Enverus Blog

Insights across the energy value chain

 

Following a quiet summer, E&P activity in the Eastern Mediterranean is gathering steam towards the end of 2018. Several significant exploration wells are planned in the near future, and acreage offerings are being prepared across the region.

 

Cyprus

To date, six exploration wells have been drilled offshore Cyprus, three of which have been successful. Noble Energy drilled one well in 2011 and one in 2013, discovering and confirming gas in the Aphrodite field (estimated at 4.5 Tcf recoverable). Eni targeted the same play in Block 9 in 2014 and 2015, but both wells came up dry. In February 2018, the Italian company attempted to drill a further well on the play in Block 3; however, rig operations with the Saipem 12000 were impeded by Turkish military vessels, which prevented the drillship from reaching the wellsite.

Blocking the ship was the latest twist in decades-old feuds and overlapping, contested claims in the eastern Mediterranean. Turkey and its vassal state, the Turkish Republic of Northern Cyprus (TRNC), object to the Republic of Cyprus (RoC) drilling in waters that the RoC claims under international maritime law. The RoC ratified the UN Convention on the Law of the Sea (UNCLOS) in 1988 and proclaimed its EEZ, in conformity with UNCLOS, in 2004.

Turkey is the only member state of the UN that does not recognize the RoC, and it is not a signatory to the UNCLOS. In addition, Turkey considers that a recent agreement between RoC and Egypt, which ratifies the delimitation of their respective economic waters, is null and void.

Just before this hostile episode in the Cyprus-Turkey relations, Total and Eni had some success in chasing the Zohr play in the RoC EEZ. The Total-operated Onesiphoros West 1 well on Block 11 found non-commercial gas, whereas the Eni-operated Calypso 1 NFW on Block 6 was announced as a gas discovery. Calypso reportedly contains 6-8 Tcf (assumed to be GIIP); Eni plans an appraisal program. Further exploration drilling will be carried out by ExxonMobil, with the company planning to conduct a two-well back-to-back drilling campaign on Block 10 in late 2018 to early 2019.

While there had been talk of another offshore bid round, the Cypriot cabinet has decided to go a different route this time around. In early October 2018, it invited energy companies already licensed to explore offshore Cyprus to submit their expressions of interest (EOI) for Block 7 (Herodotus Basin). The invitation concerns companies with concessions bordering the open block, namely Eni (Blocks 6 and 8), ExxonMobil (Block 10), and Total (Block 11), which were given one month to submit their EOIs. Yiorgos Lakkotrypis, Minister of Energy, Commerce, Industry and Tourism, stated that the government chose to offer the block in this way instead of another licensing round as “there are particular geological reasons related to the Calypso discovery.” The Minster’s statement, and the fact the Calypso 1 NFW is located in the south-east corner of Block 6, suggest that the Calypso structure extends into neighboring concessions.

Figure 1. RoC demarcated offshore blocks and exploration wells. Also shown are the RoC’s proclaimed and partly agreed EEZ (light blue line), the TRNC’s proclaimed EEZ and outline of demarcated blocks (red line), the outer limits of the continental shelf as claimed by Turkey (orange line), as well as Turkey’s offshore exploration wells. *

Figure 1. RoC demarcated offshore blocks and exploration wells. Also shown are the RoC’s proclaimed and partly agreed EEZ (light blue line), the TRNC’s proclaimed EEZ and outline of demarcated blocks (red line), the outer limits of the continental shelf as claimed by Turkey (orange line), as well as Turkey’s offshore exploration wells. *

 

Turkey

In Turkey, more than a dozen wells have been drilled in the Eastern Mediterranean since 1966, with the last being drilled in 2014. None has been successful so far, apart from some oil and gas shows. While the shows suggest a working petroleum system, it is not a very good track record. However, it must be said that offshore exploration drilling has been limited to near-shore zones in the Gulf of Alexandretta and the Gulf of Mersin, leaving large areas unexplored.

In an effort to extend exploration in the Eastern Mediterranean, the Turkish state oil company (Türkiye Petrolleri Anonim Ortaklığı – TPAO) has conducted extensive seismic acquisition programs over the last few years. In 2013, TPAO bought an 8-streamer 3D seismic vessel from Polarcus (the “Samur”, rechristened the “Barbaros Hayreddin Pasa”). Since then, it has been acquiring data in the Black Sea as well as the Mediterranean. In the Eastern Mediterranean, the vessel has concluded at least six separate surveys, with another currently ongoing. Surveys have been acquired to the northeast and southwest of Cyprus, parts of which cover disputed areas.

Turkish officials have stated on various occasions that the country will take steps this year toward exploring and drilling in the Mediterranean. To this end, TPAO acquired its own drillship, the “Deep Sea Metro II” (now renamed “Fatih”), in late 2017, and has recently signed a two-well contract with Rowan Companies for the “Rowan Norway” ultra-harsh environment jack-up rig.

