Exxon Mobil and Qatar Petroleum (QP) consortium announced the natural gas offshore discovery at Glaucus-1well on 28 February 2019. Noting the public statement of the Exxon Mobil, “the well, located in Block 10, encountered a gas-bearing reservoir of approximately 436 feet (133 meters). The well was safely drilled to 13,780 feet (4,200 meters) depth in 6,769 feet (2,063 meters) of water.”[i]
A high-quality reservoir 5-8 TCF of natural gas, although has been characterized as the largest discovery so far discovered in the EEZ and according to official data one of the greatest discoveries in the world in recent years, practically is medium size discovery from global perspective. Additionally, any estimated value of the discovery, at this early exploration phase is misleading for the highly probable volume of the discovery since more appraisal is underway, and considering further the challenging and capital intensive ultra-deep water operations that will take place, the problematic for the depletion based projects European gas market, and the fact that final investment decision has not been taken for gas monetisation.
The development of Glaucus reservoir, cannot be connected with the development of the Aphrodite reservoir; the intergovernmental agreement was signed between Egypt and Cyprus for Aphrodite gas reservoir, and the reservoir development has already taken its route.
Having in mind that the ultimate plan to build a liquefaction plant in Cyprus for LNG exports, significant gas quantities are required for the commercial viability of such project, and Glaucus discovered highly probable reserves solely are not enough.
Considering the above, clearly there is a need to manage expectations. On the other hand, I am of the opinion that Glaucus discovery could be a game changer discovery for the reasons stated below:
As Steve Greenlee, president of ExxonMobil Exploration Company stated on the joint press conference with the Minister of Energy of Cyprus George Lakkotrypis on 28 February 2019, “these are encouraging results in a frontier exploration area, and the potential for this newly discovered resource to serve as an energy source for regional and global markets will be evaluated further”. [ii]
Indeed the EEZ of the Republic of Cyprus is a frontier area, and frontier areas have significantly higher exploration risks rather the more mature areas. Having in mind that is expected that the success rate of exploration drillings is ¼ (25%), the consortium had a ½ (50%) of success rate in block 10. Thus, the result is promising for Cyprus adding to its reputation as an emerging gas province, and combined with other similar discoveries it will excite interest among oil majors in the East Med.
Moreover, Exxon Mobil along with QP, ENI and Total will evaluate the results exploring the “potential for this newly discovered resource to serve as an energy source for regional and global markets will be evaluated further”[iii]. Thus, the significance of this discovery is that the exploration program of Exxon Mobil and QP is expected to continue in block 10, and likely extend in other blocks. Considering the fact that the Exxon Mobil and QP have significant capabilities to carry forward LNG terminal projects globally, and their active involvement in the development and optimization of gas reserves of the Republic of Cyprus, will excite the interest among oil majors.
International Gas Union, World LNG Report of 2019[iv] data provide a clear indication of the Exxon Mobil-QP consortium capabilities. Noting the appendix 1 of the Report (table of global liquefaction plants) the Consortium owns and operates 61.4 MTPA of the 77MTPA[v] total liquefaction capacity of Qatar with utilization rate 102%. On the other hand, noting same appendix, ENI and TOTAL invested less aggressively in LNG infrastructure and always with 3 or more joint venturers.
In terms of market share of LNG trade globally Qatar along with Australia currently lead the global LNG market.
Concluding, the Glaucus discovery, it could be a game changer discovery for the development of gas reserves of the Republic of Cyprus as secures the involvement of the Exxon Mobil-QP consortium, and this involvement increases the confidence of ENI and TOTAL for the development of Kalypso and any subsequently discovered reservoirs in their licensed blocks, and improves the prospect of Cyprus as an emerging gas province, exciting other oil majors to participate in future licensing rounds for the remaining unlicensed blocks, or by acquisition of participation interests in the licensed blocks.
[i] https://corporate.exxonmobil.com/news/newsroom/news-releases/2019/0228_exxonmobil-makes-natural-gas-discovery-offshore-cyprus, accessed 12 April 2019.
[ii] https://cyprus-mail.com/2019/02/28/5-8-trillion-cubic-feet-gas-find-encouraging-says-energy-giant/ accessed 12 April 2019.
[iii] As stated on Exxon Mobil press release cited above.
[iv] Published on 2 April 2019, and is freely accessible on the link https://www.igu.org/events/lng
[v] Remaining 15.6 MTPA owned and operated by QP and other joint venturers.