[Premium] ExxonMobil Confirms 2H 2018 Cyprus Drilling
The US major ExxonMobil confirmed at a presentation in Nicosia September 5 that it plans to drill two exploratory wells in block 10 in Cyprus’ exclusive economic zone during the second half of 2018. ExxonMobil and Qatar Petroleum (QP) secured the exploration license for block 10 in April.
In making the presentation, ExxonMobil’s vice-president for Europe, Russia and the Caspian Tristan Aspray said: "The Zohr and Leviathan finds have created cause for optimism” in the region.
ExxonMobil’s interest in Cyprus is two-fold. First, it has been attracted by the prospect of making a significant gas discovery in a stable region, within the EU, with established regulatory, taxation and fiscal systems. A discovery of a Zohr-size gas-field could add over 20% to ExxonMobil’s proved reserves, which is of particular importance to the company.
Second, a sizeable discovery can be used to develop LNG exports, particularly if gas prices recover in the mid-2020s. Increasing its gas and LNG portfolio is a high priority for ExxonMobil as it tries to diversify from oil to gas, where demand is rising in transport, power and other sectors.
ExxonMobil confirmed during its presentation in Nicosia that preparation to enable drilling to start during the second half of 2018 is already in progress.
In a presentation in Cyprus in June, ExxonMobil's head of upstream Steve Greenlee said: “Our vision, which I believe you all share, is for Cyprus to become an energy centre and we do hope to find enough quantities of natural gas – something that will set the foundations for Cyprus to become an energy exporter.” He also said that based on work done by the company by that time, the state of play appears to be good.
This is in line with indications from the initial assessment of the 3-D seismic data obtained by PGS on behalf of the energy ministry. This data, made available to ExxonMobil, show geological formations similar to those of Zohr, with indications of a similarly sizeable gas reservoir in carbonate formations. ExxonMobil has used ultra-high-speed computer modelling to predict good places to drill, as its finds off Papua New Guinea and south America show.
However, as Aspray noted in his presentation, there is considerable uncertainty about the results of drilling, as geology can change significantly even over short distances.
Progress towards LNG
During the presentation ExxonMobil confirmed that acquisition of 3-D seismic data is now complete. Preliminary processing of the data is also complete, with detailed evaluation now in progress.
On this basis, the company is now progressing with well design and its contracting plans, which will include securing a drilling rig, support vessels and services, setting-up the onshore drilling support base. Before it can start work it must also submit documents to the relevant ministries, including the environmental impact assessment.
The company is strengthening its team in Cyprus with additional staff in preparation for drilling. It is also working with the government to develop local capabilities through training, internships and scholarships.
Aspray said that planning further, future, developments will depend on the results from next year’s drilling campaign. Should this be successful, export will probably be in the form of LNG. Depending on conditions being right, such as gas quantities and commercial factors, this could be through an onshore LNG plant hopefully in Cyprus. He also said that successful drilling could be the beginning of long-term co-operation with Cyprus.
Total busy in block 11
In the meanwhile, the French energy company Total is progressing its drilling at Onesiphoros in block 11 as planned, without interruptions. The energy minister George Lakkotrypis, said that it is likely that initial results will be announced next week. Both Italian Eni and ExxonMobil will be looking at these results with interest. They will be invaluable in helping these companies finalise details of their drilling plans.
However, there is still a long-way between discoveries and successful exploitation through international gas sales. Global gas prices are low, and will stay low in the longer-term, and the global gas market is challenging. Ultimately, collaboration will be key to keeping development costs down. In a low price environment, only integrated projects which minimise costs from well-to-export will stand a chance to become financially viable and secure export markets. And even then it will be challenging.
Charles Ellinas