Cyprus Mail

Be cautious, despite oil majors’ interest, warns expert

DESPITE the impressive participation in the third hydrocarbons licensing round in Cyprus’ Exclusive Economic Zone (EEZ), the government should not rest on its laurels, an energy analyst has told the Cyprus Mail.

“We are still a long way off from any [exploratory] drilling in the acreage put up for auction, and besides, matters do not seem to be moving forward with regard to the Aphrodite prospect,” Charles Ellinas said.

The expert said the turnout in the third licensing round was particularly impressive, in terms of the calibre of the bidding companies. Three oil majors are involved – ExxonMobil, ENI and Total.

“Competition for block 10 is going to be intense. It will be interesting to see who lands that concession.”

Earlier this week, the government announced that US energy giant ExxonMobil filed a bid jointly with Qatar Petroleum for block 10; while a consortium of Italy’s ENI and France’s Total, also applied for block 10, as well as for block 6.

In addition, a consortium of Capricorn, a subsidiary of Scotland’s energy company Cairn, with Israel’s energy companies Delek and Avner, bid for block 8, for which ENI also applied.

“Total badly wants block 10 back. You might say that is why they joined forces with ENI, to counter ExxonMobil’s bid,” noted Ellinas.

Last year, Total had relinquished block 10, having at the time found no promising drilling targets there.

But later, in September 2015, ENI announced the discovery of Zohr, a gas reserve in Egyptian waters and adjacent to Cyprus’s block 10. Zohr is estimated to hold some 30 trillion cubic feet (tcf) of natural gas.

And surveys have shown that block 10 and Zohr share geological features.

For ENI, it also makes sense to get a foothold in block 10, as the Italians already have the concession in nearby Zohr.

On ExxonMobil, there has been speculation as to why a corporation of their calibre would want to engage with Cyprus, with some even suggesting a political dimension – namely the presence of a behemoth might discourage Turkey from any future aggressive or provocative moves in Cyprus’ EEZ.

However, the reasoning here appears to be flawed, as Ankara has never laid any claim to block 10.

Rather, Turkey says that part of block 6 lies within the Turkish continental shelf. Turkey’s claims partly overlap with Cyprus’ blocks 1, 4, 6 and 7. Ankara also supports the breakaway regime’s claims on blocks 1, 2, 3, 8, 9, 12 and 13, including within few kilometers from the Aphrodite gas field.

Moreover, Ellinas said, ExxonMobil does not engage in projects for any reason other than the bottom line.

“If block 10 is found to hold, say, 10 tcf of gas, that’s more than enough for ExxonMobil to get interested.”

The oil major, meantime, is looking to expand its role in the broader region. It is reportedly interested in ENI’s gas fields in Mozambique, where ENI are looking for a partner.

ENI have likewise indicated they want to sell 20 per cent of their interest in Zohr.

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