* Crew airlifted to Block 12 in Cyprus EEZ *
Noble Energy has started drilling for natural gas in Block 12 south of the island, with an uneasy Turkey watching from afar saying Cyprus has no right to explore for hydrocarbons, unless it shares its resources and wealth with the Turkish Cypriots.
The Texas-based company has been airlifting its crew from Limassol port to the offshore rig by helicopter over the past few days and started the long-anticipated exploration process on Tuesday, which is expected to last up to 73 days in search of deposits estimated at 10 trln cubic feet. Preparatory work had started on Sunday evening at a point where the water is about 1.6 kms deep.
"The drilling process has been started by Noble Energy on the basis of the agreement with the Republic of Cyprus," deputy government spokesman Christos Christofides confirmed on Tuesday.
This marks a turning point in an escalating row with Turkey over offshore gas resources in the eastern Mediterranean which has seen former ally Israel tap into one of the richest gas deposits in the region.
Turkey has threatened to give naval escorts to its own exploration vessels operated by the Turkish oil company TPAO west and north of Cyprus unless the Greek Cypriot government halted its exploration plans, in what is seen as yet another obstacle in the way of finding a solution among the island’s divided communities.
Cyprus says it is fully within its rights to develop any potential offshore deposits, though areas it has mapped for potential offshore development all lie to its south, avoiding the Turkish-controlled north.
"Our attempts to exploit hydrocarbons from our exclusive economic zone have the support of the international community," Christofides said.
He said the drilling work, which was exploratory, was likely to last about two and a half months. A second round of exploration would follow, lasting several months. It would, he said, "give a clear picture on the size and the quality of the deposit."
The European Commission called on Monday for both sides to show restraint and work towards a resolution of the division of the island.
Turkey has warned the European Union that it will break off relations with the EU presidency should Cyprus take over the rotating role in the second half of next year.
The United Nations has appealed for a peaceful resolution to the dispute, saying both sides should benefit from any energy reserves that are found, in the context of a future settlement on the island.
The Financial Mirror had reported earlier this month that Noble was keen to bid for a second block once the government starts auctioning some or all of the remaining 12 parcels some time next year.
However, the government wants to wait and see before it invites bidders. A gas find similar in size to the giant deposits that Israel found near the Cyprus Exclusive Economic Zone (EEZ) could bolster the Christofias administration’s economic status and on the prospect of future earning alone, ease its way to a recovery and reduction of its bloated public debt.
Energy industry experts suggest that a fresh round of bidding could produce far better results than the first time in 2007 when little interest pushed the government to nearly abandon all interest in oil and gas exploration.
The huge gas discovery in Israel’s adjacent Leviathan field was a game changer and some of the leading international oil and gas companies are now keen to establish consortia in order to grab a share of the island’s prospective deposits. However, full production out of Cyprus’ offshore gasfields is not expected to start any time sooner than 2020.
Already, “Triple 5” was reportedly ready to pay a signature bonus of 80 mln dollars to the Cyprus government just to have access to two of the offshore blocks.
PIPELINE BY 2014
Energy Services Director Solon Kassinis told a parliamentary hearing this month that Noble is prepared to build a pipeline from the Israeli gasfields adjacent to Block 12 in the Cyprus EEZ and pump liquid natural gas (LNG) to the Vassiliko power station by 2014.
The Electricity Authority of Cyprus is determined to repair the dual-use units 4 and 5 at Vassiliko and resume power production by next summer, while the power station that will be able to accommodate LNG is expected to return to full production by 2013.
Kassinis said that the government should decide very soon to proceed with plans to import gas, as had been discussed between Presidents Christofias and Shimon Peres in May. The matter will probably be discussed in Peres’ upcoming visit to Cyprus.
Noble Energy has had the concession to Block 12 since 2008, and under a March 2010 agreement, Israel’s Delek Group units Avner Oil and Gas LP and Delek Drilling LP have an option to 30% of the concession.
Under the terms of the exploration license, Delek Drilling and Avner will bear 15% of Noble’s expenditures for Block 12, including exploration and appraisal wells, development or production, and/or other operations, in accordance with the Production Sharing Contract.
The deadline for the Cypriot authorities to approve the transfer of rights to Block 12 has been extended to August 1, 2013. Until then, Avner and Delek Drilling can transfer their rights to a third party acceptable to Noble Energy and subject to approval by the Cypriot authorities.
Noble Energy has never disclosed estimates about the potential natural gas reserves in Block 12. Leviathan has an estimated 16 trln cubic feet.
Noble Energy and Delek are partners in Leviathan, as well as in other Israeli offshore licenses, including Yam Tethys, which is in production, Tamar, Dalit, and Noa.