Oct 5, 2015 - Gary Lakes, Energy Journalist
The phrase ‘game-changer’ was used often in reference to the East Mediterranean before Israel slammed into its regulatory impasse and Cyprus discovered a couple dry holes – we won’t mention Lebanon’s political imbroglio and its lingering licensing round. But Eni’s recent discovery of the Zohr gas field in Egypt’s deep water offshore just might live up to what the term implies.
Zohr – it sounds like science fiction – is the largest gas discovery yet made in the Mediterranean and holds an estimated gas resource of 30 trillion cubic feet of natural gas in place – the equivalent of 5.5 billion barrels of oil and also just a little less than the entire gas resource offshore Israel.
The real science of further seismic work and appraisal drilling, due to begin in January 2016 with the mighty Saipem 10000 drillship, will establish the facts about the reservoir’s potential, which Eni said “will be able to ensure satisfying Egypt’s natural gas demand for decades.”
Eni, which thinks there is another gas structure beneath Zohr, plans to “fast track” development, something that is bound to please the government of gas-starved Egypt. First gas might come into production by 2020.
Discovery well Zohr 1X NFW, located in Egypt’s Shorouk Block and near the maritime border with Cyprus, “was drilled to a total depth of approximately 4,131 meters and hit 630 meters of hydrocarbon column in a carbonate sequence of Miocene age with excellent reservoir characteristics (400 meters plus net pay). Zohr’s structure has also a deeper Cretaceous upside that will be targeted in the future with a dedicated well,” Eni said in industry-speak when announcing the discovery.
According to experts approached by Global Source, it was the “carbonate sequence” that yielded the surprising gas find. The gas discoveries made so far in the East Mediterranean have been made in sandstone formations. Carbonate “build-ups” were not targeted.
“Eni took a big risk – and they got a big reward,” a Cypriot government expert told Global Source. “We know the story behind it. Shell had a huge block [offshore Egypt] but never drilled.
Nobody was interested in drilling a carbonate build-up. High risk. Eni did it. Succeeded. Changed the game.”
The discovery has generated considerable – but guarded – optimism in Cyprus where Eni drilled two dry holes in Block 9 late last year and then called time out to recalibrate its seismic data. The exploration scene has since been quiet on the island, but the Zohr discovery prompted Eni CEO Claudio Descalzi to visit Nicosia in mid-September to reassure Cypriot officials that Eni was still committed to exploring in Blocks 2, 3 and 9, which it was awarded in January 2013.
A geological map of Cyprus-Egypt maritime border area shows a large “carbonate platform” existing in the island’s southern offshore blocks of 10, 11 and 12, and in blocks 7 and 8, which lie in an uncontracted area known as the Eratosthenes Mount.
Cyprus’ Block 11, operated by France’s Total since February 2013, lies only 6.5 kilometers from the Zohr discovery.
Total was ready to pull out of the Cyprus offshore last year after failing to identify any prospects and has already relinquished Block 10. Its exploration contract for Block 11 is due to expire in February 2016 and this month it is expected to present to the government a report on recent seismic work that will likely determined whether it moves into the next exploration phase or not.
Asked if the Zohr discovery had rekindled Total’s interest in the block, country manager Jean-Luc Porcheron told Global Source: “To some extent, yes.”
“We were already working on assessing the potential of the ‘carbonate play’ on Block 11, and the discovery made by Eni precisely in this geological formation is definitely encouraging,” Porcheron said. “We are now reviewing internally results of our own studies together with these new indications in order to make a decision by the end of the year.”
One company whose interest has definitely been perked by the Zohr discovery is Ireland’s Petroceltic.
Partnered with Italy’s Edison as operator in Egypt’s deep water North Port Fouad (NPF) and North Thekah Block (NT), which are adjacent to the Cypriot and Israeli exclusive economic zones (EEZs), Petroceltic told Global Source that drilling could begin in late 2016 or early 2017. The Zohr well is only 3.5 km from NPF. Some 1,500 sq km of 3D seismic has been gathered over the NT Block and 3D work will begin over NPF this year or early next. A discovery in a carbonate build-up in either block could restore excitement to the East Mediterranean.
