Cyprus Mail
Cyprus

Gas estimates lowered (updated)

CM archive

By Elias Hazou

THE GOVERNMENT yesterday sought to put a positive spin on the downgrading of estimated reserves within the Aphrodite natural gas field, insisting the updated amounts do not affect Cyprus’ plans for an LNG project on the island.

“For the Republic, this changes nothing,” government spokesman Christos Stylianides told reporters.

He was responding to an updated estimate of reserves at the Aphrodite well, announced a day earlier by Delek Drilling and Avner Oil Exploration, Noble Energy’s Israeli partners in the Block 12 concession.

“It seems that these two companies, with which the Republic is cooperating, are pressing ahead within the timetables and at exactly the same pace,” he added.

Stylianides said the new numbers quoted by the Israeli companies fell within the range announced earlier.

In a statement to the Tel Aviv Stock Exchange, Delek Group said reserves have dropped to 4.1 trillion cubic feet (tcf) from a previously estimated 5.2 tcf.

The Israeli companies said their latest announcement of 4.1tcf was based on the findings of their assessors, consultants Netherland, Sewell & Associates.

The statement said also there are “significant” amounts of condensate – estimated to reach 8.1 million barrels. The group previously thought there were not commercial quantities of condensate at the field.

In early October, and following the completion of appraisal drilling at the Aphrodite-2 well, the field’s operators Noble Energy had updated their estimate of gross resources from 3.6tcf to 6 tcf, with a mean of approximately 5tcf.

These were the preliminary results from the appraisal work; Noble said at the time that it would announce their own updated results by the end of this year.

Delek and Anver, listed on the Tel Aviv bourse, have different reporting schedules to US-based Noble. Noble operates offshore Block 12 with a 70 per cent working interest; Delek Drilling and Avner Oil Exploration each have 15 percent working interest.

Delek’s statement said also the total volume of resources in the Aphrodite reservoir “in the low scenario rose by 30 per cent while this volume declined by 25% in the high scenario. Reduction of the range between the high scenario and the low scenario is received with the progress of the reservoir appraisal plan.”

The Israelis added that “it is not possible to set an estimated schedule for preparation and/or implementation of a development plan for the Aphrodite reservoir until the various plans to commercialize and develop the natural gas in the reservoir have been explored and prepared.”

Delek went on to note the “possibility for integrating its development with the development plans for adjacent fields within Israel’s exclusive economic zone, including the Leviathan natural gas reservoir.”

The latest updated reserves from the Israelis are considerably lower than the initial estimates from the exploratory drilling carried in 2011, which had yielded a gross resource range of 5 to 8 tcf, with a gross mean of 7 tcf. Estimates are typically revised and refined in the industry.

But the latest findings may force a rethink of strategy, said Charles Ellinas, executive chairman of the Cyprus National Hydrocarbons Company (CNHC).

“The natural gas scene in the eastern Mediterranean is shifting constantly,” he told the Mail. “Now, the downgrading of Aphrodite makes the option of pooling Aphrodite’s reserves with those of Leviathan even more significant.”

So far the Block 12 reserves are not sufficient to make a mooted LNG project on the island commercially viable. An LNG plant with a single train (or production line) is thought to require at least 5.5 tcf.

Noble is mulling additional exploratory drilling at two other locations in the Block 12 concession, which may – or not – substantially increase the overall amount of reserves. But this drilling would take place in late 2014.

And the ENI-KOGAS consortium – with concessions on blocks 2, 3 and 9 – is expected to conduct exploratory drilling in mid-2014, with the results coming in 2015.

All this points to further delays in gas development compared to the dates initially mooted by officials.

Neither is the presence of 8.1 million barrels of condensates within the Aphrodite well a game-changer, said Ellinas.

Assuming a barrel of condensate goes for the same as a barrel of oil ($100), the 8.1 million barrels would fetch gross revenues of $810m (€600m) over the entire development period for the field – around 20 years. That works out to about $40m gross revenues (not including costs) per year.

Within the strata, the condensates (vapour droplets) are mixed in with the natural gas, which is composed of 98 per cent methane.

Condensates contain a high calorific value, boosting the BTUs of energy that can be extracted from burning natural gas – so it might make more sense not to separate the condensates from the natural gas, explained Ellinas.

 


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