The recent discovery in Egyptian waters by Eni of a (currently estimated) 30 trillion cubic feet (tcf) in the Zohr natural gas field has prompted a range of reactions in the Cyprus press.
The earliest commentaries suggested that this was the end of Cyprus’ dreams of producing gas from the offshore Aphrodite field and that plans recently announced to sell Aphrodite gas to Egypt for processing in their (idle) liquefied natural gas (LNG) plants would also be abandoned. However, the Ministry of Energy was quick to confirm that talks were still on-going.
The subsequent visits by emissaries from both Israel and Egypt to Cyprus would certainly suggest that the cooperation between the three countries is considered important enough to continue.
We are encouraged by the president’s recent comments, which suggest that he is embracing the strategic goal of Cyprus becoming a regional hydrocarbons hub and linking the solution of the Cyprus problem to the economic benefits of hydrocarbons production.
Significance of the Zohr discovery
We should therefore examine just how significant the recent discovery is and what effect this has on Cyprus’ plans.
According to the well and geophysical data (so far) available, the field could hold a potential of 30 tcf of lean gas in place, therefore representing one of the world’s larger natural gas finds. The Zohr 1 field is close to the border and adjacent to Block 11 in the Cyprus Exclusive Economic Zone (EEZ).
According to the well and seismic information available, the discovery could hold a potential 5.5 billion barrels of oil equivalent in place covering an area of about 100 square kilometres. Zohr 1, at 4,757 feet of water depth, is the largest gas discovery ever made in Egypt and in the Mediterranean Sea and could become one of the world’s largest natural gas finds.
This exploration success will make a major contribution to satisfying Egypt’s natural gas demand for decades. Eni will in all probability immediately appraise the field with the aim of accelerating a fast track development.
Meaning of Zohr for Cyprus
So what does this mean for Cyprus?
The discovery confirms the eastern Mediterranean as an important hydrocarbons province.
The find will encourage further exploration within Cyprus EEZ, and we would expect Total to quickly re-examine its decision to withdraw, since its Block 11 is potentially part of the same geological play.
The success in Zohr will encourage Eni to explore further in the area and may accelerate its plans to explore its acreage in Cyprus waters, despite its recent disappointments.
There may be an extension of the Zohr field into Cyprus EEZ, but this will take some time to assess and early suggestions that we may be in for a 15% ‘windfall’ are exaggerated.
The most important impact for Cyprus in our view, is that it gives even more credence to the proposal to create a hydrocarbons hub in Cyprus. Such a hub will do the following:
*Provide a safe alternative for gas export to Europe.
*Provide a base for international companies to provide drilling and auxiliary (shipping) services to the region and a long-term economic benefit to Cyprus even if we do not develop Aphrodite in the short term.
*Kickstart the hydrocarbons economy in Cyprus, based on the interim gas proposals, which have recently been announced.
*Provide a raison d’être for examining the further education infrastructure in Cyprus and preparing the next generation to become the hydrocarbon workforce for the region and beyond.
Strategic plan for a hub
In order to achieve these goals and provide employment and economic growth at a time when Cyprus is slowly emerging from the recent financial crises, we believe that it is essential that a clear strategic plan for such a hydrocarbons hub emerges, which provides clarity for international investors and encourages them to invest in the future role of Cyprus as a the gateway for trapped gas in the eastern Mediterranean and beyond to Europe.
The production of such a plan is now essential to demonstrate Cyprus’ determination to make use of this opportunity, and we believe that such a plan will quickly provide the assurances needed for investors (including the EU infrastructure funds) to look more closely at significant contributions.
Meanwhile, talks continue on the future of the Aphrodite field, complicated by Noble’s on-going discussions with the Israeli government on the insistence by the regulator that Noble’s monopolistic position be reduced.
We understand that several companies are interested in acquiring Noble’s share in the Aphrodite field, and this will no doubt influence the timing of any decision on the development of Aphrodite.
We understand that a ‘field development plan’ is on the table at the ministry and the Cyprus Hydrocarbons Company but experts will no doubt still be analysing how best to bring the gas to shore, since the development plan envisaged by Noble only brings it to the surface.
The costs of individually collecting all the gas in the Eastern Mediterranean may well prove prohibitive at current prices, and analysts do not expect an early return to higher oil prices given the advent of Iranian production and Saudi Arabia’s determination to maintain market share.
This is one more reason why a strategic plan to gather the gas with an infrastructure based on a hub in Cyprus makes excellent long term sense. We hope that the will to provide such a plan will become reality.
Adam Lomas is Managing Director of Castor and Partners
Source: http://in-cyprus.com/strategic-plan-cyprus-gas-hub/
This is one more reason why a strategic plan to gather the gas with an infrastructure based on a hub in Cyprus makes excellent long term sense. We hope that the will to provide such a plan will become reality.
Adam Lomas is Managing Director of Castor and Partners
Source: http://in-cyprus.com/strategic-plan-cyprus-gas-hub/