While Israel wallows in a regulatory morass over the development of its Leviathan and Tamar gas fields and giving little thought to further offshore exploration, Cyprus is hoping that the carbonite build-ups in its EEZ will invigorate Total, Eni and Noble towards further exploration and attract the attention of other international operators.
“The most significant aspect of the Zohr discovery is that it proves that there is a hydrocarbon system in that area. It’s six and a half kilometers from our maritime border,” the Cypriot government official told Global Source.
“The next most significant aspect of Zohr is that this is the first time there has been a discovery within carbonite targets,” the source said. “This is very important. All the discoveries made in the East Med over the last 15 years are related to the more conventional sandstone reservoirs. That makes Zohr quite interesting and I’m sure that companies are keen to know more about it,” the source said, adding that neither Noble Energy nor Total have commented on Zohr to the Cypriot government.
Under circumstances such as these, it would not be out of place for a country to consider organizing a new licensing round, but that is not on the table yet for Cyprus, which held its second and last bidding round in February 2012. Being the highly-politicized region that the East Mediterranean is, a new licensing round for Cyprus could complicate its decades-old tense relations with Turkey. It might also impact UN-sponsored negotiations between the Greek- and Turkish-Cypriot communities, which are so far reported to be making progress.
Rather than a new licensing round or new drilling, what is more immediate and controversial is the development of the Aphrodite gas field. Block 12 operator Noble Energy has delivered to the Cypriot government a development plan for Aphrodite that is currently under review. Cypriot Energy Minister Yiorgos Lakkotrypis and his team journeyed to Noble headquarters in Houston in mid-September to discuss the plan, but no official disclosure has been made about the next step.
What is under consideration is a plan to export Aphrodite gas by subsea pipeline to Egypt, where most of it would be exported in the form of LNG. A government official disclosed to Global Source that during Descalzi’s meetings on the island, the possibility of linking Aphrodite into Zohr’s pipeline infrastructure for transport to Egypt was discussed. Such an arrangement would require an agreement between Noble Energy and Eni. But either way, Aphrodite is not expected to emerge from the waves until later this decade.
Meanwhile in Israel, which was once thought the be an energy market game changer – or at least player – domestic politics is preventing the shaky coalition of Prime Minister Benjamin Netanyahu from moving forward on a framework agreement with Noble and its Israeli partner Delek Group covering the development and export of the 22 Tcf of gas in the Leviathan field and the expansion of the 10 Tcf Tamar gas field, which currently provides fuel for 60% of Israel’s power generation. The matter hinges on the government having the power to override the Anti-Trust Authority’s decision concerning the restructuring of Noble’s and Delek’s shareholdings in the gas fields, which at present give them a monopoly position in the Israeli gas market.
“Many of Netanyahu’s opponents are against the export of gas and so it has become a political issue between him and the opposition,” energy consultant Amir Mor, CEO of Eco Energy, told Global Source. “The discussion is not a professional one about gas, the discussion involves the anti-trust issue, the pricing issue and the monopoly issue,” he said, adding that the affair has become stuck in “regulatory deadlock.”
Furthermore, Israeli media is reporting that Noble Energy is preparing to go to international arbitration if the matter isn’t resolved soon.
According to Mor, Israel is running the risk of missing out on three possible and important export contracts with Egypt and one to Jordan.
“Netanyahu is unable to gain a majority in the Knesset to bypass the regulators,” he said. “Time is passing and the longer the time passes the likelihood of securing those export projects declines.”
Lucky thing for Egypt that Eni took a risk on those carbonite build-ups.
Source: https://www.linkedin.com/pulse/enis-egyptian-discovery-rekindles-interest-east-gas-prospects-lakes?trk=hp-feed-article-title-like
