Statoil is one of the largest offshore operators in the world and the second biggest supplier of gas to Europe after Gazprom. Yet it was only in Cyprus’ third recent licensing round that the Norwegian company, 67% of which is owned by the state, decided to make a bid.
Statoil is bidding for Block 10. This is the most popular, having attracted two other bids, one from a consortium comprising Eni and Total, and one comprising ExxonMobil and Qatar Petroleum.
Earlier, Statoil had already carried out two-dimensional surveys of the area, but had not moved to make a bid. Eni’s massive 30 trillion cubic feet (tcf) find in carbonate structures in the Egyptian Zohr field, just six miles from the Cyprus Exclusive Economic Zone (EEZ) changed calculations, however. “As often happens, with exploration you get new results and you get encouragement from other people’s discoveries,” Statoil’s Executive Vice-President Exploration, Tim Dodson, told the Cyprus Weekly.
The biggest offshore operator
Dodson says that Statoil brings three qualities to the table for Cyprus. The first is size and offshore experience.
“We are the biggest offshore operator in the world. We operate more installations and we drill more offshore wells than anyone,” he said.
The second is innovation
“Statoil is a company that is innovative. A lot of oil and gas offshore technology has been developed in Norway, spearheaded by ourselves. The most recent addition to that portfolio has been the subsea gas compression unit,” Dodson said.
The subsea gas compression unit, which was developed for the Åsgard field in the Norwegian Sea, does away with the need for compression platforms above sea level. Instead, the subsea platform compresses gas on the seabed, then transports the gas by subsea pipeline to shore, where it is cleaned of water and carbon dioxide, turned into liquefied natural gas (LNG) and then sold all over the world.
The subsea templates and platforms are built in such a way that they do not interfere with fishing and have no impact on sea temperatures.
The Norwegian model
As well as its long offshore operating experience and its technology, Statoil will also offer what is often termed the Norwegian model.
“The Norwegian model is really one where we strive to create value, not just for ourselves, but for the societies in which we are involved… You have to demonstrate that you are taking into due consideration the local communities, the regions,” said Dodson. “Transparency is absolutely essential. It has to be an open and honest dialogue. To pretend that anything else works: it doesn’t.”
Statoil also has very rigorous due diligence requirements for anyone it partners with. Indeed, it has partnered frequently with ExxonMobil and Eni, its rivals for Block 10.
Building up local industry
The Norwegian model also involves building up local industry.
“There has been a very conscious effort in Norway to try to generate as much supporting and service activity in-country, in-region, locally,” he added. This includes the supply base, the logistics base. “Someone has to supply the food that is being sent out on the ship; you have to have a supply base to get all your chemicals out, you have to have a supply base to get all your piping out,” he said.
“But it is not all about these. It is also about the next layer and the next layer again: generating employment, providing the communities with work places.” With its large shipping sector Cyprus is already starting from a good place. “The starting point in Norway was quite similar to Cyprus in terms of having a very strong maritime industry,” he said.
Cyprus a regional hub?
Whether Cyprus can become a regional hub will depend a great deal on how much gas is found.
“Cyprus is obviously geographically very central, both in the eastern Mediterranean, but also towards the European gas market. Should Cyprus prove up significant gas resources, then it is not unlikely then that Cyprus will have a key role to play in the region with respect to energy,” Dodson said. It will not happen overnight, however. “The pace of any development has a lot to do with the availability of market but also to a certain extent infrastructure. Of course the infrastructure is well established in Egypt. It is not here [in Cyprus]. So things are likely to move quicker towards those places that have the infrastructure and the market.”
Commitment to follow through
Dodson does not seem overly worried by the possibility that Turkey might again send seismic and military vessels into areas where drilling is being carried out, as it did when Noble was drilling in 2011 and Eni in 2014.
“If we are awarded that licence we are committed to following through on the operations, seismic and drilling and, if we make a discovery, then potentially developing this,” he said. “We feel confident about doing that because we regard this block as not having disputed claims … we choose not to engage where that kind of politics is in play.” Notwithstanding the fact that the Cyprus EEZ agreement with Egypt is lodged with the UN, Turkey claims that parts of Blocks 1, 4, 5, 6 and 7 lie within its continental shelf.