Egypt Awards Four New Licenses | Natural Gas Europe

October 07th, 2015

EGYPT AWARDS FOUR NEW LICENSES

Egypt's giant discovery made by ENI in late August has prompted the Egyptian government to pursue exploration activities off its coast. Suffering from a major energy crisis that has led to severe power outages and a spiking energy bill, the government is determined to work its way towards natural gas independence. Once a net natural gas exporter, Egypt's rising domestic consumption and the failure of its past decision-makers to properly manage the country's offshore riches have caused the country to look for suppliers of natural gas.

Egypt’s state gas company EGAS has awarded four new licenses to BP, Edison, a consortium involving BP and ENI´s Egyptian subsidiary and a consortium involving ENI, BP and France´s TOTAL. The field discovered by ENI in the Shorouk Block, 6 kilometers from Cyprus´EEZ, is estimated to hold as much as 30 Tcf of natural gas, enough to ensure the country's natural gas independence and its re-entry into the export market.

Egypt has been engaged in talks to import gas from neighbouring Israel and Cyprus who have discovered in recent years substantial amounts of hydrocarbon beneath their seabeds. Israel’s Leviathan and Tamar fields are estimated to hold respectively 22 and 10 Tcf of natural gas. Cyprus’ only discovery, the Aphrodite, is estimated at 4.54 Tcf. ENI’s discovery off Egypt’s coast has spurred fears that Cyprus and Israel may no longer be potential suppliers of gas for the Egyptian market. Egyptian officials have however repeatedly announced that Egypt will still look to import gas from the newly emerging natural gas producing countries as an interim solution until it has reached production stage in 2020.

The landscape of the Eastern Mediterranean region is no doubt being reshaped by the new hydrocarbon discoveries. Ties and friendships are forming, albeit in the midst of complications of different natures. Cyprus is struggling to encounter additional amounts of natural gas. ENI’s discovery in Egyptian waters is however encouraging of the Cypriot potential given the proximity of the find to Cypriot waters. ENI, Noble Energy and TOTAL are involved in Cyprus’ EEZ, and while TOTAL has not yet decided to commence drilling, ENI and Noble are committed to further explore the island’s hydrocarbon potential. Israel has been stuck in a policy stalemate with endless domestic debates that may prove pricy. Lebanon, believed to also be home to significant amounts of natural gas, has yet to open its first licensing round if the country manages to put an end to its political vacuum and never-ending rivalries.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat 

Source: http://www.naturalgaseurope.com/egypt-awards-four-new-licenses-25758

Israel Hires American Law Firm Should Noble Turn To Arbitration | Natural Gas Europe

October 07th, 2015

Israel's Ministry of Justice has hired the services of an American law firm to represent the state in the event that Noble Energy sues Israel for damages. The Ministry has also started collecting evidence and documents to defend Israel's legal position.

For the last few months there has been a concern among Israeli officials that the American energy company, who is part-owner and sole operator of the Tamar field and is part owner of the Leviathan field and other natural gas assets offshore Israel, and is the leading player of the monopole in the Israeli natural gas market, will sue Israel at the ICC International Court of Arbitration in Geneva and will seek damages of billions of dollars. It is now assumed that if the Natural Gas Framework will not be approved during the coming few weeks Noble Energy will freeze indefinitely the development of Leviathan field and will turn to arbitration. The arbitration at the ICC could last a few years.

According to reports in Israeli media, Noble Energy is considering that course of action because of regulatory hurdles that the company claims delayed the development of its natural gas assets, in particular the development of the Leviathan field.

As an American company, Noble Energy will not able to sue Israel at the ICC, since there is no bilateral agreement between Israel and the US that enables a private company to sue the state. However, Israel has such an agreement with Cyprus. Commentators have noticed that 3 years ago Noble established a Cypriot entity to deal with Israeli authorities and through this company, according to assessments, Noble is able to sue Israel for damages.

