Exxon’s Cyprus discovery ‘huge’ but with rocky road ahead, analysts say

ExxonMobil last week made what was described a major gas discovery offshore Cyprus, joining Eni and Noble Energy in making significant gas finds in the eastern Mediterranean. While at first, this is good news for the company and Cyprus, analysts worry the find might fuel the Cyprus dispute with the Turkish side, and say it might be years before the find is put to production.

Cyprus Flag / Image source: Pixabay
Cyprus Flag / Image source: Pixabay

As reported last week, Exxon said it had made the discovery at the Glaucus-1 well in Block 10 offshore Cyprus. The discovery, per Exxon, could represent an in-place natural gas resource of approximately 5 trillion to 8 trillion cubic feet (142 billion to 227 billion cubic meters).

Commenting on Exxon’s discovery, Rystad Energy’s senior upstream analyst Palzor Shenga said: “ExxonMobil continues to impress with its sheer volume of discovered resources. The Glaucus-1 discovery is huge. Rystad Energy forecasts it will hold recoverable resources of around 700 million barrels of oil equivalent.”

“Cyprus could turn into an important gas hub and might consider constructing a land-based natural gas liquefaction plan after the impressive string of major discoveries in the area. We expect Glaucus-1 and the neighboring discoveries Aphrodite and Calypso to collectively add around 2 billion cubic feet per day of gas at peak. However, we do not expect Glaucus-1 to come online until the late 2030s, due to the lack of liquefaction capacity.”

Aphrodite was made a few years back by Noble Energy which is working with the government on development options, while Calypso was made by Eni and Total in 2018, and needs further appraisal.

 


Related: Exxon makes gas discovery at Glaucus-1 well, offshore Cyprus


 

“The discovery is located at around 2100 meters water depth in the Exclusive Economic Zone (EEZ) southwest of Cyprus. The area holds several giant discoveries, and there has justifiably been a huge buzz about the area for years,” Shenga said. ExxonMobil is using the Stena Icemax drillship for its operations offshore Cyprus.

Cyprus’ energy minister Giorgios Lakkotrypis last week shared the video of the Glaucus drilling operation and said the discovery demonstrated the emergence of Cyprus as an alternative indigenous source of gas supply to the European Union.

Rystad’s Shenga said that bringing gas from these discoveries to the market will not be straightforward, Shenga said.

“Cyprus currently lacks a natural gas liquefaction facility. Egypt and Cyprus have recently agreed to build a subsea pipeline to link the significant gas resources located in Cypriot waters with Egypt’s LNG export facilities. The landmark deal is expected to carry a price tag of around $1 billion. This pipeline will be initially used to transport gas from Aphrodite, followed by Calypso. The liquefied gas will be then re-exported to the EU in the form of LNG. However, the project is not as easy as it sounds due to the geopolitical concerns from the neighboring countries.”

Fueling the dispute?

Shenga said that those huge gas discoveries could add fuel to the ongoing dispute between the governments of Cyprus and Turkey.

He said: “Under these circumstances, Cyprus must make sure that the energy giants can run their operations safely, without threats of military intervention, and that they can invest in developing and bringing them into production.”

To remind, upon making the Calypso discovery last year, Eni tried to move the drillship to its Block 3 off Cyprus to drill the Soupia well, but it was blocked by the Turkish navy on the grounds of the expected military operation at the destination. Eni then moved the Saipem 12000 drillship out of the country altogether and sent it to drill a well in Morocco.

Despite the setback with Block 3, in a conference call in April 2018, Eni said it had plans to progress with appraisal works at the Calypso well in the first quarter of 2019.

Offshore Energy Today Staff

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