“Glaucus”: Cyprus’s gas deposit

The results of American ExxonMobil’s drilling in block 10 of the Cypriot EEZ were exceptional, according to Nicosia’s announcements, with energy minister, George Lakkotrypis, saying that the deposit contains 5-8 trillion cubic feet.

Mr. Lakkotrypis said that the biggest discovery of natural gas in Cyprus and globally in the last two years took place in the target “Glaucus” of block 10 in the country’s EEZ, adding that quality of the deposit is very high.

Mr. Lakkotrypis explained that despite the fact that there were no discoveries at the first target in block 10, called “Delphyni”, the final results prove the country’s role as a significant source of supply for the EU.

As he mentioned, these findings are a good basis to explore the prospect of building an LNG plant in Cyprus, however even greater quantities will be needed.

On his part, ExxonMobil’s vice chairman, Tristan Asprey, expressed his enthusiasm for “Glaucus’s” results, saying that the company will continue to analyze them. Mr. Asprey mentioned during a press conference that this is the beginning of a great journey for future development and he spoke of the possibility of new discoveries in block 10 and other blocks of the Cypriot EEZ. Furthermore, he expressed ExxonMobil’s interest for even wider exploration in the Eastern Mediterranean, underlining that block 10 is not disputed, while commenting on Turkey’s usual provocations.

The announcement of Cyprus

According to the Cypriot Republic’s formal announcement: “the well encountered a gas-bearing reservoir of approximately 436 feet (133 meters). Based on preliminary interpretation of the well data, the discovery could represent an in-place natural gas resource of approximately 5 trillion to 8 trillion cubic feet. Further analysis in the coming months will be required to better determine the resource potential. Drilling in target “Delphyne-1” superseded “Glaucus-1” and took place between November 2018 and January 2019 without locating a viable concentration of hydrocarbons”.

ExxonMobil’s announcements

In its own announcement, American ExxonMobil characteristically said:

The well, located in Block 10, encountered a gas-bearing reservoir of approximately 436 feet (133 meters). The well was safely drilled to 13,780 feet (4,200 meters) depth in 6,769 feet (2,063 meters) of water.

Based on preliminary interpretation of the well data, the discovery could represent an in-place natural gas resource of approximately 5 trillion to 8 trillion cubic feet (142 billion to 227 billion cubic meters). Further analysis in the coming months will be required to better determine the resource potential.

“These are encouraging results in a frontier exploration area,” said Steve Greenlee, president of ExxonMobil Exploration Company. “The potential for this newly discovered resource to serve as an energy source for regional and global markets will be evaluated further.”

Glaucus-1 was the second well in a program of two wells in block 10. In the first well in Delphyne-1 no viable quantities of hydrocarbons were discovered.

Block 10 is 2,572 sq.km. ExxonMobil Exploration and Production Cyprus (Offshore) Limited is the operator and holds a 60% share in the block. Qatar Petroleum International Upstream O.P.C. holds 40%.

It should be mentioned that drillings in Glaucus and Delphyne were conducted by the ExxonMobil Exploration and Production Cyprus (Offshore) Limited and Qatar Petroleum International Upstream OPC partnership.

Glaucus’s discovery and the LNG plant

The discovery of a potential deposit in Glaucus constitutes a very important turning point in the course of the Cypriot exploration program and the potential geopolitical upgrade of Greek Cypriots, said Theodore Tsakiris, professor of geopolitics and energy in the University of Nicosia and director of ELIAMEP’s energy course.

The announced results are a first order of size, which is smaller than the respective evaluation for “Aphrodite’s” deposit. We then spoke of a deposit of 7-10 tcf with a 50% chance of discovering 9 tcf and a 75% chance of finding 7 tcf. In Glaucus’s case we are talking about 5-8 tcf, a 50% chance of 6 tcf and a 75% chance of 5 tcf. The chances of confirmation are increased as the size of the potential deposit becomes smaller.

This evaluation is not the final size of the deposit and for that exact reason a confirmative drilling will be required to form a complete picture about the size of the possible deposit and this may take time. The confirmative drilling for Aphrodite took place after a two year delay!

The confirmative drilling usually reduces the original scope of the initial exploratory drilling. In the case of Aphrodite, the result of the initial drilling (September, 2013) showed a deposit of 5-8 tcf with a more probable average quantity of 6 tcf. Finally, in August 2018 the government admitted that the deposit only contains 4 tcf of natural gas, while the companies holding the rights to the field had already announced in 2016 an average of 4.5 tcf.

A similar, but not as lengthy evaluation process will follow in the case of Glaucus. The deposit’s evaluation, however, does not mean the end of the process. The time between the initial discovery and the beginning of production is 4-7 years on average. This is the global average, especially when we are talking about medium size underwater deposits. Practically, we will not likely see gas from Glaucus before 2025-2026, according to Mr. Tsakiris.

“It is important to understand that the beginning of production is not something immediate and for that reason it would be a great error to follow propositions saying that Cyprus should not proceed in the selling of gas to Egypt in 2022 and wait until 2026 to see whether we have enough quantities to build an LNG plant”, he notes.

