LNG: Cyprus hopes Total will rethink natgas drilling halt

News reports on Wednesday said that Total is considering abandoning its Cyprus offshore exploration plans several months before its first expected drill, which the group’s new chief executive suggested in a recent interview was part of accelerating and deepening a group-wide cost-cutting plan.
Total is licensed to drill in blocs 10 and 11 of the Cyprus Exclusive Economic Zone (EEZ) with the first exploration attempts expected to take place in the first half of this year.
Yet, the company had informed the government from as far back as last September that “it was finding it difficult to identify tangible structures or targets for drilling within the blocks that it has been licensed,” the Minister said.
House President and Acting President of Cyprus Yiannakis Omirou said after being brief by Lakkotrypis on Thursday that “expectations on energy resources must be compatible with the confirmation of tangible data.”
Suggesting that there should be no disappointment in Total’s results, Omirou said that “it is known that there are sufficient deposits in the ‘Aphrodite’ gasfield (operated by US-based Noble Energy), which are enough to satisfy the needs of Cyprus for a long time and even offer some export prospects.”
He added that seismic studies and drilling had to be conducted frequently until the right deposits were found. “This was the case with Norway and Israel,” Omirou said.
“What’s important is that Cyprus is already on the energy map – geostrategically, geoeconomically and geopolitically,” he said.
Lakkotrypis added that he briefed Omirou that Total’s potential withdrawal were based solely on geological, geophysical and economic reasons.
“We are now focusing our efforts on the ‘Aphrodite’ gasfield in bloc 12, while exploration activity continues (by ENI-Kogas) in the ‘Amathusa’ gasfield of bloc 12, from where we expect the first results within a few weeks.”
“Disappointing drills or not finding hydrocarbons is more of the rule than the exception. Just the other day, Noble announced a failed drill in the Gulf of Mexico,” Lakkotrypis added.
As regards Egypt’s intentions to buy future natural gas output from Cyprus, the Energy Minister said that “the talks continue. At the moment, we are at a technical stage and we hope these will develop to commercial negotiations. The same applies to Jordan, in anticipation of President (Nicos Anastasiades’) state visit following an invitation from the Ming of Jordan.”
After a disappointing initial test drill by the Italian-South Korean venture ENI-Kogas in Block 9 in late-2014 and below-expectation finds in Block 12 by the US-Israeli partners Noble Energy and Delek-Avner, the Cyprus government may have to reconsider its future oil and gas plans, that have already added to the tension with Turkey that wants a share of future energy output, allegedly for the Turkish Cypriot community.
President Anastasiades pulled out of UN-sponsored peace talks last year after Turkey issued a ‘navigational telex’ (NAVTEX) by its survey vessel Barbaros within the Cyprus EEZ, in violation of international maritime rules and as a provocation towards the Republic of Cyprus which Ankara refuses to recognise.
Total E&P Cyprus Ltd. has yet to take a clear decision on its Cyprus offshore assets, all of which are related to falling crude prices and lower margins.
Abandoning Cyprus exploration prospects altogether is an option, with Total preferring to suffer the cost of the licensing. On the other hand, the French giant may decide to simply postpone exploration and conduct surveys in other gasfields, within blocs 10 and 11, or in blocs 6 and 7 where it has a partial option for drilling.
In an interview with the Financial Times on Monday, CEO Patrick Pouyanne said Total will “weather the storm” sweeping through the oil and gas industry by accelerating and deepening a group-wide cost-cutting plan initiated by his predecessor, the late Christophe de Margerie.
But while this plan will involve steep spending reductions, Pouyanne said he will sell some less profitable exploration and development projects, and delay others.
Total, he said, will reduce group capital spending by 10% in 2015, from $26 bln last year — a larger cut than expected. Of that reduction, the exploration budget — the easiest area where majors can save money — will be cut 30% to less than $2 bln.