No gas drilling for two years. More time for Cyprob?

GAS-CYPRUS-APHRODITE

The gas bonanza seems to be over before it even started. With either dry wells or nothing worth drilling for, Noble’s Aphrodite in Block 12 is the only exploitable field for the foreseeable future.

Energy Minister George Lakkotrypis announced yesterday that after drilling to a depth of 5,485 metres, the Eni-Kogas consortium had “not identified exploitable hydrocarbons” in the Block 9 field.

The Italian-Korean consortium has asked for two more years to examine the data – understood to mean it will not be conducting any more drilling for two years.

This is the second dry well for Eni-Kogas. The Onasagoras well was announced dry in December. Globally the rate of success for drilling is only 20%.

Total not drilling

Financial challenges at France’s Total mean that it has no intention of drilling either, the Cyprus Weekly has learned.

On March 18, the government trumpeted an updated gas agreement with the company, following an announcement in January that after conducting research, Total “was having difficulty finding any structures” and “had not found any target to drill”.

Lakkotrypis was somewhat vague last week on the details, saying that they were “extending the exploration programme in different areas” but adding, “I’m not going to say which”.

The Cyprus Weekly has learned via two independent sources that the reason for the minister’s lack of detail is that Total has no intention of drilling in Blocks 10 and 11 while oil prices remain so low.

“The likelihood of them spending billions in a remote corner of the Easter Mediterranean is close to the square root of zero,” said one industry source.

Financial trouble

A key reason why Total will not be drilling is that it is going through a severe cost-cutting exercise.

Total is reported to have paid $2bn to secure 10% in a new 40-year concession in Abu Dhabi. However, other oil majors walked away from the deal, finding it too expensive in the current price environment. In response to falling oil prices, Total has slashed its exploration budget by 30%.

More time for Cyprob?

With no drilling expected any time soon, the ‘window of opportunity’ diplomatically referred to last week by the Special Adviser to the Secretary-General on Cyprus, Espen Barth Eide, has suddenly grown from Eni’s three-month “technical pause” to two years.

While all involved have been careful to avoid any official link between separate developments, talks to resolve the decades-old Cyprus problem are expected to resume after the pause in drilling the expiry of the Navtex (notice to mariners) issued by Turkey for Cypriot waters on April 6 and the Turkish Cypriot leadership elections on April 17 and 24.

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