By Marius Vassiliou
Even though the Aphrodite gas field may hold lower quantities of recoverable natural gas than initially thought, it is still a significant find. Cyprus’ waters may also have considerable undiscovered potential. Nevertheless, it is not wise to be overly optimistic. Not only are there geopolitical, economic and technical difficulties that must be overcome, but the global gas market is also undergoing rapid changes that suggest more abundant supplies than we believed possible five or ten years ago.
Some of the difficulties that Cyprus must overcome to realise the benefits of Aphrodite and future gas discoveries have been extensively discussed. Israel, which has made even more significant gas discoveries, is interested in using a possible liquefied natural gas (LNG) terminal outside its territory. Cyprus is perhaps the best potential host, and such a terminal could be used to process Cypriot gas as well. Without Israeli gas, an expensive LNG plant in Cyprus might not make economic sense (unless, of course, huge new discoveries are made in Cyprus’ offshore blocks). Israel, however, is also apparently interested in having other export avenues, primarily involving Turkey. Israeli gas could be piped both to a future Cypriot LNG terminal and to the Turkish coast, where it could feed the national grid or even a future Trans-Adriatic pipeline onward to the rest of Europe. This would most likely mean that a submarine pipeline to Turkey would have to cross Cyprus’s Exclusive Economic Zone (EEZ). The geopolitical environment makes this difficult, and Israel is understandably reluctant to get in the middle of the continuing tensions – between Turkey and Cyprus.
All these problems are serious enough, but there is also another factor: there has been a very significant change in the global supply picture for natural gas over the last several years. The combination of horizontal drilling and hydraulic fracturing technologies has allowed the tapping of huge potential quantities of so-called “unconventional gas”: that is, gas trapped in rock formations such as shale or low-permeability sandstone, from which it does not flow easily.
The United States Energy Information Administration has estimated that the inclusion of unproved, technically recoverable shale-trapped gas increases total global gas resources by almost 50 per cent; for oil, the increase is 11 per cent. Of course, technically recoverable gas is not the same as economically recoverable gas, but one has only to look at the recent experience of the United States to realise that unconventional gas and oil are now a major factor. By exploiting its unconventional hydrocarbons in states like North Dakota, the United States has cut its imports of crude oil and natural gas by 32 per cent and 15 per cent respectively in the last five years, and is on track to surpass Russia as the world’s largest annual producer of oil and gas. There is even talk of the United States becoming a significant gas exporter.
While the United States has led the way in developing these unconventional resources, it is important to realise that they occur in many places in the world. Most crucially for Cyprus, there are significant likely deposits within the European Union, notably in Poland and France, which have an estimated 137 and 148 trillion cubic feet (tcf) respectively of unproven but likely technically recoverable resources of unconventional gas. One major factor holding back exploitation of unconventional gas in the highly regulated European Union will be the potential for adverse environmental impact. There has already been stiff public resistance to hydraulic fracturing proposals in the United Kingdom, for example. However, as technology advances and better standards are established, it is possible that environmental difficulties may be overcome.
Europe as a whole, excluding the former Soviet Union, may have 470 tcf of currently unproved unconventional gas, over three times its conventional gas reserves. Russia is estimated to have 287 tcf. By comparison, the Aphrodite field is now thought to contain about 5 tcf. Of course, this is comparing apples and oranges, because the estimated technically recoverable unconventional gas for Europe is not anywhere near the same stage of exploration and development as the Cypriot find, but it shows the potential for the future. If the rest of the European Union begins to exploit its unconventional gas to the same degree as the United States, the finds in Cyprus, while still important, will not be quite as crucial.
Dr Marius Vassiliou is a geophysicist, computer scientist, R&D executive, and author who has worked in the oil and aerospace industries, as well as US federally funded research and development centres. He can be reached at msvgalumni.caltech.edu