SOURCE

Views On Companies Likely To Consider A Stake In Zohr | Natural Gas Europe

October 06th, 2015

VIEWS ON COMPANIES LIKELY TO CONSIDER A STAKE IN ZOHR

Natural Gas Europe reached out to many experts for their thoughts on two questions related to the recent Zohr gas discovery by ENI in Egypt: Which are the companies most likely to take a stake in the Zohr discovery should it become available? What are the possible drivers behind their decisions?

Our engagement did show a strong interest among experts, with many actively working on the issue and declining our invitation  to respond to the two questions. Many also deferred comment given the early stages of this hypothetical proposition. 

Sohbet Karbuz, Director of Hydrocarbons, Mediterranean Observatory for Energy (OME)

First of all, it is quite speculative that ENI would sell part of its stake in the field. The field can become a cash machine if it is developed as quickly as it is proclaimed. Even though total development cost of the field will be well beyond $7 bn, the price the produced gas will get is quite handsome, minimum $4/MMBtu max $5.88/MMBtu. Another speculation is the possibility that the field may extend to Block 11, licensed to French Total, into Cypriot waters, even though ENI itself has given no indication for that. If it does perhaps this would raise the interest of Total to take part in the field. Another potential candidate could be Edison, which is active in Israel, and has 50% stake (Petroceltic another 50%) at the North Port Fouad concession, next to the block where the Zohr field is discovered. Companies involved in the LNG plants in Egypt; particularly Union Fenosa Gas  (a joint venture between Gas Natural Fenosa and Eni), the operator of the Damietta LNG plant, should also not be overlooked. Other potential candidates would include companies with deep pocket to help ease the financial burden of developing the field, companies that would like to (re)enter the Egyptian market or reinforce their presence there. However, until we have a better picture about the field in the coming months in terms of its real size and dimensions, speculations about acquiring a stake in it will likely continue.

Theodoros Tsakiris, Assistant Professor for the Geopolitics and Economics of Hydrocarbons at the University of Nicosia, and South Europe Programme Associate LSE IDEAS at London School of Economics

The most likely partner who has no ownership over any LNG capacity in the Eastern Med is Total. Total is also present offshore Cyprus and offshore Egypt and I believe that it has revitalized its interest in the region after the Zohr discovery which is almost adjacent to its own licence areas in Cyprus. Shell/BG could be another option as on offtaker of gas for Zohr provided of course that Cairo decided to direct a very significant portion of Zohr's discovery to its LNG facilities in Indku and Damietta.

Madalina Sisu Vicari, PhD candidate, University of Liège

First, the possibility of selling the stakes in the Zohr gas field has not definitely been nailed down. Given this gas field’s proximity to existing infrastructure, the sustainable costs of the investments-estimated at $7 billion so far, the option of entirely developing the Zohr field by ENI itself should not completely be ruled out. More, as ENI is the main shareholder of Saipem - a major company in the gas services sector - it could and should take advantage, in Zohr’s development, of this company’s specific experience and important track-record. Actually, ENI is facing two options with regard to the Zohr’s development: either it would attempt to monetize the gas field without selling any stake or it would proceed at selling stakes - but no less than 50 percent, in order to maintain its value and future development prospects. The final decision would be determined by several variables such as: 1. the share of the future gas output which would be destined to the Egypt’s domestic market-whose prices are not pegged to the oil; 2. the possibilities of exporting the output - so far it has been assessed the prospect of LNG exports to Europe; 3. ENI’s further decision with regard to its dividends; 4. and ultimately ENI’s strategy with regard to the place it intends to occupy onto the global gas market.

At this early stage, it is rather difficult to assess which companies would take a stake in the Zohr’s field, as some major issues are not clear yet: whether ENI would finally sell stakes; the percentage and the price of the stakes which would be sold; and the share of the output which would be destined to the Egyptian domestic market, along with the prospects of gas output export. In this context, it is worth mentioning that the Egyptian authorities had already announced that, under the production sharing agreement for Zohr’s field, 65% of the future output would go to the Egyptian domestic market, and  35% would remain to ENI. However, these figures remain to be confirmed. Nevertheless, given the aforementioned Zohr’s proximity to existing infrastructure and the sustainable costs of the field’s development, along with the windows of opportunity to supply an energy-hungry market like Egypt and export the gas to other markets, it would be very likely that many companies would manifest interest in acquiring stakes in the Zohr’s gas field. There is also the possibility that another energy-hungry country to see in Zohr an opportunity to satisfy its energy needs, as it was the case of China National Petroleum Corporation, which bought two years ago an important share of ENI’s Mozambique offshore gas field.

Nikos Tsafos, President & Chief Analyst, Enalytica

From a risk management perspective, it could make sense for ENI to reduce its share, but interest for entry into Zohr might be limited. For one, ENI has already done the heavy lifting (discovery), and so the entry price will be steep, especially if ENI believes that there is considerable upside in the block. Moreover, since this gas is likely to be sent largely to the local market, there are limited opportunities for any company to add considerable value through marketing or to see any upside from having physical access to the gas. Given these limitations, entry into Zohr would probably make most sense for an E&P player with existing operations in Egypt who is looking to expand their footprint. But it would not be surprising if there was lots of bargaining over the price, including a possibility that ENI would develop this alone. 

Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci

Source: http://www.naturalgaseurope.com/zohr-gas-discovery-potential-players-25604

The Final Nail in the Coffin of Israel's Natural Gas Framework | Haaretz

While Israelis were on vacation, the global price of natural gas dropped, and with it the basis for the revenues the government was counting on.

Eytan Avriel Oct 06, 2015

“Only a donkey doesn’t change his mind,” Moshe Dayan supposedly once said. It is clear to any thinking person that if the market conditions change, then you must rethink things. Now, with the High Holidays behind us, the government must return to the issue of natural gas and make a decision about the so-called framework agreement. The question is simple: Will Prime Minister Benjamin Netanyahu continue to insist on finding a way to approve the present natural gas framework, or will the government reexamine it in light of the major changes that have occurred in recent months?

What changes? First is the discovery of the enormous Zohr offshore gas field off the Egyptian coast, which is some 40% larger than Israel’s Leviathan field. Every week there is a new analysis of the implications of this find on the Mediterranean gas market.

The second major change, and the more important one, is the world price of natural gas. While we, in Israel, were on vacation, or busy arguing over the gas framework the global price of natural gas has continued to fall, and with it all the calculations of profits and revenues on which the framework was based.

True, energy prices are very volatile and extremely difficult to predict, but nonetheless we must still make decisions. And the only way to decide is based on expert opinions. And it turns out the experts forecast that demand and prices in liquefied natural gas markets are falling - and this is true for the medium term, at least until 2020.

Analysts from investment bank J.P. Morgan, for example, recently published a report that is quite challenging for world gas prices. The American investment bank estimates that very few long–term natural gas contracts will be signed in the coming years, and after a visit to Asia, where the major customers for LNG are, they identified 10 trends that reinforce their forecast of low natural gas prices.

These trends include a drop in demand for energy in general, the restarting of nuclear power plants in Japan, low prices for coal (lower than for gas), a lack of customers for new gas contracts, continued development and supply from new gas fields in Africa and Canada, competition in the European market, and low yields from new drilling in Australia. This is a list that drives the last nail into the coffin of the natural gas market, as JP Morgan analysts said.


The gas monopoly has already demonstrated its power

The government of Israel and the Israeli public both had many reasons to demand a different gas framework to regulate the natural gas market even a year or two ago, well before the Egyptian discoveries and the drop in world gas prices.

The proposed framework does not dismantle the gas producers’ monopoly, it does not control prices, and does not lower the price paid in the long–term contracts signed by the Israel Electric Corporation (which determine the price of electricity in Israel). It does not require the producers to build a second pipeline to bring the gas onshore and create a backup supply system, and it provides the companies with a hard–to–understand governmental promise of immunity from future changes — and developments over the last few months certainly prove that such changes will always occur.

