The 1.5 billion barrels of oil that could lie in the deepwater strata of Cyprus’ Block 12 may be the equivalent of a little more than half the monthly, world consumption of oil but for the island this would still be a huge quantity. If the estimates, suggesting that Cyprus would make €60 billion from such a quantity, were accurate this would be enough oil not only to pay off the country’s public debt but also to create jobs for all the unemployed and offer all public services free of charge.
But the truth is that any celebrations would be very premature, with experts making it clear that it was far too early to tell whether Cyprus has hit the jackpot. In a statement issued by Noble Energy, there was talk of “evidence of multiple opportunities” and “significant exploration potential” with “approximately 3 billion barrels of gross unrisked oil potential.” However, according to the experts ‘unrisked’ means a rough estimate of reserves that does not reflect the probability of geologic success.
To be fair, apart from some exaggeration by the media and politicians, who urged the government to ask the company to speed up procedures and claimed we could be selling oil in two years’ time, the government reacted in a very sensible and cautious way to the news, with energy minister Giorgos Lakkotrypis refusing to get carried away. Quite correctly, he pointed out that we could talk of proven oil reserves in Block 12 only once drilling had taken place and Noble has not given a time-frame for this. It had said that it would carry out additional exploratory drilling for natural gas within Block 12 at the end of next year or early 2015.
So there is a long way to go before there would be any oil revenue and this is assuming that sufficient quantities are recoverable which is not yet known. We should note that Noble’s initial estimates of gas reserves in Block 12 were revised downwards significantly after this year’s appraisal drilling. Someone could say that even if half the estimated quantity of oil existed it would still fetch €30 billion in revenue, after the drilling company took its share of the profits, but again this would be rather rash.
The fact is we should not be making any future economic plans based on this news. Noble Energy Senior Vice President Keith Elliott put things in perspective during a conference call on Wednesday. “At this time we don’t have enough information on a number of key characteristics,” he said and added: “Failure of any of these features to occur can cause the prospects of discovery to disappear.”
For now all we can do is hope that the prospects of discovery do not disappear.