Exxon’s Cyprus gas discovery adds another giant to East Med collection

By Michele Kambas and Sabina Zawadzki

ATHENS/LONDON (Reuters) – ExxonMobil (NYSE:) added another giant gas discovery to the east Mediterranean region after finding a gas-bearing reservoir offshore Cyprus but infrastructure bottlenecks and geopolitical disputes mean output from the field could be far off.

Exxon, together with partner Qatar Petroleum (QP), estimated in-place gas resources in the reservoir at 5 to 8 trillion cubic feet (tcf) of gas, similar order of magnitude to the Aphrodite and Calypso gas finds nearby, also in Cypriot waters.

The region’s gas output has begun to soar thanks to older discoveries finally bearing fruit. Israel’s Leviathan field, found in 2010 with around 22 tcf, will fully come online in November, though the 2015 Zohr discovery offshore Egypt with up to 30 tcf is already producing.

“This is the biggest find so far in Cyprus and based on some official data it is one of the biggest finds worldwide in the past two years,” Cypriot Energy Minister Yiorgos Lakkotrypis said.

Exxon’s Vice-President of Exploration for Europe, Russia and the Caspian, Tristan Aspray, said the company will now analyze data from drilling the reservoir, known as Glaucus-1. Exxon owns a 60 percent of the block, Block 10, with QP holding the rest.

Industry consultants Wood Mackenzie said they estimated recoverable resources of Exxon’s field to be 4.55 trillion cubic feet. That compares to its 6.4 tcf estimate for Calypso, found by Italy’s ENI (MI:) and France’s Total last year.

“Glaucus is a giant. It will be one of the biggest discoveries of the year,” Senior Research Analyst for Europe, Robert Morris, said. “(It) maintains the East Mediterranean’s position as one of the world’s premier exploration hotspots.”

LNG EXPORTS

The new discoveries have prompted Egypt, which has the ability to liquefy and regasify gas for LNG trade, to try to establish itself as a regional hub. It also provided a degree of energy security to Israel.

In Cyprus, development could be complicated by the internationally-recognized government’s dispute with Turkey, which does not recognize its right to develop the resources.

Meanwhile, Cyprus’ Aphrodite, which was first discovered in 2011, has been delayed as block stakeholders Noble Energy (NYSE:), Delek and Royal Dutch Shell (LON:) renegotiate their production sharing agreement with the government.

A development concept for Aphrodite is also still being debated, with some now advocating that the gas be sent to Egypt to be liquefied and exported onwards on LNG tankers.

Morris said commercialization of the Exxon field was also “not straight forward”.

“There is limited space in local markets and existing export infrastructure. And the volume is insufficient for ExxonMobil and its partner Qatar Petroleum to feed a two-train LNG plant – which had been the partnership’s goal,” he said.

He said Exxon may instead look to cooperate with Calypso finders Eni and Total. “A joint development would potentially serve up enough gas to support a greenfield LNG development.”

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