The Onisiphoros gas field in Cyprus’ exclusive economic zone (EEZ) is not commercially viable, Energy Minister Giorgos Lakkotrypis said on Tuesday as it has been found to contain less than half a trillion cubic feet (tcf) of natural gas.
Announcing the raw results of the exploration well by Total and ENI in block 11, the minister added, however, that the results are encouraging in the sense that they confirm the existence of natural gas within a carbonate formation inside the EEZ, similar to the one discovered at Zohr.
“The importance of Onisiphoros lies in the fact that it proved that the geological model of Zohr does work,” he noted.
Lakkotrypis said carbonate formations in the bedrock within the three blocks awarded in the third licensing round – blocks 6, 8 and 10 – bear a resemblance to the structure in which the super-giant Zohr gas field was discovered by ENI in Egyptian economic waters.
Asked whether his assessment was that the “big target” might be discovered in the blocks awarded in the third licensing round, he offered: “In one of those blocks.”
The companies would not have competed for the concessions on those blocks unless they thought they held reserves that are commercially viable, he added.
Responding to another question, Lakkotrypis said the government is waiting to hear from Total whether they are interested in renewing their concession on block 11. The exploration license expires in February 2018.
Under the production-sharing contract, the concessionaires must inform the government within 30 days from now as to whether they intend to proceed with an appraisal, or follow-up, drill at Onisiphoros.
Asked in general what is the threshold that renders a reservoir marketable, Lakkotrypis said it depends on the manner in which a gas field is to be developed, but also on prevailing commodity prices.
He cited the Aphrodite field in block 12, which despite holding some 4.5 tcf, has not been developed due to currently suppressed oil prices which would not yield a high profit margin.
The minister hastened to add that during the preceding months he never played up the prospects at Onisiphoros, quite the opposite:
“I was personally stressing to the media that, judging from the seismic data, I did not anticipate a large discovery, rather, a small to medium-sized one.”
Nonetheless, the result at Onisiphoros did not dampen the government’s energy plans.
“We press on, we are encouraged by the result, and we continue with our plans as scheduled.”
And he reiterated that, as far as the government is concerned, the option for a land-based Liquefied Natural Gas (LNG) facility remains on the table, although that would depend on future discoveries.
Commenting on the latest development, energy analyst Charles Ellinas said the hit-and-miss in block 11 is par for the course.
Globally, the success rate – finding any gas in place, let alone a significant quantity – is just under 25 per cent.
“In Cyprus, there have been four exploratory wells to date, and we’ve been successful on two occasions. That’s a 50 per cent success rate, so we’re well within bounds,” Ellinas said.
He was referring to Aphrodite and Onisiphoros as the hits, and the two duds in block 9 as the misses.
“Let’s put it this way: the latest result was certainly disappointing, but I wouldn’t call it a failure.”
Looking ahead, the expert said block 10 looks the most promising prospect. Seismic data released to the bidding companies during the third licensing round showed a large-sized formation within the acreage.
ExxonMobil, which together with Qatar Petroleum, hold the concession on block 10, said they are planning two drills in the second half of 2018.
But before that, ENI has announced their intention to carry out up to three drills in blocks 3, 6 and 8. According to public pronouncements, their first attempt is expected around November of this year.
ENI have yet to identify the targets. Their concession on block 3 – awarded during the second licensing round – expires in February 2018. The concessions on blocks 6 and 8 were awarded during the third licensing round.
In Ellinas’ opinion, Total would probably not have proceeded with developing Onisiphoros even had they made a sizeable discovery there.
Market conditions – and the high cost of investing in the infrastructures – are not conducive at the moment, he added.
The analyst thinks the best scenario for the energy companies engaged in the Cyprus EEZ would be to pool their resources and jointly develop their finds.
This is an option they are already contemplating, he added.
He cited the Zohr field, where ENI has sold up to 15 per cent of the rights to BP and 35 per cent to Rosneft.
