Cyprus Marks Start of 2018 with New Offshore Well

Cyprus has started the new year off with an exploration well in Block 6, located southwest of the East Mediterranean island. With Eni as operator and Total as 50% partner, the companies will examine a part of the island’s offshore geology that resembles the carbonite build-up geology in Egypt’s deep water Shorouk Block where Eni made the giant Zohr gas discovery in August 2015.

The Saipem 12000 started drilling the Calypso-1 well on January 1 in 3,500 meters of water with a subsea target depth of 3,500 meters. Drilling is expected to take about 35 days. Upon completion of the well, the mighty drillship will move to Cyprus Block 3, southeast of the island, where it will drill the Cuttlefish-1 well.
Italy’s Eni is the main investor in Cyprus offshore exploration. In 2013 it was awarded Blocks 2, 3 and 9 in partnership with a 20% participation by South Korea’s Kogas following the island’s second licensing round. In April 2017, Eni was awarded Blocks 6, in partnership with France’s Total, and Block 8, where it holds 100%. Last summer Eni farmed in to Block 11 where Total is operator.

In mid-2017, Total spudded the Onisiforos-1 well in Block 11 very near the Cyprus-Egyptian maritime border and in close proximity to the Zohr discovery with great anticipation of finding an extension of Zohr or a separate field of considerable size. Unfortunately, the well made a non-commercial discovery of less than 1 trillion cubic feet. Total continues to evaluate the well results.

As with all hydrocarbon exploration work within the Cyprus exclusive economic zone (EEZ), as defined by the UN Convention on the Law of the Sea, Turkey has expressed its opposition to the well in Block 6, part of which Ankara claims lies in its own continental shelf within the Mediterranean.
Turkey objects to exploration work offshore Cyprus on the grounds that the long-running political dispute between the Greek and Turkish communities on the island has yet to reach a permanent settlement. The Greek-Cypriot Republic of Cyprus is recognized internationally as the legitimate government on the island. The northern, Turkish-occupied side of the island, is administrated by Turkish-Cypriots who have established a political entity that is recognized solely by Ankara. Both Ankara and the Turkish-Cypriot administration demand that the Republic of Cyprus halt exploration until a political solution is found.
Turkey invaded the island in 1974, prompted by an attempted coup by Greek nationalists designed to unite the island with mainland Greece. In one of the first examples of ethnic cleansing in post-World War II Europe, the Greek and Turkish populations moved respectively to the southern and northern sides of the island after a ceasefire was established and continue to remain divided as communities although it is possible to cross the UN administered Green Line that separates the island.
“It is unacceptable that the Greek-Cypriot side persists in acting as though it were the sole owner of the island and continues with its unilateral hydrocarbon-related activities in the absence of a just and lasting comprehensive settlement in Cyprus,” Turkey’s foreign ministry said in a statement in 29 December 2017. “Turkey…is determined to protect both its own rights and interests in its continental shelf and to continue its support to the Turkish-Cypriot side,” the statement added.
The statement said that Turkey is proceeding with exploration plans of its own in the East Mediterranean, including in areas that the Turkish-Cypriot administration awarded to Turkish Petroleum (TPAO) in 2011. For it to do so would definitely heighten tensions in the East Mediterranean. And, as it has done regarding all exploration work offshore Cyprus, Turkey has sent warships to monitor the Saipem 12000 from a distance.

Meanwhile, the Republic of Cyprus continues with its hydrocarbon exploration program with full support of the European Union and the international community.
Eni’s return to Block 3 in February will have it pick up from a four-well drilling program for Blocks 2, 3 and 9 that was suspended in 2015 after the Italian major drilled two dry holes in Block 9. It has yet to announce plans for further drilling. Those may come by the end of 2018 after the well results for Calypso-1 and Cuttlefish-1 are thoroughly analyzed.

Talks continue regarding the shipment to Egypt by subsea pipeline of the 4.5 tcf (127 billion cubic meter) of natural gas in Cyprus’ Aphrodite field, which was discovered by Noble Energy in December 2011. Cyprus is keen to monetize the field, but the €3 billion price tag of developing the gas and condensate resource in the current market of low gas prices is proving an obstacle. Cyprus and Noble Energy – whose partners in Aphrodite are Shell and Israel’s Delek Group – want to ship the gas to Egypt’s Idku LNG plant, which is operating well below capacity, for re-export as LNG with Europe as the target market. The Idku plant is operated by Shell.

The governments of Cyprus and Egypt recently acknowledged that discussions on this subject are being pursued more vigorously than they have in the past. And there exists the possibility that a Cyprus-Egypt deal on Aphrodite gas could lead to circumstances whereby Israel’s Leviathan gas might be routed to Egypt’s LNG plants via a connection through Aphrodite. Noble and partner Delek discovered the 22 tcf Leviathan field in late 2010. Now after several years of administration and legal wrangling between the partners and the Israeli government, Leviathan has moved into the second stage of development with a contract to supply to Jordan, but the field needs a bigger market to do justice to its size.

After several years of little action in the East Mediterranean, 2017 witnessed a number of steps forward for the region’s energy sector – in Cyprus, Israel, Lebanon, and especially Egypt. 2018 is off on the right foot.

 

Author: Gary Lakes