Cyprus Mail

‘Noble exploring floating LNG option’

By Elias Hazou

NOBLE Energy, aware that discovered reserves in Block 12 are insufficient for an onshore liquefied natural (LNG) plant, has reportedly proposed other means of exporting Cypriot gas.

According to news website, the Texas-based energy outfit has proposed floating LNG to develop the proven gas reserves at the Aphrodite prospect in its Block 12 concession.

Floating LNG solutions are coupled with shuttle vessels or tankers, and are deployed for smaller quantities than are onshore LNG projects.

Noble, the report said, believes the actual amounts of gas there are more likely to be closer to 3.5 trillion cubic feet (tcf), while as-yet undiscovered gas at other sites in Block 12 might collectively muster another 1.5 tcf. Even combined, these quantities would be nowhere near enough to justify a single-train onshore LNG terminal, which to be viable requires proven reserves of at least 5.5 tcf.

Noble therefore suggested to the government that 1 tcf be diverted (via floating LNG) to the domestic Cyprus market for electricity generation, while 2 tcf would be made available for exports to Greece and Italy.

According to the website, the Americans made the pitch during a meeting in Nicosia with the President in December. It’s understood this is the same meeting where Noble’s Keith Elliott first hinted at the potential for oil discovery within Block 12.

Sources said the website report held “a kernel of truth.” Noble, the Mail learns, recently informed the government that the actual recoverable reserves within the Aphrodite well are most likely 3.1 tcf.

Privately, the Americans have assigned a 90 per cent probability – P90 in industry jargon – to the presence of 3.1 tcf.

Publicly, back in December Noble reiterated that the ‘gross resource range’ at Aphrodite was 3.6 tcf (P75) and 6 tcf (P25), with a mean of 5 tcf.

Whereas these numbers still hold, explained the same sources, the number to watch is the P90 – the 3.1 tcf

“And as far as investment goes, it’s the 90 per cent probability, and not the mean, that counts,” they said.

In early December, Noble’s Israeli partners in Block 12 – Delek Drilling and Avner Oil Exploration – said estimated reserves in the Aphrodite field dropped to 4.1 tcf from a previously estimated 5.2 tcf.

That’s because the Israelis use different reporting methods to the Americans; the 4.1 tcf they cited is based on a 50 per cent probability, or P50.

The mean is not the same as P50.

The Mail is also told that, during the December meeting at the Presidential Palace, Noble proposed a combination of small-scale LNG projects (based on offshore, floating technology) and compressed natural gas to develop Block 12.

In such a scenario, comparatively small amounts of gas would be exported by ship to Greece and Italy, the rest going to Vassilikos (again by carriers, not a pipeline) for electricity production.

Noble’s proposal to supply ‘interim gas’ to Cyprus is not a new one. But the novel element could be that the Americans may be getting cold feet about the onshore LNG project.

Although speculative, this is lent some credence by the fact Noble itself recently acknowledged the lack of gas resources in Block 12.

During a presentation to analysts and investors in Houston on December 17, Noble said in clear-cut terms that additional discovered resources are needed for a land-based LNG facility.

In the same presentation, Noble presented alternatives: using floating (offshore) LNG technology, and sending Cypriot gas to existing LNG plants in Egypt.

As things stand, in order for an onshore LNG plant here to be viable, Cypriot resources would need to be pooled with gas from Israel’s Leviathan field. Such a project could only be implemented via pipeline.

But for Leviathan, also operated by Noble, the Americans are opting for floating LNG solutions there – not a pipeline to either Cyprus or elsewhere.

Meantime, the Mail understands that the government was less than impressed with Noble’s latest proposal. The reason: the administration seems to be fixated – for lack of a better word – on the construction of an onshore LNG facility on the island.

For example, the government is pressing ahead with a second tender for the import of ‘interim’ gas supplies – even though Noble’s spiel does cover the interim angle as well.

Industry sources said they do not expect a new interim gas tender to lead to a contract securing substantially lower prices than the first bidding competition.

The aim of the ‘interim’ gas solution is to secure gas for electricity generation. It is hoped the use of gas will drive down the cost of electricity.

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