Cyprus Mail
Cyprus Featured

Entry of major energy players not a game changer, expert says  

It's far-fetched to think a that ExxonMobil CEO Rex Tillerson being tapped for Secretary of State in the new US administration would benefit Cyprus in a political sense

WHEREAS there is no doubt the third hydrocarbons licensing round was a successful one – with the entry of US energy giant ExxonMobil – Cypriots would be well advised to manage any expectations of a financial bonanza, an energy analyst tells the Cyprus Mail.

“The economics of the eastern Mediterranean remain the same, regardless of the players,” said Charles Ellinas.

Profitability being the bottom line, and with gas prices still suppressed, discouraging development of natural gas fields at the moment, the entry of ExxonMobil is welcome, but not a game changer.

The same problems will persist unless there is a dramatic increase in gas prices, Ellinas said.

During 2016, the price of natural gas in European markets averaged at a low $4.5 per BTU.

The expert also called far-fetched opinions voiced in the local media that ExxonMobil CEO Rex Tillerson being tapped for Secretary of State in the new US administration would benefit Cyprus in a political sense.

Tillerson is almost certain to sever his ties with the company, resigning as CEO and divesting his shares if he is indeed appointed as chief US diplomat.

What’s more, Ellinas said, it would be false to assume that the mere presence of ExxonMobil in Cyprus’ Exclusive Economic Zone automatically gives Cyprus “a leg up over Turkey.”

The only scenario where the US government might throw its weight behind ExxonMobil is if the company faces a direct problem from Turkey.

“The US government did the same for Noble Energy, not an energy behemoth, when their drilling operations were being harassed by Turkish vessels. So ExxonMobil’s size does not matter in this respect.”

Also, ExxonMobil – with a presence in more than 150 countries worldwide – are careful not to appear as an organ of the United States.

This week, the government picked the consortium of ExxonMobil and Qatar Petroleum as the preferred bidders for offshore Block 10. Decisions to award concessions are expected in late January or February 2017, the energy minister said.

Block 10 is the ‘prime cut’ of the acreage offered up for auction in the third licensing round.

The other preferred bidders named were a consortium of ENI and Total for Block 6; and ENI for Block 8.

ENI already holds concessions on three offshore blocks (2,.3 and 9).  Total is the concessionaire on Block 11.

Competition for Block 10 was intense, and it’s understood that the criteria in scoring the bids was 70 per cent weighted toward the companies’ financial offer – the percentage of proceeds going to the state, and the signature bonus to be paid upon awarding of a concession.

It’s also understood that Total, which had earlier relinquished Block 10, was eager to reclaim it.

Preliminary indications are that Block 10 could be even larger than the Aphrodite reservoir, which holds an estimated 4.5 trillion cubic feet (tcf) of gas.

However, as always exploratory drilling is needed to confirm the presence of any hydrocarbons.

For ExxonMobil, reserves replacement through new discoveries is the priority at the moment.

Ellinas posits a hypothetical, where should Block 10 be found to hold 15 tcf, or half of Egypt’s Zohr field, that would increase ExxonMobil’s worldwide proven reserves by 10 per cent –making it well worth their while.

Should the energy giant secure the concession, Ellinas says the company will spend most of 2017 conducting desk studies, followed by seismic surveys during 2018. Their first drill can be expected no sooner than 2019.

The analyst likewise dismissed speculation that Qatar Petroleum might block development of Block 10 because Qatar is a close ally of Turkey.

As the operator, ExxonMobil is the party calling the shots, the analyst said.

Qatar Petroleum holds only a 20 per cent stake in the consortium.

“It’s extremely rate for a minority stakeholder to stop a project,” Ellinas noted.

Related Posts

Excavations shed further light on ancient Kition

Jonathan Shkurko

CERA renews pledge to renewable energy, lower prices

Jonathan Shkurko

All around the (Golden) globe.

Constantinos Psillides

President praises role of ombudswoman in human rights protection

Antigoni Pitta

EU Commission offers 140 scholarships for Turkish Cypriots

Staff Reporter

Martial arts Cyprus-style

Alix Norman


Comments are closed.