In addition to the question of gas prices, the framework strengthens an extremely powerful monopoly — both economically and politically — and all this is in direct contradiction to what the politicians from all parties promised before the recent elections: To fight monopolies.

It is impossible to ignore the threat of the gas monopoly on Israeli democracy: Kobi Maimon, the owner of Isramco and one of the partners in the Tamar offshore gas field, has incapacitated his good friend, Finance Minister Moshe Kahlon, who is unable to fulfill his responsibilities.

Kahlon decided he will not deal with gas matters, but in reality the members of his party are acting to promote the framework, which is a great boon for the partners in Tamar. Yitzhak Tshuva, one of the owners of both Tamar and Leviathan, sometimes meets with Netanyahu; while Texas based Noble Energy, the senior partner in the offshore fields, has been putting great political and diplomatic pressure on Netanyahu from Republican donors connected to the oil and gas industry, as well as making threats to sue Israel in international courts.

Alongside all these other faults of the framework, there are now the new developments in the gas market. The fall in prices, for example, has trashed all the calculations for government revenues from gas in coming years. The public certainly remembers Netanyahu’s mantra while he was trying to sell us the framework: The gas will bring in hundreds of billions, and this money will “flow to health, education and welfare.” National Infrastructure, Energy and Water Minister Yuval Steinitz promised that some 70% of the revenues of the Leviathan field would “be returned to the public.” But if the experts are right in their assessments of future gas prices, then the government’s numbers are simply wrong.

Even before the holidays, it was revealed that the Finance Ministry and Tax Authority had already estimated that these revenues would be tens of percent lower than the figures Netanyahu and Steinitz had relied on, using estimates of historical prices from the Bank of Israel.

New, realistic estimates — that any accountant can calculate based on the company’s financial reports and the new taxes on natural resources — show that the state’s share of the Tamar field revenues will be no higher than 45% in terms of discounted cash flow.

The government won’t see a cent from Leviathan any time soon

The fate of the Leviathan field is very murky — given the present price level and supply, it is not at all certain that there will be any buyers for the gas. In any case, it is also clear that the state will not see a single cent from Leviathan any time soon, and even after that the government’s revenues will be very low, certainly compared to the rosy forecasts bandied about until now.

It is hard to believe that only a few months ago Steinitz tried to convince the public and the Knesset that the price of gas in Israel was low by presenting out of date figures that reflected the situation before prices crashed, while ignoring (innocently, or not) expert opinions about future prices.

In other words, the central claim of those who supported the gas framework was the “gas will return to the public,” but today that is in great doubt.

The Egyptian gas find also changes the rules of the game. The principle behind the gas framework, under the pressure from Noble, Delek and Isramco, was to receive permission to sell as much gas as possible — and immediately. This was a natural and logical demand for the companies to make. The minute they found gas and built the infrastructure, the marginal production costs were almost zero. The gas comes out of the ground all by itself. So it is in their interest to sell as much gas as possible, as quickly as possible to return their investment and start making a profit.

What the gas monopoly achieved in the framework was the government’s consent to allow them to sell 25% (at the very least, and this could grow to 30%) of Tamar's gas as exports. The plan was to lay a pipeline from the Tamar field (and later from Leviathan) to Egypt, where the gas would be liquefied, loaded on ships and sold in world markets.

But given the Egyptian gas discoveries, all these dreams of exports may be unrealistic. It depends on Egypt, its interests, and how much Cairo decides to export from the Zohr field.

Another idea of laying a pipeline all the way to Greece is completely impractical given today’s prices. The idea of building a liquefaction plant in Cyprus also seems to be marginal from an economic standpoint.
This in itself is not a disaster: If Leviathan has no customers, then maybe it would be better to save the gas for Israel’s future generations and to encourage large parts of the Israeli economy, such as buses and other public transportation, and power stations to make the transition to gas — over half of Israel’s electricity is still produced with coal today.

