[NGW Magazine] Cyprus Drilling Tests Relationships

This article is featured in NGW Magazine Volume 2, Issue 15

Cyprus entered a new era in July as a potential upstream province: the country's first well is now being drilled in block 11. Geological risk is just one problem that the operators might have to deal with.

The drilling rig West Capella arrived in block 11 offshore Cyprus July 12 to drill the first well at a prospect named Onesiphoros on behalf of the Total-Eni partnership. The well is about 180 km south of Limassol and within 8 km of the boundary of Cyprus’ exclusive economic zone (EEZ).

This marks a decisive period for Cyprus, with at least four and possibly seven wells to be drilled over the next 12 or so months.

Following the recent disappointments at the talks in Switzerland to resolve the Cyprus unification problem, a commercial gas discovery will certainly lift spirits.

Cyprus’ government has already declared two NAVTEX, effective between 10 July and 15 October, securing the area around Onesiphoros West-1 (OW-1), as the well has been named. These set-up safety zones against any shipping activities during the drilling period.

The water depth at OW-1 is about 1,700 m and the reservoir is expected to be 3,500-4,250 m beneath that. This will be reached early September, after which it will be known whether a discovery has been made. If successful, it will be followed by data acquisition and logging to assist Total to estimate potential gas quantities and quality, which will probably last another 3 weeks. The well will then be sealed and appraisal drilling will follow at a later stage. Preliminary results are expected to be announced September/October.

But this could be a crucial and critical period depending on what Turkey does.

Following the failure of the negotiations at Crans-Montana in Switzerland, there have been veiled warnings already from Turkey’s president Recep Tayyip Erdogan and his prime minister. They warned Cyprus to refrain from taking ‘one-sided measures’ after the re-unification talks failed and that they will protect the rights of Turkish Cypriots to the end. They also made threats against the oil and gas companies drilling inside Cyprus’ EEZ and spoke of higher tension in the region. It is unlikely, though, that these will escalate into a ‘hot’ incident.

Even though the Turkish survey vessel Barbaros has been withdrawn from Cyprus’ EEZ, the expectation is that Turkey will not abandon its well-known positions and may interfere, having declared its own Navtex in an area which includes blocks 4,5,6 and 7.

The area where drilling will take place is not a part of Turkey's claim, but Turkey disputes the right of Cyprus to search for hydrocarbons except with Turkish Cypriot participation Cyprus’ president Nicos Anastasiades made a statement distinguishing between Cyprus’ energy programme and the failure to reach agreement on Cyprus confirmed that drilling will progress as planned. Nevertheless the government is concerned, especially after the declaration July 11 of a Navtex by Turkey southwest of Cyprus for naval exercises.

On the other hand, when asked by Reuters at the World Petroleum Conference in Istanbul in early February whether drilling could alienate Turkey, Total’s head of exploration and production Arnaud Breuillac said the company had "no concerns". Total also has the full support of the French government.

American interest

ExxonMobil, Noble Energy and other oil companies interested in the eastern Mediterranean are watching drilling in block 11 with great interest. A successful discovery of hydrocarbons in carbonate formations will confirm that Zohr is not unique: other such reservoirs may exist not only in the eastern Mediterranean, but also south of Crete. Hence ExxonMobil’s and Total’s interest in acquiring exploration rights in blocks offshore Crete in June.

Given such strong American interests, it is not surprising that 36 members of the US House of Representatives, with Hellenic American Leadership Council and American Jewish Committee support, requested US Secretary of State Rex Tillerson to continue the active engagement by the State Department in the region, including against Turkish threats towards Cyprus’ EEZ.

Both the US and the EU have confirmed Cyprus right to develop its hydrocarbons for the benefit of all Cypriots. But unfortunately for them, this may not carry much weight with Turkey.

However, with so many warships drawn to the region by the conflict in Syria, the UN expressed concern about continuous tension in the region, adding that it does not want to see any incidents.

Prospects

Seismic data have already indicated that the prospect for a hydrocarbons discovery in block 11 is very promising. Total’s expertise combined with Eni’s detailed knowledge of the geology of the region and proximity to the Zohr gas-field bode well.

Eni data acquired from drilling Zohr have helped pinpoint where the best prospects lie in block 11. Onesiphoros is just the start. Total is positive about the chances of a reasonable size discovery. But of course only drilling can confirm that.

Prospects for an even bigger discovery in block 10 are even better, There are also prospects for discoveries in blocks 6,7 and 8 and a positive outcome in block 11 will reinforce these.

Should a discovery be made, it is very likely Total will continue drilling to test other prospects, which have already been identified in block 11, and to ascertain what the full gas potential of the block is before it starts considering how best to develop these.

Total is also likely to wait and see the outcome of drilling by Eni in blocks 2,3 and 9, to start late this year, and especially by ExxonMobil next year in block 10, before it formulates development plans.

The prospects for new gas-field discoveries and substantial quantities of gas in Cyprus EEZ look good. The key issue, though, following such discoveries, is to secure firm sales agreements, something that so far has not been possible for the 2011 Aphrodite gas find. New gas discoveries will be excellent news, but sales are required to realise benefits. The LNG market has entered an era of rapidly increasing new supplies and a glut of LNG is keeping global prices low.

Charles Ellinas