East Med's best is yet to come
The East Med has enjoyed deep water success over recent years and there are new developments to watch out for
From being something of a backwater in energy terms, the Eastern Mediterranean is suddenly the place where the majors want to be.
The game changer was the huge Zohr gasfield discovery off Egypt in a previously unknown carbonate layer. Eni says Zohr contains at least 30 trillion cubic feet of natural gas and the company is continuing to build production towards its 2020 capacity target of 2.7bn cubic feet a day. Eni is also preparing to carry out exploratory drilling at the Noor field, off Sinai, amid speculation that another Zohr-size discovery awaits.
Edison also holds deep-water blocks off Egypt, North Thekah, North Port Fouad and North East Hapy. The company is expected to begin drilling in North Thekah next year.
Egypt is increasingly attractive to international firms because it has opened up its entire gas sector to private investment. This has eased the way for a deal that could see gas from Israel's giant Leviathan (21 trillion cf of producible gas) and Tamar (10 trillion cf) offshore fields reaching Egypt. Noble Energy and Israel's Delek, operators of the two fields, have signed an agreement in principle with private buyers in Egypt to supply 226bn cf of gas over a 10-year period.
At the same time, Energean is developing the Karish and Tanin fields, where 2.4 trillion cf of gas had been discovered but not developed. The Greek firm has concluded agreements with private Israeli power producers for the supply of a total of 148bn cf a year for 15 years. First gas is expected in 2021.
So enough has happened already to make the East Med seem highly attractive to would-be investors. "The region has been shown to be prolific in world-class deep-water natural gas prospects," says East Med energy analyst Charles Ellinas. "The fact that the Calypso find offshore Cyprus, with 6-8 trillion cf gas, is the biggest so far worldwide in 2018 is indicative of this potential."
The Calypso discovery, made by Eni in Block 6, is further proof of how interest in Cyprus's deep-water offshore has soared post-Zohr. All eyes will be on Block 10 later this year when ExxonMobil, partnered by Qatar Petroleum, begin exploration drilling. Further to the east, Noble Energy and partner Shell are renegotiating their production-sharing agreement with the Cyprus government. Their aim is to develop the Aphrodite find (discovered in 2011) and build a pipeline to take gas to Shell's Idku liquefied natural gas plant in Egypt.
A likely newcomer to the East Med deep-water party is Greece. ExxonMobil, with Total, have been given the go-ahead to explore in two blocks off Crete. With geology similar to that of Zohr, hopes are high. But challenges have yet to be overcome, primarily the fact that the average water depth is more than 2,000 metres. The start of drilling is some six years away.
While optimism permeates the East Med, it's not all good news. Geopolitics could be a spoiler. For example, Turkey objects to firms drilling in Cypriot waters while the island remains divided. In February, its navy blocked an Eni drill ship trying to reach Block 3. Turkey has threatened similar action in the future.
Then there's the economic factor. "The challenge is the cost of producing this gas and getting it to markets," Ellinas says. "With a world awash with energy sources, keeping prices down, East Med must remain competitive if it's to benefit from this resource. On the other hand, the deep-water finds mean regional energy markets will be well supplied with natural gas for years to come."
Egypt's key gas infrastructure Source: Petroleum Economist