[Premium] ExxonMobil Gives Cyprus New Hope

Two months ago Noble Energy rented nine floors and a 13,000 m² of office space in Israel. Today it employs about 200 people in Israel – a few of them in the Herzliya office, and others in various gas production facilities in the country and on its offshore facilities.

The company has not made clear why it now needs such a huge office space for 10 years with an option for another 14 years. It only said that it expects to recruit more workforce in Israel. "Noble Energy will be active in Israel for many more years," its head of operations Bini Zommer said, according to The Marker, a business website.

However looking from outside it is not clear how Noble Energy, barred from last year's Israel licensing round because of its monopoly in the Israeli domestic gas market, expects to expand its Israeli operations. It is now the operator of the Tamar gas field and responsible for the development of Leviathan which is expected to come online in about 18 months' time.

It is possible that those offices will serve as Noble Energy regional headquarters, if and when the company implements the development of Aphrodite, the offshore Cypriot gas field, in which the company is a 35% shareholder and the operator.

The company might also be allowed to take part in the future in further Israeli licensing round offshore Israel. And it might have other initiatives in the pipeline.

However all speculation about the development of the natural gas industry in the eastern Mediterranean is now on hold, sources at the Eastern Mediterranean Gas Conference (EMGC) in Nicosia in March told NGW pending results from ExxonMobil's drilling.

The biggest private energy company in the world won an exploration licence offshore Cyprus, and is expected to complete an exploration well this year. The name alone of the supermajor appears to be enough to raise the hope of the island’s population that the drilling will be crowned with success.

A senior official from the Cypriot ministry of finance said that if ExxonMobil makes a huge discovery, all bets are off. ExxonMobil, supported by the American administration, will be able to develop the gas field and would not need to send the gas to Egypt for liquefaction. It will build its own liquefaction facility either as a floating LNG project – which is still an untested technology – or a terrestrial one in Cyprus; and export the gas, whether to Europe or elsewhere.

However, the official did not rule out co-operation with Israel, particularly since Aphrodite is also awaiting development and it is adjacent to Leviathan, the giant offshore Israel gas field.

It would be logical to develop both of them in tandem, since the ownership is almost overlapping and make the development of a liquefaction facility in Cyprus more economical. In that case, the official told NGW, Israel's navy might defend gas facilities around Cyprus from Turkish threats. A few weeks ago Turkey prevented an exploration ship contracted by the Italian producer Eni from drilling in Cyprus.

However Turkey’s attitude is changing a bit and its alliance with Russia and Iran on Syria, might signal to a different tone. The American presence in the eastern Mediterranean is also in doubt following the announcement by the US president, Donald Trump, that US forces will be out will live Syria soon. That would give Russia more leverage in the region. Trump was speaking before the illegal gas attack April 7 on the Syrian town of Douma, for which he blamed the regime, which Russia is supporting militarily.

But generally Russia would not look favourably on any natural gas development in the eastern Mediterranean that will lead to more competition and lower gas prices in the European Union, its most profitable export market. So a huge gas discovery by ExxonMobil would raise the stakes.

That brings to mind another option: a pipeline to Europe. The debate on the route is still ongoing and it is far from clear how much it would cost. Early assumptions of $6bn for the 2,000 km undersea and overland pipeline seem to be far off the mark. Eni’s head of exploration Luca Bertelli told the conference that it is possible to build a pipeline but so far not enough gas has been found to justify it.

(Source: Cyprus)

The leaders of Israel, Cyprus and Greece are expected to meet next month for a tripartite meeting with gas being one of the main topics of the meeting. They will have to weigh carefully the options, that might lead to a kind of conflagration in the region. However, nothing will be decided until the fat lady sings. And neither ExxonMobil or Russia are just a fat lady.