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Our View: Hydrocarbons exploration a minefield of unknowns

Energy Minister Giorgos Lakkotrypis

A GAS discovery in the Cypriot EEZ was announced by Italy’s energy giant ENI on Thursday. Analysis of data, the company said, showed that it “is a promising gas discovery and confirms the extension of the ‘Zohr-like’ play” into the Cypriot EEZ. “The news is positive,” said energy minister Giorgos Lakkotrypis, describing the new finding as “important”.

The size of the find is estimated to be between 4.8 and 8.1 trillion cubic feet (tcf), but according to ENI, “additional studies will be carried out to assess the range of the gas volumes in place and define further exploration and appraisal operations”. In other words, there is still some way to go before there could be any certainty about the size of the find.

To his credit, Lakkotrypis, did not make a big song and dance about the discovery, avoiding comment on the size of the reserves. After five years as energy minister, he probably has learned that the less said the better. There is nothing to gain from going on about the possible size of the discovery, before the company makes announcements based on the data it has collected.

Everyone – government, politicians, journalists – is gradually learning that the energy business is complicated and slow-moving because of the huge costs involved and the influence of world prices on the decision-making of the oil companies. The government has realised that it has little control over what happens and that the oil companies, which invest hundreds of millions to extract the hydrocarbons, call the shots.

Some 4.5 billion tcf was found in the Aphrodite plot in 2011, the only discovery until now, but almost seven years later nobody knows when the gas will be extracted and who it would be sold to. Even bigger quantities were found in Israel’s EEZ, much before the Aphrodite discovery but the gas remains largely unexploited, although there had been discussions about selling it to Turkey. As regards, Cyprus’ gas, there has been talk of sending it to Egypt’s liquefaction plants or to Greece via the multi-billion euro, EastMed pipeline, which for now is more a pipe-dream.

There is also the Turkey factor, which is not easy to predict, to consider. Will Ankara step up the threats now there has been a discovery in Plot 6, the north part of which Turkey claims is in its continental shelf? Will Ankara decided to start drilling in the Cypriot EEZ once it takes delivery of the drilling platform it has reportedly ordered? Will there be pressure by Turkey on the oil companies to stop future explorations?

Nobody has the answers. For now, the exploratory drilling will continue with Eni’s drilling ship heading to the Cuttlefish plot in Block 3 for exploratory drilling, while in the second half of the year the Exxon Mobil–Qatar Petroleum consortium is expected to embark on exploratory drilling in Block 10. The only thing the Cyprus government can do is wait and see, while avoiding announcing big plans.



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