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Network News • 2022-09-06

Cyprus discovers more offshore gas deposits

Author: George Mangion - Senior Partner PKF Malta
Published on Malta Business Weekly: 1st September 2022

Readers may be insensitive to aspirations of Malta striking an oil or gas discovery and treat the subject as taboo. Again, the anticipation of success in the past tantalised electorate in the hustings prior to elections – this is now conceived as a damp squib by most of us. It is a paradox, to recall how all neighbouring countries in the Central and Eastern Med basin have been successful in drilling for fossil fuels yet we have only issued 13 licenses in the past 62 years. Italy itself successful, has drilled in thousands of sites before striking oil. Exploration in Malta started in the 1950s, shortly after the discovery of oil in Ragusa in southeast Sicily. D’Arcy Exploration, later British Petroleum, was granted an exploration licence in 1954 and drilled the first onshore well in 1959.

Following the enactment of the Continental Shelf Act in 1966, Malta’s offshore acreage was opened for exploration in the 1970s. Four wells were drilled between 1971 and 1973 by Shell, Aquitaine and Home Oil.

Since then, a further eight wells have been drilled but so far no commercial discovery has been made. The success story of Cyprus makes us envious of their ample discoveries and perhaps déjà vu  sinks in that we have abandoned seeking investors. In 2014, Joseph Muscat signed with Azerbaijan to buy LNG for 30 years via a controversial consortium (Electrogas). Sadly, one of the local shareholders is in jail pending trial accused of complicity in murdering a journalist. Back to Cyprus, one notes that the latest discovery adds to three other major gas finds, including at the Aphrodite well in Block 12 of 4.5 trillion cubic feet, licensed to US firm Chevron, Britain’s Shell, as well as Israeli partners. The early bird catches the worm and Cyprus has been vigilant in seeking foreign investors. It continues to build on its prowess for offshore exploration considering that at present, eight exploratory licences have been granted with the first licence for Block 12, named Aphrodite, granted to Noble Energy in October 2008. In January 2012 Noble Energy announced a natural gas field discovery at Aphrodite with an estimated resource range of 5 to 8 trillion cubic feet (Tcf). In June 2015 the Aphrodite gas field was declared commercial. The Minister of Energy, Commerce and Industry Natasa Pilides estimated it would take about three years to commercially exploit Aphrodite, with the gas likely to be exported to nearby Egypt.

Over the period, Noble Energy has farmed-out most of its participation in the gas field, retaining a stake of 35%. Noble’s partners to Block 12 now include Royal Dutch Shell and the Israeli companies Delek and Avner.

More good news follow as fortune favours the brave. In December, US giant ExxonMobil and Qatar Energy signed a contract for oil and gas exploration and production-sharing off Cyprus. Intensive marketing of its offshore acreage rewarded Cyprus by attracting international investors. The Cypriot energy ministry proudly announced that more drilling had begun in a new well called Zeus-1 in Block 6, where additional quantities of gas could be discovered.

TotalEnergies and Eni (operator) made a significant gas discovery at the Cronos-1 well, in Block 6, offshore Cyprus. This discovery follows the second Calypso-1 discovery made on the same Block in 2018. Located at approximately 160km southwest of the Cyprus coast, Cronos-1 encountered several good quality carbonate reservoir intervals and confirmed overall net gas pay of more than 260 metres. Cypriot Energy Minister prides itself by saying that such new gas discoveries off Cyprus could potentially speed up exploitation of untapped resources and help secure supplies to Europe.

With Russia threatening to cut off gas supplies to the European Union, Nicosia was in talks with Brussels to become part of the bloc’s energy plan to reduce reliance on Moscow. In a smart move, Cyprus contacted Eni and TotalEnergies to find ways to optimally exploit another discovery located 165km off the southwest coast of Cyprus. So far, Nicosia has granted drilling licences for seven blocks to the Eni-Total consortium.

In conclusion, last year our finance minister Clyde Caruana announced government’s intention to apply for an Exclusive Economic Zone (EEZ). This could hold huge economic potential in the coming years, not just for fisheries, but even artificial islands, wind farms, solar farms, wave-generated electricity and revenue from shipping movements. The EEZ could potentially be 226 times the size of Malta. Apologists for Malta’s failed oil exploration programme blame the dearth of licenses due to disputes over boundaries of the vast continental shelf. Notice how this time the issue of a PMC by our Continental Shelf directorate to attract investors excludes the use of EEZ acreage for upstream exploration.

Author: George Mangion - Senior Partner PKF Malta
Published on Malta Business Weekly: 1st September 2022
Get in touch: info@pkfmalta.com

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