassandra, and Epanomi in 1971. By 1974, however, the company withdrew from that unsuccessful effort.

The ocean at last provided the country with the discovery of its first exploitable oil fields. Between 1973 and 1974, petroleum deposits were discovered in the Thasos region, at two offshore sites known as Prinos and South Kavala. These discoveries led the Greek government to establish its own oil company, Public Petroleum Corporation (or DEP, after its Greek name) in 1975. Under the law establishing DEP, the Greek government took control of all petroleum exploration, drilling, and refining, including the importation of crude oil for refining. At the same time as it created DEP, the Greek government took over the operation of the Aspropyrgos refinery as well. That refinery operated under the name Hellenic Aspropygos Refinereies SA, or ELDA.

DEP's production ramped up in the early 1980s, and by the middle of that decade production had reached 25,000 barrels per day. Yet by the late 1980s, production had already begun to dwindle, as the Prinos and South Kavala sites proved to offer only limited reserves. By the late 1990s, the sites produced just 14,000 barrels per day of crude oil. DEP now took oversight of further exploration operations, much of which was conceded to third parties.

Vertically Integrated Regional Player
in the 21st Century

In the meantime, DEP took on a more central role in Greece's energy industry. The company took over the operations of DEP-EKY, created as the government-controlled exploration and production entity. DEP also took over the operations of another state-created company, Public Gas Corporation, or DEPA, which targeted the natural gas exploration and production market.

As part of its entry into the European Union, the Greek government was forced to deregulate the domestic petroleum market in the early 1990s. In preparation for deregulation, and for its own coming privatization, DEP took steps to increase its level of vertical integration. In the early 1990s, DEP took over the government's EKO service station network, which had been acquired from Esso at the beginning of the previous decade. The takeover of EKO also gave DEP control of EKO's refinery in Thessaloniki. With its acquisition of control of the ELDA refinery in Aspropygos, DEP now entered refining of its own and imported crude oil.

DEP's vertical integration continued into the 1990s, with the creation of VPI and the construction of a polyethylene plant as part of DEP's move into the petrochemicals market. DEP then became the only petrochemicals company in Greece. In 1996, as its domestic oil supplies approached depletion, DEP awarded a new round of four exploration concessions to Enterprise Oil, Union Texas Petroleum, MOL, and Triton Energy. DEP itself, through subsidiary DEP-EKY, took part in the consortiums backing the Enterprise and Triton concessions.

These moves helped prepare DEP for its privatization in 1998. In that year, the Greek government sold a first block of 23 percent of the company with a listing on the Greek and London stock exchanges. DEP then changed its name to Hellenic Petroleum SA. At that time, Hellenic Petroleum shifted 85 percent of its stake in DEPA to the Greek government in order to refocus itself purely on the petroleum market. Also, Hellenic Petroleum restructured parts of its operations, merging ELDA and EKO into a single company, EKO-ELDA. In that same year, the newly created EKO-ELDA expanded with the acquisition of G. Mamidakis, which specialized in petroleum marketing, and of Petrolina, active in the liquified petroleum gas (LPG) market.

Hellenic Petroleum next began to target expansion beyond the domestic market. In 1999, the company made its first step into the wider Balkans region, setting up a joint-venture, ELPET Valkaniki, which then acquired a 54 percent stake in the Okta Ad Skopje facility in the Former Yugoslav Republic of Macedonia. The company also moved into Albania that year, acquiring 75 percent in petroleum marketer Global SA. Following that purchase, the company set up a new subsidiary in Albania, Elda Petroleum Albania.

Company Perspectives:

The HELLENIC PETROLEUM Group is Greece's biggest industrial and commercial corporation, with a dominant position in the local petroleum market. Leader in refining and wholesale supply. Leader in petroleum marketing. Leader in petrochemicals production and marketing. Leader in engineering services. Leader in private electric power production with an important share in the natural gas sector. The financial strength of HELLENIC PETROLEUM makes it a major player in developments in the energy sector in Greece and the wider region of SE Europe.

The Greek government continued to reduce its stake in Hellenic Petroleum, launching a new public offering of the company's shares in 2000. By the following year, however, the government announced its interest in selling off as much as 23 percent of its remaining holdings to a strategic partner. When no appropriate bidder appeared, the government called off the offer. Instead, it continued to reduce its stake in Hellenic Petroleum, selling a 16.5 percent stake to the Latsis Group for $383 million. By 2003, the Greek government shareholding in Hellenic Petroleum had dropped below 58 percent.

In 2002, Hellenic Petroleum strengthened its Balkan-region interests with the acquisition of a 54 percent stake in Montenegro's Yugopetrol Ad Kotor. The following year, the company purchased BP Cyprus Ltd., providing Hellenic Petroleum with an entry into that market through a network of 70 service station, as well as related fuels businesses, including an LPB storage and bottling plant and a 65 percent share of a Superlube lubricants blending plant.

Back at home, Hellenic Petroleum moved to consolidate its dominant position in the domestic market through the acquisition of Petrola Hellas in 2003. That company had set up its own petroleum refining operations in the late 1960 and had grown into the country's second-largest refiner with a 23 percent market share—with the Latsis Group serving as its main shareholder.

Hellenic Petroleum continued building on its plans to become a major regional player. By the beginning of 2004, the company had entered the Bulgarian market as well, setting up a local subsidiary of EKO-ELDA, and opening 11 service stations for a cost of EUR 22 million. In early 2004, the company announced its intention to spend another EUR 23 million in order to build 14 new service stations by the end of the year. Hellenic Petroleum in the meantime announced its intention to look abroad for new strategic partners, as a new block of some 8 percent of the company was slated to come up for sale in July 2004. Hellenic Petroleum had established itself as the dominant oil company at home and was well on its way to becoming a major regional player as well.

Principal Subsidiaries

Eko-Elda A.B.E.E.; Asprofos S.A.; Hellenic Petroleum International A.G.; Diaxon A.B.E.E.; Hellenic Petroleum—Poseidon Shipping Company; Elpet-Balkaniki S.A. (63%); Global Petroleum Albania S.A./Elda Petroleum Sh.P.K. (99.96%); Athens Airport Fuel Pipeline S.A. (34%); B. Of Hellenic Petroleum International A.G. Jugopetrol Ad Kotor (54.35%); Hellenic Petroleum Cyprus Ltd; C. Of Eko-Elda A.B.E.E.; Eko Georgia Ltd (94.8%); Ekota Ko S.A. (49%); Eko—Yu—Ad—Beograd; Eko—Elda Bulgaria Ead; D. Of Elpet-Balkaniki S.A.; Okta Crude Oil Refinery A.D./Okta Trade (69.5%).

Principal Divisions

Petroleum Refining; Petroleum Marketing; Petrochemicals; Exploration and Production; Engineering.

Principal Competitors

Petrom S.A.; Misr Petroleum Company; SOCAR; Kramds NJSC; ENI S.p.A.; Consolidated Contractors Company; Koç Holding A/S.

Key Dates:

1902:

The first attempt is made to drill for oil in Greece.

1960:

The Greek government sets up an oil exploration department in cooperation with France's Petroleum Institute and Greece's Geology and Subsoil Research Institute.

1969:

The first offshore exploration concessions are awarded.

1973:

Oil reserves are discovered at Prinos and South Kavala sites in Thasos offshore field.

1975:

The Greek government establishes the Public Petroleum Corporation (DEP) to oversea oil industry development.

1998:

DEP is privatized, changes its name to Hellenic Petroleum, and lists on the Athens and London stock exchanges.

2000:

Hellenic Petroleum acquires a majority control of Global SA in Albania.

2003:

Hellenic Petroleum acquires BP Cyprus and merges with Petrola Hellas.

Further Reading

"Bulgaria Industry: Hellenic Petroleum to Build New Petrol Stations," Country ViewsWire, March 19, 2004.

"Greece's Hellenic Petroleum Shifts E&P Focus Abroad While Shrinking Its Upstream Role Domestically," Oil and Gas Journal, March 27, 2000, p. 27.

"Greek Refiners to Merge," International Petroleum Finance, June 2003, p. 13.

"Hellenic Petroleum Seeks to Expand in Balkans Market," Europe Intelligence Wire, October 18, 2002.

"Industry Restructuring—BP Is Selling Its Retail Network of 70 Service Stations and Other Inland Fuels Businesses in Cyprus to Hellenic Petroleum," Petroleum Intelligence Weekly, October 21, 2002, p. 6.

"New CEO of Hellenic Petroleum Sees Room for New Strategic Investor," Europe Intelligence Wire, April 22, 2004.

"Petrola, Hellenic Petroleum Merger Deal Progresses as Scheduled," Europe Intelligence Wire, June 24, 2003.

"Synergies in Oil Firm Merger to Total Up to 300 Mln Euros," Europe Intelligence Wire, June 5, 2003.

—M. L. Cohen