While the Fatih drillship is expected to start drilling its first well, Alanya 1, in the Gulf of Antalya in late October or early November 2018, the planned drilling locations for “Rowan Norway” have not been revealed. However, the N-class jack-up has a rating of 120m, so it is likely to be targeting prospects in the aforementioned Gulf of Mersin. Some reports suggest that in future, TPAO will conduct drilling operations in contested waters around Cyprus. For the ultra-deep water “Fatih” drillship with a rating of 3050m, the water depths in the Eastern Mediterranean present no problem, allowing it to drill on any of the demarcated Turkish or TRNC offshore blocks.

Turkey and TRNC signed a continental shelf delimitation agreement in September 2001. Turkey’s claim on the island’s EEZ partly overlaps with the RoC’s blocks 1, 4, 5, 6, and 7. Ankara also supports the TRNC’s claims over RoC’s Blocks 1, 2, 3, 8, 9, and 13, where the self-declared TRNC has demarcated Blocks F and G. Should TPAO start drilling in any of these areas, it could lead to a serious geopolitical – or even military – crisis.

Lebanon

After the conclusion in 2017 of the delayed First Offshore Licensing Round, Lebanon is looking ahead to the drilling of the first exploration well. A JV between Total (40 percent), Eni (40 percent), and Novatek (20 percent), the only bidding group in the tender, signed E&P Agreements (EPA) for Blocks 4 and 9 in February 2018. Subsequently, Lebanese authorities approved exploration work plans submitted by the Total-led consortium, paving the way for operations; drilling is expected to begin in Q4 2019.

Total’s stated priority is to drill a first well on Block 4, with a second expected to follow on Block 9. With regards to Block 9, the company said that the consortium is fully aware of the Israeli-Lebanese border dispute in the southern part. However, given that the main prospects are located more than 25km from the disputed area, exploration drilling on the acreage will have no interference at all with any fields or prospects located close to the southern border.

Prior to the drilling of the first offshore well, Lebanon will open its Second Offshore Licensing Round. The Lebanese Petroleum Administration (LPA) announced preliminary details of the bid round in late July 2018, proposing a launch in late 2018. An unspecified number of blocks will be made available in a competitive and open tendering process, which is expected to conclude towards the end of 2019. At present, out of the ten demarcated offshore blocks, eight are unlicensed.

A four-month period, from January 2019 to the end of April 2019, has been reserved for companies to submit their applications for prequalification. Following this, companies will be required to form a consortium composed of three partners or more, with at least one prequalified as operator. Companies will be able to choose their partners and prepare their bids over a period of at least six months, from May 2019 to October 2019. Once bids are submitted, the LPA will evaluate them and prepare a recommendation to the Minister of Energy and Water and the cabinet by November 2019.

Figure 2. Lebanon’s exploration blocks. All or parts of the open acreage may become available in the Second Offshore Licensing Round. *

Figure 2. Lebanon’s exploration blocks. All or parts of the open acreage may become available in the Second Offshore Licensing Round. *

Israel

Following several offshore gas discoveries in Israel between 2009 and 2013, current activity is focused on bringing the discovered resources onstream. Noble Energy’s Tamar field (~10 Tcfg 2P) is the only producing offshore field, with Leviathan (~12.5 Tcfg 2P), also operated by Noble, currently under development. Leviathan’s first phase is around 64 percent complete, on track to deliver first gas by the end of 2019.

Plans are also in place for the development of the Karish and Tanin fields. Operator Energean’s Field Development Plan (FDP) envisages a two-phase approach, with the Karish field to be developed first. The FDP includes the drilling of three development wells at the Karish field and the installation of a new FPSO around 90 km from the shore. Development drilling is expected to start in Q1 2019, and first gas is planned for 2021. In a second phase, the Tanin field development will follow, with the drilling of six wells. These will also be connected to the FPSO.

In terms of exploration, Energean is the only operator with firm plans to conduct exploration drilling in the near future. It is planning to spud the Karish North near-field exploration well in March 2019, and has the option to drill a further exploration well on completion of the Karish development drilling campaign.

There may also be another offshore bid round. Israeli officials have announced on several occasions that a Second Offshore Licensing round was under consideration, with launch dates between late 2018 and early 2019. Following disappointing results in the first bid round, contractual modifications may be made to make the bid round more attractive. However, no details have been revealed yet.

Figure 3. Israel’s exploration and production licenses. The First Offshore bid round grid may be utilized for a Second bid round. *

Figure 3. Israel’s exploration and production licenses. The First Offshore bid round grid may be utilized for a Second bid round. *

Conclusion

The upcoming exploration activity in the Eastern Mediterranean provides risks and opportunities alike for the littoral states. Successful exploration campaigns could significantly help reduce the energy dependence for some of the countries and provide additional revenue to the public coffers. However, even if significant resources are discovered, it is not guaranteed these will be quickly developed. As shown in the cases of Aphrodite and Leviathan, border disputes and regulatory changes can result in long delays. In addition, should resources be discovered in disputed waters, it could potentially cause further geopolitical friction in the area, or worse.

 

* The maps are not an authority on international boundaries.

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