Besides, the discovery of deposits in itself does not guarantee the construction of an LNG plant. In any case, the geographical distance between Aphrodite and Glaucus is such that it makes their common development especially problematic even if cumulatively they offer 10 tcf of gas.

These 10 tcf represent the minimal quantity of gas to support an LNG plant in Cyprus that could exceed 10 billion dollars in cost. Plants are not constructed in a day and the global average for their construction time is between 3 and 4 years, which means that whoever wishes for an LNG plant will have to start now in order for it to be complete by 2022, but quantities from Glaucus will only follow 3-4 years later than that.

“If the block 12 partners (Shell, Delek, Noble) wanted a plant, they would have done so without waiting for anyone to propose it. But why do that if it is not economically viable, when there is already a huge plant at a distance of 400km in Idku, Egypt?” he wonders in another part of his intervention. A plant could be seriously discussed and possibly forwarded if ExxonMobil-Qatar Petroleum discovered in “Delphyni” the 15 tcf they were expecting, but unfortunately they found nothing.

If Aphrodite’s quantities are finally sold in Egypt – and there is no other option – it will take other discoveries apart from Glaucus to acquire the least possible quantities of gas to begin the process of evaluating a plant.

The completion of the permitting process for block 7 to the Total/Eni partnership will accelerate the works for a second drilling in “Calypso”, which extends in block 7. This should be the government’s priority and the first drilling to take place in the EEZ after Glaucus in 2019.

Even more important is to “lock” Aphrodite’s exports to Idku, since the commercial window of opportunity is closing because of the rise of Egyptian production forwarded for liquefaction and they will not wait for Nicosia for ever.

Ankara’s stance is a question mark

A crucial question arising from Cypriot energy developments concerns Turkey’s stance. Already, Turkish energy minister, Fatih Donmez, said to Anadolu that Ankara will attempt to discover gas in Cyprus, while he sent a message to Athens and Nicosia by saying that “I wish the opposite side could see this reality and agree to a model with both sides benefiting”.

Donmez said that Cyprus, Israel and Egypt conduct natural gas exploration in the Eastern Mediterranean, adding that “we know that the region contains possible energy deposits and -God first- with our first exploration we will also succeed”.

He added that “we do not think it is right that the Greek-Cypriot side acts as the only sovereign in the island and manages by itself the energy sources, enhancing its economy. There is a Turkish-Cypriot community and its rights need to be protected fairly”. The Turkish energy minister underlined: “Of course, if the two leaders sit and find a solution we will be satisfied. But right now we do not think it is right for the Greek-Cypriot community to claim its own zones and say that it will unilaterally explore. Because, as you know, the “Turkish Republic of Northern Cyprus” on the other hand did the same by claiming its blocks and authorized Turkey, therefore we also say we are going to explore there. That is my hope, of course. I wish the opposite side sees this reality and agrees to a model where both sides win”, adding that “we do not have a claim on anyone’s ground or fortune, but in our fields we will conduct the exploration and no matter who says what, we are closing our ears”.

Concerns about this Turkish mobilization are obvious among all protagonists in the region, as shown by the US undersecretary of state, Matt Palmer, calling for restraint of everyone involved in the Cypriot EEZ. Athens monitors developments from afar. At no level is there an estimation that Turkey will proceed with some sort of an aggressive act, especially in the Aegean.

As a matter of fact, defence minister, Ev. Apostolakis, described the wider geopolitical situation during a closed-doors meal with about 20 businessmen under the auspices of the Greek-American chamber of commerce. According to well informed sources, Mr. Apostolakis explained to his counterparts the factors according to which he believes that Turkey will not move aggressively and they are primarily connected to the international environment.

Another parameter is that of renewed negotiations for the Cypriot issue. Everything points to Ankara pushing for the beginning of an process that will keep away from the table the abolishment of its interventional rights as a guaranteeing force. Much can be said about the formula and the date of a possible renewal of negotiations. There is however a constant. Greece is now in an election year and the current government could not manage another round of Cypriot talks.

What “Glaucus” means for Greece

In Greece, they are searching the market for prospects for new hydrocarbon drillings after the successful end of the “Glaucus 1” drilling by ExxonMobil-Qatar Petroleum in block 10 of the Cypriot EEZ, which led to a deposit of up to 8 tcf. Specialists said that the great discovery has or may have Greek repercussions.

ExxonMobil, after discovering “Glaucus”, appeared once more willing to continue drillings in the Cypriot EEZ, while also mentioning a new drilling in 2020. The biggest oil company in the world also participates in the Total-HELPE partnership, which has undertaken the exploration south and southeast of Crete. The result in the Cypriot EEZ is estimated to clear the way administratively for necessary permits on behalf of the Greek side.

Furthermore, it is highlighted that any new deposit discovered in the region of SE Mediterranean and especially in Cyprus, Israel and Greece, advances the prospect of building East Med, an ambitious and particularly expensive project that is supported by these countries, Italy and the EU Commission. The pipeline is part of the EU’s effort to reduce its dependence on Russia when it comes to natural gas.

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