EMGC '17: Execs outline gas prospects for Cyprus, Lebanon, Israel

Adrienne Blume, Editor, Gas Processing and Executive Editor, Hydrocarbon Processing March 14, 2017

NICOSIA -- Gulf Publishing Company's Eastern Mediterranean Gas Conference (EMGC) 2017, the fourth iteration of the world's primary event for discussing the forces shaping gas industry development in the Eastern Med, opened on March 14.

Stelios Nicolaides, Director of Hydrocarbons Service for the Republic of Cyprus' Ministry of Energy, Commerce, Industry and Tourism delivered, welcoming remarks on behalf of George Lakkotrypis, Minister of Cyprus' Ministry of Energy, Commerce, Industry and Tourism.

Cyprus pushes for regional cooperation. Dr. Nicolaides said that Cyprus is pursuing agreements with bordering states. The country already has signed framework agreements with Egypt, Greece and Lebanon to help promote cooperation for hydrocarbon development.

Cyprus has issued three licensing rounds—one in 2007, another in 2012, and a third in March 2016. The government has also entered into six production-sharing contracts, five of which are still in effect.

The 2011 discovery of Aphrodite field was a game-changer for Cyprus. A final investment decision (FID) has not yet been taken on the field's development, but the government hopes to make moves in this direction in the future.

"The commercialization of gas remains a priority for the government," said Dr. Nicolaides. "With our partners, we have determined that the most reasonable commercial path forward is a pipeline to Egypt." However, inter-governmental cooperation would be needed for a new natural gas pipeline, the director acknowledged.

"Looking at the broader picture of the region, it becomes evident that the announcement in 2015, of the world-class Zohr field, has given high [resource] potential to the Eastern Med," said Dr. Nicolaides.

"Despite a harsh economic and investment environment, six applications were received, and negotiations have been concluded with three selected applications.

"Expectations for 2017 are that it will be an important year for understanding the potential of the exploration area," Dr. Nicolaides continued. "The Eastern Med has the potential for becoming a new source of energy for the EU, and guaranteeing energy security." The region's resources will also help meet domestic demand in Eastern Med countries.

Dr. Nicolaides closed his remarks, noting, "Regional cooperation is of paramount importance, if we are to achieve our energy goals. Hopefully, meetings in the future will include more of our neighbors. As Winston Churchill said, 'A pessimist sees difficulty in every opportunity, and an optimist sees opportunity in every difficulty.'"

Keynote address. Next, Luca Bertelli, Chief Exploration Officer of Italy's Eni SpA, delivered an opening keynote address, wherein he discussed the promising potential of Eastern Med gas. Read our coverage of Mr. Bertelli's keynote here.

Realizing Eastern Med resource potential. The first session of EMGC 2017 kicked off with a discussion by Dr. Panos Kelamis, CEO of Cyprus Hydrocarbons Co., on Cyprus' strategy for oil and gas.

"Knowledge is the cornerstone of what we are trying to achieve," Dr. Kelamis (pictured) stated at the start of his talk. "So what are the drivers for building and developing expertise? It's all about exploration. It is the responsibility of every nation to assess its wealth in terms of oil, gas and minerals—what we call a prospectivity assessment."

Dr. Kelamis named three main drivers for gas resource development in the Eastern Med:

  • Prospectivity assessment: Includes basin studies, geology, geophysics, leads, prospect developments and estimation of reserves;
  • Exploration, appraisal and field development: Includes issuing of licensing rounds, production-sharing agreements, collaborations with international oil companies and drilling proven reserves;
  • Production and monetization: Includes production strategies, monetization strategies, gas sales agreements and infrastructure (i.e., FPSO, LNG, pipelines) strategies.

The CEO also touched on the subject of building an LNG plant in Cyprus. The country has the potential to become a hub for the region's collective reserves, he said, adding that space is available for at least three LNG trains at the proposed terminal site of Vasilikos.

"We have to be patient and look at the big picture, instead of short-term success or failure," Dr. Kelamis stated. "How can we create an oil and gas culture? The key to success is to promote collaboration between governments, the private sector and academia.

"Cyprus can be a beautiful carrier of technology," Dr. Kelamis continued. "The government provides the space, the private sector makes the investment, and the university professors produce hydrocarbon research that combines with [the efforts of] the government and the private sector to promote resource utilization."

The goal, Dr. Kelamis said, is to advance Cyprus Hydrocarbons Co. as an operator and key player in the E&P area, with active participation in the Cyprus Exclusive Economic Zone (EEZ) and abroad. "We want to do this with well-calculated steps, by having the right people in place, and by developing the right knowledge," the CEO said.

