Now that the Greek economy is lying in the gutter bleeding, the word is that Greece is poised to be the next oil export super-power.

Holy Fraque, Batman! Does Greece have oil? We’re saved! Here is an interesting report by William Engdahl from Sibel Edmonds’ Boiling Frog site:

In December 2010, as it seemed the Greek crisis might still be resolved without the by-now huge bailouts or privatizations, Greece’s Energy Ministry formed a special group of experts to research the prospects for oil and gas in Greek waters. Greece’s Energean Oil & Gas began increased investment into drilling in the offshore waters after a successful smaller oil discovery in 2009. Major geological surveys were made. Preliminary estimates now are that total offshore oil in Greek waters exceeds 22 billion barrels in the Ionian Sea off western Greece and some 4 billion barrels in the northern Aegean Sea.

The southern Aegean Sea and Cretan Sea are yet to be explored, so the numbers could be significantly higher. An earlier Greek National Council for Energy Policy report stated that “Greece is one of the least explored countries in Europe regarding hydrocarbon (oil and gas-w.e.) potentials.” According to one Greek analyst, Aristotle Vassilakis, “surveys already done that have measured the amount of natural gas estimate it to reach some nine trillion dollars.” Even if only a fraction of that is available, it would transform the finances of Greece and the entire region.

Uh-oh. You know you’re in trouble when the word ‘huge’ is applied to the word ‘bailout’ rather than ‘proven oil reserves’. It suggests there is no real oil … which is not a problem under the circumstances. The world has graduated from ‘light sweet crude’ to ‘technology’. What is needed are words not deeds, and well formed promises.

Engdahl spells out the geopolitical jockeying between regional players: Turkey, Syria, Lebanon, Israel, Greece, Cyprus along with the EU and the United States. Keep in mind is that nothing has been confirmed and the subject of petroleum in Greece as elsewhere is the topic of wild (prayerful) speculation (Hellas Frappe):

Obviously there are too many coincidences, there are too many references back to oil exploration, and they raise too many questions on a number of issues.

There must be hydrocarbons, and/or petrol in the Aegean Sea, and a lot of it otherwise why all this hype?

Why, indeed? The reasonable conclusion is that Greek crude is nothing but a scam. Why not? Who knows for sure what is a mile down under the Mediterranean? The Greeks are masterful con-artists. They can sell a successful ruse to gullible investors similar to the ongoing shale-gas scam underway in the US.

Let’s give the conniving Greek oil ministry and its PR department the benefit of the doubt and put the entirety of announced Greek ‘reserves’ into context. The amounts of hydrocarbons under discussion — assuming they are real — are insignificant relative to ballooning demand.

Figure 1: Jeffrey Brown does not include demand on his chart because it cannot be measured with certainty, however it exists everywhere in the world there is a TV set and paper money. Prior to 2002, extraction was able to remain comfortably ahead of demand (for the most part). Excess became spare capacity or was shipped into inventories. The outcome was the plunge in fuel prices to $12 per barrel and less in 1998. Since 2005, the rate of extraction world-wide has stalled while demand in China, India and elsewhere has exploded. High-cost technology and new oilfields have not been able to push supply even as depletion from existing fields accelerates with the drillers falling farther behind.

Consumption is a matter of infrastructure: oil drilling infrastructure cannot lift crude as fast as auto factories, house builders and banks can create consumption … or demand that is impossible to satisfy. Debt-dependent drillers with high-cost plays must compete with consumption for a shrinking pool of lendable funds. Consumption must borrow otherwise it cannot service its debts. By doing so consumption crowds out the drillers. When consumption is unable to borrow, the effects cripple drillers as well as the rest of the economy. Right now drillers can fund themselves … what happens tomorrow?