Times have changed, the numbers have changed, and so the framework needs to be rethought. Now is the time. Israeli politicians need to realize that they cannot rid themselves of the thorn in their backsides that is the natural gas framework. Why? Because this is the largest industry in Israel and the most important one. It affects the entire country’s energy independence, and it will be influenced by geopolitical factors which are constantly changing.

Eytan Avriel
Haaretz Contributor
read more: http://www.haaretz.com/business/.premium-1.679066

Source: http://www.haaretz.com/business/.premium-1.679066

Eni’s Egyptian Discovery Rekindles Interest in East Mediterranean Gas Prospects | LinkedIn

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

“Nessun Dorma” | eniday

 By Marco Alfieri on October 5, 2015

Like all great exploration discoveries also the Zohr discovery is full of surprises, the unexpected, intuitions, mistakes, skill, enthusiasm, and ups and downs in which the human element is as crucial as the technology. It’s a story worth telling from the beginning because we already know what Eni has found in the Egyptian offshore and the geopolitical impact on the area, but still very little about how we arrived at this mega-discovery. A three-year journey – together with an extraordinary team of geologists, geophysicists, drilling engineers and logistics specialists, experts in ICT and economic evaluations – that it was was to tell from the inside…     

“The truth? I’ve never seen more than 600 metres of gas permeated rock with pressure points so aligned..” my new explorer friend tells.

While he speaks his small eyes flash with emotion and adrenaline. It’s a warm September afternoon, we are sitting in an empty room in San Donato, a long way from the Egyptian platforms, but it feels as if we are in one of those construction site containers, between excitement and curiosity.

Like all great exploration discoveries also the Zohr discovery is full of surprises, the unexpected, intuitions, mistakes, skill, enthusiasm, and ups and downs in which the human element is as crucial as the technology.

It’s a story worth telling from the beginning because we already know what Eni has found in the Egyptian offshore, the potential of the discovery, the geopolitical impact on the area and the possible developments of the system (a Mediterranean gas hub), but still very little about how we arrived at this mega-discovery. How the teams in Egypt and San Donato worked for three long years, what were the decisive moments, the difficulties and the diffidence that were overcome.

Making a discovery is like winning a football championship. It takes patience, method, tenacity, talent, expertise, firmness, team work, vision, cold blood (and a warm heart, always).

Often, we journalists like to tell it as if it were the final of the Uefa Champions League. With soccer stars like Andrea Pirlo or Leo Messi, dribbling round the defence and going for goal with the ball. But this risks trivializing, simplifying or over-personalising.

“Meet the man who discovered …” blah blah blah …

But that’s not how it works.

One of the first things my explorer friend told me was even disarmingly: “We are not like Indiana Jones as some people imagine. We don’t have a whip, we don’t consult miraculous algorithms nor do we whisper to stones … ”

Each discovery is the result of the geological knowledge and insights of a great team. The whole company is involved and bings its contribution: those who explore, drill, develop the wells, those people in IT, those who make economic evaluations, and on up to the top management.

This is why a premise is necessary.

The story of Zohr began in mid-2012 when Egas, the Egyptian state exploration agency for the offshore Nile Delta, announced a competitive bid, or “bid round” to use the technical term, in the Mediterranean offshore, with the offer to oil companies of 15 blocks to be evaluated.

Politically the period was full of uncertainty, it was the post-Arab Spring. In Cairo in June the Muslim Brotherhood came to power, and the major oil companies were having difficulty in collecting the arrears due to them. Eni decided to keep a regional base in Egypt and continue to study, from a geological point of view, the area of ​​the Levantine basin.

For as long as possible, the first rule of an energy company is that contingent and geopolitical factors should never make you stop searching (and trying to understand). Oil is a long-term business; tomorrow things can be different, maybe even better.

But there is a second factor. The IEOC, historically the driver of exploration activities in Egypt, for the first time in forty years was about to run out of areas to explore. Uncertainty, as Mao Tse Tung would have said, is an excellent opportunity to try to reconstruct the portfolio with more or less limited investment (the competition would be low), pending an improvement in the conditions for investing in the country.