Lebanon offers first licensing round. Representing another key player in the region, Wissam Edmond Chbat, chairman and head of Geology and Geophysics for the Petroleum Administration of Lebanon, shared updates on Lebanon's licensing plans for its gas reserves.

Mr. Chbat noted that Lebanon's gas reserves are located between two basins, in two different formations, with varying geology—all of which pose exploration challenges.

Of Lebanon's open blocks, Block 1 has high-to-moderate hydrocarbon potential, with gas, possible condensate and oil expected to be discovered. Block 4 has moderate potential for gas, oil and possible condensate. Block 8 has high potential for gas and some condensate, while Block 9 has very high potential for gas, condensate and oil. Block 10 also has very high potential for oil, condensate and some gas. The majority of the gas would be targeted for export. "We hope we reach a point, where we can make further investments and drill holes in the right places," Mr. Chbat quipped.

Lebanon launched a marketing campaign in February to promote its first licensing round. It is also inviting companies to participate in a prequalification round. By September, the country hopes to receive bids from prequalified companies on the blocks open for bidding. In November, a decision will be made to approve awards, and sign exploration and production agreements with winning consortiums.

"Creating balance [in energy negotiations] is very difficult," said Mr. Chbat. "It's very delicate. But it has to be created to satisfy investors' ambitions and preserve state life. We've offered a lot of tools to help investors."

Outline for Israeli gas monetization. After a coffee and networking break, Session 1 continued with a presentation by James Efstathiou, Exploration Manager for Energean Oil & Gas, who shared Israel's development plan for the Karish and Tanin gas fields.

Energean acquired 100% interest in Karish and Tanin from Delek Drilling and Avner in 2016. The transaction, estimated to be valued at $148 million, is being implemented as part of the Israeli government's Gas Framework Strategy, according to a World Oil report. The two fields have a combined resource volume of 2.4 Tcf.

Energean is targeting FID on the two fields by the end of 2017. It aims to commence project execution, along with partner TechnipFMC, in January 2018. Execution is anticipated to span 24 to 28 months.

If the plan progresses as envisioned, a drilling program for three wells would begin in 2019, and an offshore installation would be put into place in 2019, or after. Energean aims to deliver gas to the Israeli market by 2020.

Tamar, Leviathan and Aphrodite: Where are they now? Complimenting Energean's view and closing out Session 1, Delek Drilling and Avner Oil Exploration's project director, Aviv Kishenbaum, discussed strategies for energizing the Eastern Med's investment and production synergies.

Over 42 Tcf of gas reserves have been discovered in Israel's and Cyprus' EEZs, Mr. Kishenbaum noted. Tamar field, which saw first gas in 2013 and is the second-largest gas project in Israel after Leviathan, has five producing wells. These wells are connected to one manifold and two 16-in. pipelines, which are hooked up to a dedicated platform.

Since Delek Drilling and Avner Oil Exploration's startup of Tamar in 2016 with partner Noble Energy, the field has recorded nearly 100% uptime. At present, two export agreements are in place for Tamar’s gas. One is for infrastructure facilities on the Jordanian Dead Sea, which commenced in 2017. The other is an interruptible contract with Egypt for 250 MMcfd of gas supply for seven years.

Meanwhile, at Leviathan, FEED and the subsea gathering pipeline route have been finalized. Regulatory approvals for onshore landing have been secured, and risk modeling for the budget and schedule have been completed. The consortium plans to drill one or two new production wells at Leviathan in 2017, and first gas is expected in 2019. Delek and Noble are forecasting a production capacity of 1.2 Bcfd in Phase 1A, and capacity of 0.9 Bcfd in Phase 1B.

Mr. Kishenbaum  also shared details on the Aphrodite project. He called it a "significant gas discovery" of 4.5 Tcf of high-quality gas with 99% methane content. The field was discovered in 2011, and an appraisal well was drilled in 2013. The consortium filed an updated development plan in 2015, and is making progress in its discussions with potential buyers.

"We see synergies for Aphrodite with Leviathan in some cases, such as using existing LNG facilities in Egypt," Mr. Kishenbaum said. "We hope to have more news on the [Aphrodite] progress this year, and we are optimistic about its development."

EMGC 2017 continues. Stay tuned for more exciting coverage, including the remainder of Day 1. EMGC 2017 is taking place in in Nicosia, Cyprus from March 14–15.

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