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The Zohr effect

Hopes are high of fresh finds in the area

What a difference a day makes. When Eni announced the Zohr discovery in 2015, the whole complexion of the East Mediterranean play changed. By that time, for example, the Cyprus offshore had begun to lose its lustre. The Aphrodite field in Block 12, discovered in December 2011 with reserves of 5 trillion cubic feet of natural gas, remained (and remains) undeveloped. Total withdrew from Block 10, on the maritime border with Egypt in 2015, having given up hope of a commercial discovery, two years after being awarded the licence.

But when the third Cyprus licensing round was held in 2016, international oil companies were eager to grab Block 10 and others near the Zohr field. "There's no doubt that the Zohr geological model created renewed interest in Cyprus offshore blocks and led to the success of the third licensing round," says Charles Ellinas, an energy analyst focused on the Eastern Mediterranean. In that round, Eni (50%) and Total (50%) were awarded Block 6; Eni (100%) Block 8; and ExxonMobil (80%) and Qatar Petroleum (20%) Block 10.

While drilling in Block 11 (Eni and Total 50% each) adjacent to Zohr in 2017 proved disappointing, there's still hope that a major find is around the corner. "Indications for more finds similar to Zohr are good," Ellinas believes. "Already, drilling in Block 6 has led to a gas discovery [Calypso], even though the size of the find is still to be confirmed. What has been confirmed, though, is that the reservoir is in a carbonate formation and has similarities to Zohr."

Cyprus might not be the only beneficiary of the Eni breakthrough in 2015. There are strong indications that more, similar finds may lie off Egypt and to the west and southwest of Crete. A new licensing round for 11 offshore and onshore blocks will be held in Egypt later this year and bidding is in progress in Greece. When drilling begins in Lebanon's offshore Blocks 4 and 9 (Eni and Total 40% each, Novatek 20%) in 2019, the Lebanese will learn whether the Zohr effect will touch them too.

Less enchanted with the Zohr discovery is Israel, which is struggling to find markets for its giant offshore Leviathan gasfield (reserves of 21 trillion cf). Israeli energy officials had hoped that Leviathan gas might be exported to Egypt, for the domestic market and liquefied natural gas exports. The news of the Zohr discovery and many others offshore and onshore in Egypt appeared to snuff out that possibility. In any event, Egypt is insistent that it won't allow the import of Israeli gas before a legal dispute between the two countries is resolved.

For East Med countries in general, Zohr could be a catalyst for the development of Egypt as an energy hub, drawing in volumes from several offshore finds in the region and exporting LNG from the country's two plants. Might this be a solution for Aphrodite, which has languished for eight years awaiting a market? Ellinas isn't optimistic. Zohr, he says, "makes it more difficult for Aphrodite gas to be exported to Egypt, for either the domestic market or LNG. But in reality, it's always been challenging commercially due to the high cost of doing so and low global gas prices. These are making monetisation of Cypriot and Israeli gas a big challenge."

Source: Petroleum Economist

This article is part of a report series on Egypt. Next article is: Full speed ahead for Egypt's gas

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