Cyprus Mail
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Saipem starts drilling in block 9

By Elias Hazou

THE Saipem 10000 ultra deepwater drillship was yesterday poised to start drilling the seabed as it prospects for natural gas offshore Cyprus.

“Drilling operations are to all intents and purposes underway,” Energy minister Giorgos Lakkotrypis told reporters a few hours after returning from a visit aboard the vessel.

It was a matter of hours before the drill was lowered into sea, Lakkotrypis said.

The Saipem is prospecting on behalf of the ENI-KOGAS consortium at a reservoir dubbed ‘Onasagoras’ in offshore block 9. The vessel arrived on Tuesday.

Lakkotrypis said the ship’s operations at ‘Onasagoras’ would last about 80 days. After that, it would take anywhere from days to weeks to analyse the initial results; in the meantime the drillship would likely move to another drill site.

The Italian-Korean joint venture is contractually obligated to drill a minimum of four wells during the next 12 to 18 months.

Lakkotrypis said the companies will decide where to prospect next, depending on how each drill goes.

The consortium holds concessions on offshore blocks 2, 3 and 9.

Asked whether Cyprus is now shifting its attention to regional exports – such as Jordan and Egypt – the minister said this was one of the options on the table.

“It is an option that has both its pros and cons, but certainly it also comes within the context of closer cooperation between Cyprus and regional nations,” he noted.

Lakkotrypis deflected another question – as to whether Cyprus can secure good prices for its gas from these countries – saying that it was too early to begin discussing this issue.

It’s understood that ‘Onasagoras’ is not the largest reservoir in Block 9; there is another, far larger potential reservoir.

However, as energy expert Charles Ellinas explained, ENI is going ahead with ‘Onasagoras’ first because it is the site for which it has the most accurate geological data to date.
The larger reservoir, lying north of ‘Onasagoras’, may hold gas on the order of magnitude of Israel’s Leviathan (some 19 trillion cubic feet).

But, cautioned Ellinas, it’s a very rough-and-tumble estimate, based on preliminary seismic surveys.

“Due to the structure of the geology, the reservoir there is less obvious than, say, Aphrodite or Leviathan. You need to drill first, otherwise it’s all speculation,” Ellinas told the Cyprus Mail.

According to the former head of the national hydrocarbons company, ENI will likely be drilling four exploratory wells and two appraisal, or follow-up, wells.

“Basically they will drill four wells, and come back to the two more promising sites out of the four. Block 9 looks especially promising,” he said.

Putting matters into perspective, Ellinas cites 2023 as the earliest date ENI would be in a position to export.

Assuming their drilling schedule wraps up by early 2016, it next takes two to three years to develop export plans and development designs, find buyers and secure financing. Construction of the infrastructure might begin in 2019 or 2020, and then need four more years to complete.

By comparison, Noble Energy – lying ahead of ENI – might be ready by the year 2021 or 2022 with an FPSO (floating production, storage and offloading) unit.

Of Cypriot sales overtures to Egypt and Jordan, Ellinas said these are not necessarily premature; rather, questions hang over the feasibility of such plans.

Egypt needs to buy gas in the short run – over the next five years or so – meaning Cyprus would not be ready by then. The Egyptians may be facing shortages now, but have huge domestic gas reserves on tap.

And the Jordanians – whom Nicosia has been sounding out – may be looking at the longer term, but they’ve already signed a preliminary deal to buy gas from Israel, satisfying most of their energy demands.

Jordan is pressing ahead with plans for an FSRU (floating storage and regasification unit) at the Gulf of Aqaba.

However demand for gas will spike as Jordan’s population is forecast to grow significantly in coming years, due to the continued influx of refugees from neighbouring countries in turmoil.

That might leave a window for Cypriot gas, but not much, says Ellinas.

“Because of their deal with Israel, which I expect will go through, the quantities we’d sell to Jordan would be small, so the question becomes how we’d find a cost-effective way of doing that.

“I think that, in the best-case scenario of us finding substantial quantities, the regional market would not be able to absorb everything. So we must not lose sight of the global gas market and, above all, we need to monetise our gas as fast as possible as natural gas prices are dropping,” the expert said.

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