Cyprus Hopes For Mega Exxon Elektra Find To Jolt Its Gas Sector To Life

Speaking at last month’s Energy Intelligence Forum in London, ExxonMobil’s outgoing upstream chief Liam Mallon ranked the East Med alongside Guyana as the two biggest new hydrocarbon provinces globally of the last three decades.

This helps explain the rapid recent growth in the US supermajor’s exploration position in a region where it has no current output. Exxon was awarded blocks 10 and 5 offshore Cyprus in March 2017 and November 2021 respectively, making the Glaucus find in the former on 2019 (MEES, 1 March 2019). It has since added three large Egyptian Mediterranean blocks, with QatarEnergy (40%) partnering Exxon (60%op) at all of the key acreage in both countries (MEES, 17 May).

And with Glaucus, the only find to date, considered borderline economic – an initial 5-8tcf reserves estimate was revised down to 3.2tcf following a 2022 appraisal well (MEES, 18 October) – Exxon sees its imminent drilling campaign as make or break time for snagging a role as a key regional producer.

Exxon and QatarEnergy plan to drill three wells in total by mid-2025 using the Valaris DS-9 drillship.

WILL NEFERTARI SHINE?

First up is the relatively straightforward Nefertari-1 on Egypt’s North Marakia block which is set to begin in the coming days and take around a month. Located in the frontier ‘West Med’ region, Exxon’s first ever well offshore Egypt will be drilled relatively close to shore. Though deepwater at around 1,500ms, it is within relatively easy potential tie-back distance of BP’s underutilized WND infrastructure near Alexandria, lowering the barrier to commerciality for a well that targets both oil and gas. Drilling of Chevron’s Khendjer-1, the WestMed’s second ever well on the North el Dabaa block just to the west, is ongoing (MEES, 8 November) with QatarEnergy recently farming in for 23% and oil the key target (MEES, 15 November). These West Med blocks are seen as a geological extension of Egypt’s Western Desert onshore, the country’s key oil producing region.

ELEKTRA: WILL SPARKS FLY?

But drilling of Elektra on Cyprus Block 5, which is slated to begin in mid-January immediately after Nefertari, has the potential to be a much bigger find, MEES understands.

Elektra is set up as a play-opening wildcat, the first to be drilled in the Herodotus Basin which extends into Egyptian waters in approximately 2,500 meters water depth.

“All the ingredients appear to be there” for a “25-30tcf” gas find, a source involved in the drilling campaign tells MEES. Though MEES understands that the pre-drill probability of success is pegged at 30% the source says that “we are cautiously optimistic.”

The Nile Delta “source rock is widespread in the Eastern Mediterranean. We have identified the turbidites… nice sandy streams so there is evidence of existence of a reservoir,” the source says. Extensive seismic has been shot over the region and while “it is very difficult to identify the reservoir with seismic, nonetheless we have hopes that there should be good reservoirs in the area,” they add.

The Herodotus Basin shares similar characteristics with the Levant Basin further east which boasts Israel’s 23tcf Leviathan and 14tcf Tamar finds and Cyprus’ own 3.5tcf Aphrodite. Given the similarities, “Exxon will be hoping to duplicate that success” a regional geoscientist tells MEES whilst cautioning that “the challenges it faces are that everything is deeper and more remote.”

Leviathan was discovered in 1,500ms water depth while Tamar and Aphrodite lie at around 1,700ms. The Israeli fields are located 130km and 80km offshore respectively while Aphrodite is 160km from Cyprus. US major Chevron, which operates all three fields following its 2020 takeover of compatriot Noble, was able to find both domestic and export markets for Leviathan and Tamar but with Cyprus having no gas industry of its own, development here has stalled.

Exxon’s Glaucus on Block 10 is 155km offshore, and with the Elektra well to be drilled in the southern portion of Block 5, this could be up to 200km offshore in a water depth of around 2,500ms.

TURKEY TROUBLE

MEES learns that Exxon and QatarEnergy’s decision to drill the southern portion of Block 5 is linked to Turkey’s overlapping continental shelf claims on the northern part of the acreage (see map).

Cyprus Offshore Blocks & Gas Discoveries

The presence of QatarEnergy in the block amid Doha and Ankara’s close ties, provides a likely deterrent against any potential Turkish harassment of vessels offshore Cyprus. Turkey has often shot seismic off the southern coast of Cyprus, and indeed in 2019 and 2020 drilled wells in locations corresponding to Cyprus Blocks 6 & 7 (MEES, 9 October 2020). Turkish warships in 2018 blocked Eni from drilling on Block 3 (MEES, 16 February 2018) in a move it said was linked to defending the interests of the Turkish Cypriot community who mostly live on the northern third of the island which has been occupied by Turkey since 1974.

