"Like a Christmas present, what was widely rumored and anticipated following recent Israeli hydrocarbon discoveries, Houston’s Noble Energy announced in late December 2011 the results of its recent well in the Cypriot
Economic Zone. It contains up to 9tcf of natural gas, a world class discovery.
The block, appropriately dubbed Aphrodite, the goddess reputed to have been born in the sea off Cyprus, is likely to usher a hydrocarbon bonanza for the island nation, a member of the European Union and the site of a rich and tumultuous history, including the ongoing unresolved dispute between Greece and Turkey. The Turkish Republic of Northern Cyprus is recognized only by Turkey.
The reverberations from recent events and their implications, along with amazing coincidences, bring to the fore the traditional meaning of the word Byzantine, as in complicated but tantalizing.
The size of the ultimate recoverable gas in the eastern Mediterranean, according to the United States Geological Survey, is of the order of 200tcf of natural gas and at least 7 billion barrels of oil. Israel has already booked about 50tcf and a dozen new Cypriot blocks, currently in the process of being offered to international bidders, will almost certainly add a further 50tcf, perhaps even 75tcf, to that already discovered.
The situation creates a new geopolitical reality in the area, perhaps as important as the Arab Spring. It is certainly affected by Turkish prime minister Recep Erdogan, who has chosen a path of confrontation with Israel. For the Greek-dominated Cyprus government, Erdogan could not have been manufactured better by central
casting. His rapprochement with Islamists in Egypt and the Palestinians and good relations with international pariah Iran, may appeal to his Islamist flank but, beyond the deterioration of relations with Israel, it works counter to his country’s image in the west and his ambitions for EU membership.
Israel is now inextricably tied to Cyprus. A natural allie, culturally and for a number of other reasons, Israel offers the best shield possible for Cyprus against an intransigent Turkey.
The would-be elephant in the room, Greece, Cyprus’ traditional supporter, has become a shadow because of its dire economic situation.
All of this, coupled with the coincidence that it appears that hydrocarbons geologically do not reach north of Cyprus, bb & flow makes for an astonishing turn of events. Turkey is practically neutralized. Coincidence upon coincidence, Cyprus takes over the Presidency of the EU next summer.
What is likely to happen next on the ground? It could play out something like this.
Israel’s Tamar field is under fast-track development.
Cyprus could proceed immediately to secure 100mmscf per day of natural gas from that field. That amount of gas, enough for current Cypriot power needs, can be transported with a relatively easy to place 8in pipeline for a cost of less than
$1 billion. Natural gas could come to Cyprus within two years at a price that would cut electricity costs by at least 50%.
The next step for Cyprus might involve and focus on oil exploration in adjoining blocks. Cyprus should definitely push the limits of the USGS estimate of 3.7 billion barrels of petroleum.
Oil discovery would prove strategic for the country and the area. Seismic mapping and some attributes suggest the presence of more oil towards Cyprus blocks, compared to those in the Israeli economic zone.
Israel’s giant Leviathan field, now upgraded by Noble Energy to hold 20tcf of natural gas and Aphrodite, are likely to be unitized with Cyprus and Israel each getting a percentage of the operation (as equal shares or proportional to the gas content), to supply three LNG liquefaction trains in Cyprus for LNG export of 20 million tonnes per annum. The fields are practically one and the same anyway, the boundary being an artifact of geography not geology. Two large, 36in pipelines would be needed to bring gas from Leviathan and Aphrodite to a Cypriot LNG liquefaction facility. This could happen within five to six years at an estimated cost of $15 billion.
Multiples of this development can take place and international demand, headed by China, indicates that a lot more natural gas will be needed in the world over the next decades. There is no shortage of gas any time soon in the eastern Mediterranean.
Europe will find a very attractive alternative to Russian gas on its doorstep and Cyprus and Israel could reap a pot of gold (assuming they do not repeat the mistakes of the other oil & gas nouveau riche).
* Michael J Economides is a professor at the Cullen College of Engineering, University of Houston, and editor-in-chief of the Energy Tribune. The views expressed in this column do not necessarily reflect OE’s position.
