The Cyprus government, Noble Energy and its partners Delek Drilling and Avner Oil simultaneously announced the appraisal drilling results from Block 12. Exploratory drilling carried in 2011 out by Noble Energy at Block 12 showed an estimated gross resource range of 5 to 8 tcf, with a gross mean of 7 tcf.

The updated figures show the offshore field holds between 3.6 tcf to 6 tcf of natural gas. “We anticipate additional appraisal activities are necessary to further refine the ultimate recoverable resources and optimise field development planning,” said Keith Elliott, Noble’s senior vice president, Eastern Mediterranean. “The appraisal drilling results prove there are substantial recoverable quantities of natural gas in the Aphrodite field, with important production capabilities,” Energy Minister Giorgos Lakkotrypis told reporters. Lakkotrypis said that preliminary calculations on reserves of 4.5 tcf indicated a net profit for Cyprus of betweenUS$12 billion to US$18 billion (between €8.8 billion and €13.2 billion) over a 14-year period, and gas with a gross value of US$50 billion (€36.7 billion) for Noble. But he said estimates were “very preliminary, considering uncertainties in the market”. Lakkotrypis said they remained committed to the construction of a liquefied natural gas (LNG) plant on Cyprus. “Despite the lower quantities we announce today compared to those of 2011, the confirmed reserves affirm a particularly important reserve of natural gas,” Lakkotrypis said.

The reserves in Block 12’s Aphrodite field are the third largest in the Levantine Basin, which lies in the seas of Cyprus, Lebanon, and Israel. Noble also has concessions in Israeli natural gas prospects. Noble’s Cyprus Country Manager John Tomich said the LNG project remained their “strategic priority in terms of commercialising the gas”. “What we found was confirmation of world class natural gas,” Tomich said.

Cyprus and Noble Energy and its partners signed in July a memorandum of understanding with a view to jointly seeking investors for the LNG plant, estimated to cost up to €8 billion euros. The aim is to agree on a special purpose vehicle by December, prior to securing an engineering procurement construction (EPC) agreement with a contractor to start works on the LNG plant by early 2016. But for the agreement to go through, Noble would need to make a final investment decision.

The head of the Cyprus National Hydrocarbons Company Charles Ellinas said in June that if the Aphrodite well were to yield less than 6 tcf – the threshold for making the LNG plant commercially viable – the difference could be met by discoveries in a second, smaller field within Block 12 that could hold about 2 tcf to 3 tcf. Noble is expected to do an appraisal drilling in the Aphrodite Field – sooner rather than later – and also more exploratory drilling in another field in Block 12 within next year. Tomich said they were also analysing the data from a 3D survey in the block that has identified at least six separate structures indicating more natural gas. The data will help Noble prioritise where to drill next.

Cyprus has signed contracts with the ENI/KOGAS consortium for hydrocarbons exploration in blocks 2, 3 and 9 and with French TOTAL for blocks 10 and 11, all in its exclusive economic zone. ENI/KOGAS are expected to begin exploratory drilling in the third quarter of 2014, with TOTAL following suit in the first quarter of 2015, Lakkotrypis said.

The more gas is found, the better Cyprus’ outlook in securing long-term buyers. Ellinas warned late last month that an increasingly competitive environment in a growing LNG market meant that Cyprus needed to start LNG exports by 2020. Cyprus needed to avoid delays in order to secure long-term buyers and sales contracts, he said.

Lakkotrypis would not say yesterday whether the discovery of lower-than-expected quantities would entail a delay in the LNG plant project. But he said they needed to bear in mind known parameters when assessing the viability of an LNG project and adjust factors such as a plant’s capacity accordingly. “The quantities are not the challenge. The amounts are there. The challenge is in the timing,” Lakkotrypis said.

Although authorities have said that natural gas is not a panacea for the island’s financial troubles, the discovery of natural gas bears hope for the mid-term. Cyprus came close to financial ruin in March, as it desperately tried to secure a 10 billion euro bailout.

Source: Cyprus Mail