Beyond the discovery of Aphrodite, 13 years ago in late 2011, Cyprus has seen four further significant gas finds, though with Glaucus the largest at 3.2tcf, none has been slam-dunk commercial (see table).

The four discoveries made since 2018, including Glaucus, are located in what energy minister George Papanastasiou calls the “South-West Corridor” all in carbonate plays, similar to Eni’s Zohr on the other side of the maritime border with Egypt.

And it is Eni that made those discoveries after Zohr became the play opener in 2015, although the field has since 2021 been beset with water breakthrough issues (MEES, 11 June 2021). In 2018 it made the 1tcf Calypso find, following that in 2022 with 2.5tcf Cronos and 2-3tcf Zeus, all on Block 6 (MEES, 23 December 2022).

PEGASUS: LOW-RISK, MODEST REWARD

The Valaris DS-9 will follow Elektra up with the Pegasus exploration well on Block 10, but close to Cronos and Zeus on Block 6, MEES understands.

Here the chance of success is considered much higher, but the pre-drill reserves estimate of around 1tcf is much lower, MEES understands. “The reason the partners are drilling the well is because they’re on the hook as part of their contract to drill another exploration well and this one gives them a high probability of success although even if gas is discovered it is unlikely to be developed as a standalone project,” the drilling source says.

Block 10’s license is due to expire in April next year but will be extended before that date Mr Papanastasiou tells MEES, while Block 5’s license, which is due to expire at the end of this month, will also be renewed as the firms enter the second two-year exploration phase.

If Exxon makes a significant discovery at Elektra, even one substantially smaller than the pre-drill estimate, then long-stalled plans for an LNG liquefaction plant at Vasilikos on the south coast could be revived (MEES, 25 January 2013). Cypriot officials have said that 15tcf of gas could justify such a plant but questions remain over Nicosia’s ability to pull off a multi-$bn project of that nature.

Indeed recent LNG-focused plans have focused on potential imports rather than exports, though neither the FSRU nor receiving infrastructure envisaged under a 2019 deal are close to entering service (MEES, 2 August).

While the FSRU is due to sail away from the Cosco Shipyard in China “any day now” according to Mr Papanastasiou, the latest estimate for completion of the onshore receiving terminal and jetty is now end-2025.

CRONOS: TIME TO SHINE?

For now, plans for both Chevron’s Aphrodite and Eni’s Cronos, the two most advanced projects, target tieback to Egyptian infrastructure. Cronos appears to have stolen a march on Aphrodite despite being discovered 11 years later with operator Eni and 50:50 partner TotalEnergies due to file a development plan before the end of 2024. Mr Papanastasiou estimates first gas in 2027.

Eni’s decision to tie back the field 60km to the now under-utilized Zohr facilities appears to be the leading option here despite TotalEnergies recently tabling a proposal for a nearfield floating LNG (FLNG) facility (MEES, 18 October).

This notwithstanding, Cypriot officials have grown increasingly exasperated with what they say is the French major’s lack of engagement with its Cyprus assets in recent years. MEES understands that a potential taker for Total’s 50% stake in the key Block 6 could come in the shape of BP and Adnoc whose Egypt focused JV is due to be finalized over the coming weeks (MEES, 29 November). Cypriot officials are also hopeful that the BP/Adnoc JV could farm in to Aphrodite, MEES understands.

NICOSIA TAPS BP/ADNOC JV

Should Total decide to sell its 50% Block 6 stake this could spell the end for the major’s 12 years in Cyprus given that its six other licenses are all set to expire next year.

BP and Adnoc have taken a keen interest in Cyprus in recent months, with high-ranking officials from both firms visiting the island in August following their failed bid to take 50% of Israel’s NewMed Energy, which holds 30% stake of Aphrodite as well as 45.34% of Leviathan (MEES, 2 August).

But a farm-in to Aphrodite would require Cyprus to lift its notice of breach of contract that it gave the partners in August (MEES, 30 August). That process was subsequently frozen for three months in September as Chevron attempts to provide Nicosia with the details of its newly filed development plan, that would see the field tied back to Port Said (MEES, 20 September).

If Cyprus accepts Chevron’s new plan, first gas could potentially come in 2030 although sources that have been following the Aphrodite saga believe there will be more twists and turns to come.

Local interest in Cyprus’ gas fortunes has waned in recent years, after the hype that proceeded the Aphrodite discovery in 2011. Exxon’s Elektra well and positive developments regarding Cronos and Aphrodite could revive those hopes, with much riding on the next few months.