East Med rides the waves
Egypt, Israel and Cyprus all saw progress in their ambitions to develop the prodigious East Med basin in 2018
The one-time backwater that was the East Med continued its transformation into one of the world's most prospective natural gas areas in 2018, with Egypt pushing the envelope through major projects and Israel also looking to get in on the act with a bold plan to send gas to its neighbour—and one-time supplier—Egypt.
Italy's Eni, which discovered the giant Zohr field, which contains some 30 tr cf of gas, was reported earlier in the year to be preparing to carry out exploratory drilling at the Noor field, off Sinai, amid speculation that another Zohr-size discovery was in the offing.
Interest in Egypt piqued as a result of the increasingly attractive terms on offer to international firms. This helped smooth the way for a deal that could see gas from Israel's giant Leviathan (21tr cf of producible gas) and Tamar (10tr cf) offshore fields reaching Egypt. Noble Energy and Israel's Delek, operators of the two fields, signed an agreement in principle with private buyers in Egypt in 2018 to supply 226bn cf of gas over a 10-year period.
In February, Noble and its partners reached a deal with Egypt's Dolphinus Holdings, a group of private sector companies, to sell gas from offshore Israel to Egypt. Though politically risky for Egypt, where dealings with Israel have historically been taboo, this has the backing of the Egyptian government and after years of halting progress, this now looks to be a game changer for the region.
Egypt saw some production developments in 2018. In August, SDX Energy announced that a successful production test had been conducted at its SD-3X appraisal well at South Disouq, Egypt. The well flowed at a maximum rate of 16.1mn cf/d during an 8-hr clean-up period.
Improving ties between Cairo and Tel Aviv should point to a stronger outlook for the region's hydrocarbon sector
In September, production capacity at Eni's Zohr project, developed in conjunction with Russia's Rosneft, BP and the UAE's Mubadala, together with Egyptian companies, was increased more than 25pc to greater than 2bn cf/d. The increase was achieved through the commissioning of the fifth gas train at the site, as well as start-up of the second export pipeline and new wells. The field is expected to reach production capacity of 2.7bn cf/d by the end of 2019. During first-half 2018, 109.5bn cf of gas were produced at the field.
Greece's Energean was meanwhile developing Israel's Karish and Tanin fields, where 2.4tr 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.
The year started on a strong footing when Eni and Total announced yet another gas discovery in the Eastern Mediterranean in February, located off the coast of Cyprus. The "Calypso 1" well suggests an extension of the Zohr like play, according to Eni—which was also active in Lebanon, where it signed deals to explore off the country's coast.
Lebanon's involvement is still low key, and it is held back by difficult geopolitics—traditionally the bane of the East Med's development prospects. Antipathy between governments in the region could deter drilling. Turkish warships reportedly stopped Eni from drilling in Cypriot waters in February due to its non-recognition of the Greek Cypriot government. Lebanon and Israel have yet to reach agreement over the maritime border area, with some of Lebanon's offshore blocks deemed by Israel to encroach into their maritime zone.
Despite the difficult politics, the apparent improvement in ties between Cairo and Tel Aviv should point to a stronger outlook for the region's hydrocarbons sector. Thanks to a proliferation of discoveries, the increase in production from both Israel and Egypt, and an emerging export option in Egypt, the Eastern Mediterranean is firmly on course to develop into a significant gas hub and source of gas exports.