Even if the oil resources are available in the amounts suggested, Greece cannot make up Europe’s energy deficit. Greece cannot bail out European consumption even as Europe refuses to bail out Greece. At 15 million barrels-per-day EU consumption, Greek fields w/ 26 billion barrels would be exhausted within five years. Fuel would not begin to appear on markets for eight or ten years: this is the time needed to bring the deep-water crude into production. Full production would require additional years. In the meantime, the relentless arithmetic of depletion would scour billions of barrels from existing fields.

This is what the ‘hopeful’ analysts miss: drillers must keep up with depletion PLUS increased demand.

The foregoing excludes two singularities: the near-certainty of a bankrupt world unable to afford Greece’s expensive new oil and the Eastern Mediterranean becoming a war zone. High cost crude gobbles credit, as credit costs mount so do bankruptcies. Greece is not the end of European insolvency-tending to collapse, it is the model for the rest. If (when) Europe becomes bankrupt it cannot fund anything.

As desperation for fuel increases, the willingness to grab stakes by whatever means increases. It is no idle coincidence that Syria and Libya are at war … and that other petro-states teeter on the edge. Both petroleum supply and consumption are exportable commodities under the right circumstances with consumer-countries possessing military advantages which they do not hesitate to exercise.

Here is the Greek inter-temporal balance sheet: not-quite assets literally underwater with compounding liabilities denominated in euros, due and payable at once! The outcome of uncertainty- tending to certainty of failure is bank runs across Europe.

– Wasting more energy is a precondition for economic growth.

– Wasting energy amplifies inter-temporal imbalances.

If energy is not wasted, growth vanishes along with the ability to meet obligations. Imbalances result in systemic insolvency and collapse as physical resource debts can never be repaid. Finding new energy does not solve problems because there are no ‘non-waste’ uses for the new energy which is simply burned like the old energy. This increases the wasters’ finance debts.

What if there are no Greek (or Turkish or Cypriot) reserves? The Greeks could use the lever of ‘potential’ to wring more euros out of the EU establishment, buying time in the bargain. Greek politicians would make populist noises to gain elective office then make nice with the Troika with press trumpeting Greek oil discoveries and massive new reserves. German funds would flow into Greek political pockets while more survey work is put into motion.

If Greek oil is a convincing enough scam Greece can sell its worthless energy properties for top dollar. Says Engdahl regarding the ongoing economic unraveling in Greece:

Notably, the IMF and EU governments, among them Germany, demand instead that Greece sell off its valuable ports and public companies, among them of course, Greek state oil companies, to reduce state debt. Under the best of conditions the asset selloffs would bring the country perhaps €50 billion. Plans call for the Greek state-owned natural gas company, DEPA, to privatize 65% of its shares to reduce debt. Buyers would likely come from outside the country, as few Greek companies are in a position in the crisis to take it.

Soon enough, there will be new ‘huge, colossal’ oil fields discovered off the Mediterranean coast of Spain, ‘gigantic, humungous’ fields off the coast of Italy, previously-missed ‘staggeringly gargantuan’ fields hinted at off the Atlantic coast of Portugal … The British will find oil in the Irish Sea while the Irish will find oil in the English Sea miss the boat and find nothing. Money will flow (the private sector will book phantom reserves and lend against them as they do now) and the crisis in the Eurobanking sector will abate until the platforms are built and piddling oil reserves are actually measured.

If there are real oil reserves off the coast of Greece, the Greeks will: a) ditch the euro and its attendant Troika-baggage, b) nationalize its finds, c) hire an oil-drilling company to lift the crude then d) sell it in the world market for dollars. Otherwise, Greek oil funds will flow to Greece’s creditors. The fact that Greece has not declared a 200 mile Economic Exclusion Zone indicates there is nothing nothing Greek waters but sea-urchins.

The largest problem for Greece is time. It is already bankrupt. What looms is total collapse. This is the outcome of decades of unproductive waste financed with debt. Greece has very little time to get its act together if it is to be a real energy supplier. Otherwise it becomes an energy-colony to a consumer power the same way Nigeria is to the United States with the same sorts of problems.