By Elias Hazou
CYPRUS is seeking to speed up prospecting for hydrocarbons in its Exclusive Economic Zone (EEZ) with a view to clinching a binding agreement for an onshore gas liquefaction terminal, energy minister Giorgos Lakkotrypis said on Tuesday.
“We are currently trying to expedite exploration and drilling procedures… and we hope to have a positive outcome soon, enabling faster exploration for more natural gas reserves,” the minister said.
“Prospects are encouraging although patience is needed,” he added.
Later this year – most likely in the fourth quarter – Texas-based Noble Energy are due to carry out exploratory drilling in a field other than ‘Aphrodite’ in their Block 12 lease.
Also, the Italian-Korean consortium ENI-KOGAS – with concessions on blocks 2, 3 and 9 – are expected to drill their first exploratory well in the second half of the year.
And French energy major Total, granted concessions on blocks 10 and 11, have said they will start drilling around mid-2015.
At the same time, said Lakkotrypis, the government is pressing ahead with talks geared at signing a final project agreement with Noble for a land-based LNG plant.
“Right now we are negotiating with the Block 12 consortium, led by Noble. The purpose is to agree a project agreement, which is basically the terms governing the operation of the terminal,” he said.
The government is hopeful that progress in the talks can be achieved over the next few weeks, added Lakkotrypis.
But he urged patience: “It is not like oil which one can exploit almost immediately. Natural gas needs infrastructures and patience, as we are talking about exploring at huge depths of over 5,500 metres. It takes time.”
Talks with Noble have been stalled for months, apparently over government dithering on what its own stake in the LNG terminal should be, but also due to a reshuffle at the national oil and gas company.
But an even larger obstacle looms: the lack of gas to justify the operation of an onshore LNG plant – a massive project requiring billions in investment.
So far the proven reserves in Cyprus’ EEZ are not sufficient for a land-based LNG terminal, which requires at least 5.5 trillion cubic feet (tcf) for a single train, or production line.
Publicly, back in December Noble reiterated that the ‘gross resource range’ at ‘Aphrodite’ was between 3.6 tcf and 6 tcf, with a mean of 5 tcf – under the LNG plant’s operating threshold.
But even that resource range is tentative, as it’s based on a 50 per cent probability. Privately, the Americans have assigned a 90 per cent probability to the presence of 3.1 tcf at ‘Aphrodite’.
To make the LNG project viable, more resources are needed; these could come either from additional discoveries in Cypriot waters, or by pooling Cypriot and Israeli reserves, though the latter is considered highly unlikely.
Speaking at the Gastech 2014 conference held in Seoul, South Korea in late March, Gregory Beard, commercial manager for LNG at Noble Energy, said: “The good news is there have only been two wells drilled in Cyprus’ exclusive economic zone.” However, he added that field development costs could be substantial.
There have also been reports that Noble has proposed a floating (offshore) natural gas solution.
According to news website newzup.net, the Americans made the pitch during a meeting in Nicosia with the President in December. There, 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 (by carriers, not a pipeline) for electricity production.