Mediterranean Gas: From the Mari-B to Aphrodite (and Beyond)

Noble Energy has been at the vanguard of natural gas exploration in the Mediterranean Sea.

In his presentation at the Frankfurt Gas Forum, John Tomich, Cyprus Country Manager, Noble Energy Inc., recalled that Noble had entered Israel in 1998 and in the early 2000's had made its first discovery offshore Israel: 1 TCF of natural gas in the Mari-B discovery.

“Basically, it started the Israel natural gas industry,” he said, “and led to significant market penetration for natural gas for electric power generation in Israel.”

Noble, he said, had drilled a number of wells after that and made additional discoveries, but the next major milestone was in 2009, when the company discovered the Tamar gas field, roughly 10 TCF of gas; the next year, Noble drilled the Leviathan, which was close to 20 TCF.

Together with its partners, Avner Oil & Gas Exploration L.P. (part of Delek Group) and other Israeli companies, he said Noble had roughty 30 TCF of gas, either producing or forthcoming production.

More activity occurred in 2011, when the company drilled “Cyprus A,” in the Aphrodite field and Block 12 of the Cyprus discovery.

Mr. Tomich explained that the production facilities at Mari-B formed the basis for the subsequent development, Tamar, an ultra-deep water development. “It sits at roughly the same water depths as Leviathan and Aphrodite, roughly 1,700 meters of water depth. Tamar came on stream in April of this year, 2013.”

He said Tamar marked a number of firsts for both Noble and the industry: “It was a very aggressive development timetable, roughly 51 months from discovery to first-gas, which is moving, if you look statistics-wise at worldwide data, ultra-deep development takes between 5 and 10 years from FID to first production, so we were very pleased for this project to come together like it did,” he said.

Another first, according to Mr. Tomich, was that there were double flow lines from sub-sea well completions to the production platform at Mar-B. “These are the longest flow-lines in the world, 150 kilometers long, climbing from water depths of 1,700 meters to roughly 3-400 meters at Mari-B.”

Tamar, he reported, was having significant impact for all stakeholders. Production there began in late March/early April 2013.

He added, “The development was completed in record time and under budget. It has had very high reliability to date. Obviously, it's less than a year, but the reliability has been superb and it's achieved very high output: over 1 BCF/day.”

According to Mr. Tomich, natural gas had become the fuel of choice for Israel. He said that the Supreme Court of Israel had recently announced it would allow exports to occur.

“We're looking at various export options and we'd like to target start-up for late 2018. The Cyprus discovery underpins Noble's long-term profile in the region,” he said.

He then proceeded to show delegates the “structural closure” of the Cyprus development, which provided trapping. Two wells, he said, had been drilled and Noble was working with the Cypriot government on an LNG project, which would be expandable.

“We could start with Aphrodite and, as further resources are found, offshore Cyprus and other blocks, they can be folded into trains and that would all be governed by an umbrella agreement, which is being discussed with the government of Cyprus,” he explained.

However, he added that Noble and the government were looking at all options (floating LNG and CNG, as well as pipeline projects), although an LNG facility was the means of choice.

“It provides greater flexibility than any other means in terms of marketing the project,” said Mr. Tomich, who admitted: “It is an expensive option and it does take time. It also provides the basis for bringing benefits to the people of Cyprus, such as more jobs, especially during the construction phase of the plant, and then fewer but more technically advanced jobs later on.”

Noble, he said, was also looking at ways to accelerate bringing gas to the shores of Cyprus to provide fuel for the domestic electric power generation market, because the country currently had some of the highest prices for electricity, but that market was small and getting smaller in the midst of the economic crisis there.

He explained: “To underpin the very high CAPEX costs that are required for development in ultra-deep water in this type of gas field, we need to have a major export project to go with supplying the domestic market – that's the challenge. We've got to ensure sufficient resource, which is the ongoing effort on the technical side. We've got to select an adequate method for developing and marketing the product and then we've got to work within the limits that are set by country and regional politics.

“So it's an exciting time to be a country manager in Cyprus, but it does have its challenges.”

In October, Noble revealed that an appraisal well in the Aphrodite had flowed with gas at very significant rates. “We estimate that these kinds of reservoirs could be capable of flowing up to 250 MCF/day, which is roughly equivalent to what we've experienced in Tamar and Leviathan, excellent quality reservoirs, world-class,” said Mr. Tomich, who said the updated resource estimate was 3.6-6 TCF (with a mean of 5).

“At the end of the day, what we're saying is on the basis of two wells we've got a lot of gas, a lot of uncertainty about how much, but we know that within limits we're looking at roughly 5 TCF, could be more or less. So the challenge is to take that resource base and figure out what the best way to proceed with a commercial project is,” he explained.

Now, he said, the Cyprus Aphrodite development was the target for Noble, which was in the process of appraising the gas field. “We've had success on the two wells to date, but additional work is required to narrow the range of uncertainty to the resource size. We are proceeding with the LNG commercial framework with the government, which forms the base case of our commercialization and marketing strategy.

“Based on preliminary feasibility studies the start of natural gas production to Cyprus would take about 38 months from FID and the start of LNG exports would be about 48 months. We're working right now to targent an FID date of late 2015, early 2016,” he reported.

According to Mr. Tomich, these were ongoing processes, but now was the time to appraise the field. He added that Noble also saw significant upside potential in the block just beyond Aphrodite, where there were potential targets, where the company had conducted a 3D seismic survey that was currently being processed.

Of the Eastern Mediterranean, Mr. Tomich concluded: “It's one of our pillars, together with west Africa and unconventional work in North America. With the resource size in Israel and the emerging picture in Cyprus, it's very exciting for us and has become one of our focus areas with a lot of our capital budget being dedicated toward those areas.”