- See more at: http://www.eniday.com/en/nessun-dorma/#sthash.N8FAozT7.dpuf

Source: http://www.eniday.com/en/nessun-dorma/

Gas Strategies Discussed in Greece | Natural Gas Europe

October 05th, 2015

GAS STRATEGIES DISCUSSED IN GREECE

The annual Global Oil&Gas Black Sea and Mediterranean Conference took place recently in Athens, Greece, and various stakeholders laid their views upon the gas culminations in the regional markets.

Danila Bochkarev, energy fellow at the EastWest Institute in Brussels, attested that the proposedTurkish Stream pipeline project could indeed become a reality in the coming years, albeit in a different form as presently presented: significantly lower in terms of volume capacity - up to 75% less. That means the pipeline would have a maximum 17.5bcm capacity and chiefly supply Turkish and Greek markets without further expansion.

It is not improbable that the Trans Adriatic Pipeline (TAP) could be used to transfer limited amounts of Russian sourced gas. On the other hand, Nord Stream is currently of outmost importance for the overall energy security of the major EU natural gas markets and in that respect, regulatory affairs should be taken into account regarding EU-Gazprom future supply relations.

The Greek government, through incumbent Energy Minister Panos Skourletis, also pledged to follow through with Turkish Stream without making any assumptions around changes in volume or route.

The impeding opening up of the East Mediterranean natural gas supply route was touched upon by a cadre of experienced policy makers on the subject. The former head of the Energy Ministry directory of Cyprus, Solon Kasinis, placed emphasis on the recent gas discoveries offshore Egypt in the Zohr field, which could have more than 1 trillion cubic metres of gas in place.

According to the Cypriot expert, plans that call for the establishment of a pipeline from that region to the EU via Greece could be revitalized. In the coming months there should be strong competition and collaboration alike by all neighboring countries to firmly set up export infrastructure in the region, with a concentration on LNG installations. The Tamar field is operational and the Leviathan is about to be streamlined as well.

It was also noted that Italian ENI is still pursuing, after a 2-year break, potential gas resources offshore Cyprus in the sea blocks 2, 3 and 9, whilst French Total will commence its research by the end of this year in block 11.

Egypt has certainly emerged a big player and has its own set of options, including stronger cooperation with Israel and Cyprus and significant investment options in the LNG market. By 2021, the situation should be settled and if new discoveries are made, the region could see a golden era of natural gas both in terms of local gasification and in export potential.

Former chairman of the Cypriot hydrocarbon agency, Charles Ellinas, pointed out that the plan to establish an LNG terminal in the Vasiliko area of Cyprus could become a reality if sources of gas are also being directed from Israel.

There are also indications for more gas to be found offshore Cyprus and the major difficulty nowadays is to secure long-term financing for any project at hand. By combining forces with Israel, Nicosia could hope for options to export both to EU and Asian markets.

With the Zohr discovery and optimistic predictions for more reserves, Egypt could again become net exporter by 2022, a development that could ease the country's commercial deficit by many billions of dollars annually.

In terms of price competitiveness, the cost of Cypriot and Israeli gas sent to Europe would be around $12 per MMBtu in today's prices, which is more than Gazprom's price to the same destination. That means that any potential exports will have to take that under consideration. In any event, exports would be a long term issue and not for the short term.

EU authorities, according to Mr Ellinas, are generally speaking in favor of projects such as the East Med pipeline, but it is not in the immediate priorities of the Union or any member states, save Greece and Cyprus. For the moment, the EU is primarily concentrating efforts on the Southern Corridor project with its TANAP-TAP system of pipelines along with assorted interconnectors. Cyprus, therefore, should speed up its efforts for a new round of explorations and be ready to hand out licensing for new sea blocks by 2016.

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Source: http://www.naturalgaseurope.com/gas-strategies-discussed-in-greece-25580

Our View: Reality must replace geo-political and gas dreams | Cyprus Mail

OCTOBER 4TH, 2015 

President Nicos Anastasiades and Egyptian President Abdel Fattah al-Sisi in Nicosia in April.

THE FOREIGN ministers of Cyprus, Greece and Egypt met when they were in New York last week in order to arrange the third tripartite summit which is expected to be held later this month in Athens. This would complete a full circle of tripartite summits, with one having been held in Cairo last year and a second in Nicosia in April.

Neither of these produced anything more tangible than some pictures of the smiling leaders shaking hands. There was also a declaration signed in each case – the Cairo and subsequently the Nicosia declaration – which spoke of economic co-operation and the strengthening of political ties among the three countries. While building good relations with neighbouring countries is good, we suspect that much more is made out of these summits than they actually have to offer.

President Anastasiades seems to relish them, as they support much of the government discourse regarding Cyprus’ geo-strategic value, the potential of becoming a regional energy centre and the need to forge alliances with neighbouring countries. Since the time of the Papadopoulos presidency the foreign ministry has been arguing about the need for geostrategic alliances, on the dubious grounds that these would strengthen Cyprus’ position in its dealings with Turkey.

Many politicians and newspaper columnists have repeatedly raised this issue, going as far as to suggest that geo-strategic alliances, based on energy co-operation, would be a better course to follow than engaging in negotiations for a settlement. The preferred country for a strategic alliance has been Israel – especially after Tel Aviv’s falling out with Ankara – and although there has been an exchange of visits between Prime Minister Benjamin Netanyahu and Anastasiades as well as a three-way meeting also involving Greece, nothing tangible has been agreed. The mooted tripartite summit of Cyprus, Greece and Israel has been more difficult to arrange, probably because Netanyahu does not see much point to it.

Cyprus is once again trying to box above its weight, but the problem is that it does not really have anything attractive to offer its potential strategic allies. As things stand, it is only a bit-player in the eastern Mediterranean energy field, given the relatively small quantities of natural gas that have been discovered. This has not stopped the government’s relentless efforts to play up the country’s energy significance and pursue alliances that have little more than publicity value.

Anastasiades and his energy minister Giorgos Lakkotrypis insisted, against all logic, that Egypt would be buying natural gas from Cyprus even after the discovery of huge deposits of natural gas in Egypt’s Zohr field – almost 10 times the quantity in our Aphrodite field. What company would invest hundreds of millions, if not billions, on pipelines to take gas from the Aphrodite field to Egypt which has huge quantities of hydrocarbons – much closer to home – that would meet its energy needs for decades? Anastasiades and Lakkotrypis need to stop claiming they will be selling gas to Egypt, because nobody can take them seriously.

In fact the entire government narrative about energy alliances that would strengthen Cyprus seems to be collapsing. Our other potential energy partner, Israel, which has never made any concrete commitment in relation to energy, has reportedly been talking to Turkey about the possibility of supplying it with natural gas. Netanyahu informed Anastasiades about this during his short visit to the island recently, suggesting that both countries could sell gas to Turkey, once there was a Cyprus settlement.

Despite the rhetoric about the energy alliances, Anastasiades has had meetings with the representatives of a big Turkish energy company in the past, indicating he is pragmatic enough to explore all options. How ironic that all the government’s grand designs have fallen by the wayside and the only potential client for our natural gas is Turkey which is not only a very big market, but is also close enough to be supplied at a competitive price.

Admittedly, there could be no such deal without a settlement, but it is still looks like the only viable option for Cyprus to monetise its modest gas finds. Having a huge market like Turkey’s so close and a deal to supply it would also be a big incentive for oil companies to increase their exploratory drilling in the Cypriot EEZ, especially as there would also be regional stability.

This is the pragmatic way forward and not the much-touted tripartite summits, which are little more than publicity exercises. Even the dream of becoming a regional energy centre requires a settlement to be realised.

Source: http://cyprus-mail.com/2015/10/04/our-view-reality-must-replace-geo-political-and-gas-dreams/