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    2015: renewed optimism for Cyprus



Cyprus is awaiting further exploratory successes off its coast before it can move ahead with its onshore LNG project in Vassilikos.

by: Karen Ayat

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Top Stories, News By Country, Cyprus, East Med Focus

2015: renewed optimism for Cyprus

Cyprus is awaiting further exploratory successes off its coast before it can move ahead with its onshore LNG project in Vassilikos. The island discovered substantial amounts of natural gas in its waters: in 2011, Texan Noble Energy made the Aphrodite field discovery in Block 12 of Cyprus’ Exclusive Economic Zone estimated at 3.6 to 6 Tcf. Most of the gas encountered in Cypriot waters will be allocated to export given the island’s modest demand for the hydrocarbon.

Despite the discovery of commercial quantities of gas in Aphrodite, experts estimate that at least another 6 Tcf of gas need to be found to justify the commercial viability of an onshore terminal. Cyprus is not only considering the LNG option; other export scenarios include the possibility of exporting to immediate neighbours namely Jordan and Egypt via pipeline. In the meantime, Cyprus has launched a tender to import gas as an interim solution before its indigenous resources are developed.

Despite TOTAL’s reconsideration of its presence in Cyprus and ENI’s disappointment after facing a dry well in the Onasagoras area of Block 9, drilling continues off the island and hopes of finding more gas remain high. The Italian-South Korean consortium ENI/KOGAS continues exploratory activities in Cyprus’ EEZ, unshaken by the presence of the Turkish vessel Barbaros violating Cypriot waters and by the results of the first drilling. The consortium is scheduled to commence drilling at the Amathousa reservoir which is also located in EEZ Block 9. Dr Sohbet Karbuz tells Natural Gas Europe: 'Drilling has always been a risky business but every drilling project starts with optimism. Globally one out of three wells come out dry. Eni was unlucky. The drilling of the new well will start again with a renewed optimism.'

The temporary setbacks caused by the disappointing results of the new drilling and TOTAL’s potential pull-out are not reflective of Cyprus future results. Dr Charles Ellinas tells Natural Gas Europe: 'We are all hopeful that Amathusa will be successful, but we have to wait and see. Even if it is not, it does not mean there is no more gas in Cyprus' EEZ. Indications are good and it is a matter of persevering with exploration and drilling and more gas will be found.' Ellinas warned however that the low oil price and its impact on gas pricing may constitute a challenge to exploratory activities in the future.

Neighbouring Israel has made significant discoveries in its waters, with the Leviathan and Tamar fields estimated at respectively 21 and 10 Tcf of gas. Israel is however facing regulatory challenges, with stringent regulations threatening to push away existing and potential international investors. The climate of regulatory hostility has led some to see Cyprus as more attractive for the environment of certainty it provides investors. All eyes are on ENI’s next results.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat