[Premium] Cyprus Well Disappoints Eni, Total
The first results from the exploration well in Cyprus' block 11 must have disappointed the stakeholders, Eni and Total, who completed the work September 8. The drilling vessel West Capella is now proceeding to plug and abandon the Onesiphoros well.
In an attempt to look at the positive side, Cyprus energy minister George Lakkotrypis told parliament September 12 that drilling confirmed that the reservoir, albeit small, is in carbonate formations. This indicates that the ‘Zohr-model’ extends into Cyprus' exclusive economic zone (EEZ), giving hope for more and hopefully larger discoveries during Eni's forthcoming drilling campaign in blocks 6 and 8 and ExxonMobil's in block 10. Depending on the further assessment of the results from the Onesiphoros well, there may also be additional drilling in block 11.
Based on analysis of seismic data, Total was hoping to discover a 4-5 trillion ft³ gas-field, in carbonate formations similar to Zohr. Instead, initial estimates indicate a discovery below 0.5 trillion ft³, which is too small to justify commercial development on its own, unless it can be tied-in to any nearby future discoveries.
In all these blocks drilling targets have been identified in carbonate formations and hopes for discoveries are still good. But no doubt, Eni and ExxonMobil will be assessing the results from this well before they finalise their drilling programmes.
Total and Eni will confirm their intentions and next steps for further drilling within 30 days. The extensions to their production-sharing agreements expire at the end of February.
Cyprus is putting a brave face on this, with press articles going as far as to say that ‘the results of drilling generate tremendous hopes!’ and ‘the finding that the geological structure of the reservoir is very similar to that of Zohr suggests that significant gas reserves exist in the region.’ President Nicos Anastasiades said September 10: “There is no question of pessimism… This particular deposit – the reservoir – may not be sufficient to satisfy the conditions for exploitation on its own, but the data create great hopes.”
No doubt, this positive slant by the government is designed to manage fallout, given the wider exploration programme. It is also an attempt to maintain strong interest in the gas potential of Cyprus’ EEZ.
Nevertheless the outcome is disappointing. Total will have to wait results from further drilling, still to be decided, before it can formulate any development plans in Cyprus. The same applies to Cyprus’ government. Exploration drilling so far, since the discovery of the 4.5 trillion ft³ Aphrodite gas-field in 2011, has been unsuccessful. Any hopes that the island’s economy will benefit from gas production will have to wait another year.
In any case, any decisions on future exploitation of any gas finds off Cyprus were always going to be left until after completion of all planned drilling, by the end of 2018. The disappointing result in block 11 does not change this. Much hangs on the more optimistic indications that block 10 may hold significant amounts of natural gas.
In the meanwhile Turkey is maintaining its pressure on Cyprus by declaring yet another NAVTEX for naval exercises that started September 11 over an area which includes parts of blocks 6, 7, 10 and 11. Asked to comment on this, the energy minister said: "What we have to do and we do is to build alliances with states that have their interests in the region, but also to continue to exercise our sovereign rights, as we have demonstrated by conducting drilling. Despite Turkey's aggression, we continue."