solon kassinis wista med conference presentation 2012

Offshore Cyprus:Oil & Gas Developments in the Eastern Mediterranean

Solon KassinisDirector - Energy Service Ministry of Commerce, Industry & Tourism

Republic of Cyprus

Le Meridien Hotel, Limassol23 June 2012

REPUBLIC OF CYPRUS Energy Service – MCIT

Cyprus: Geostrategic FactsThird largest island in the Mediterranean SeaLocated at the crossroads of big international energy routesFull member state of the European UnionOpen services-oriented market economyA strategic hub for business activities in the regionGreater Mediterranean region is a market with large potential for oil and gas trading


Regional Hydrocarbon System: PotentialUndiscovered Oil & Gas Resources in the Eastern Mediterranean Assessment by USGS

Nile Delta BasinOil: 1.76 bblGas: 223 tcf

Levantine BasinOil: 1.68 bblGas: 122 tcf


TamarNatural Gas: 9 tcfProduction: 2013

LeviathanNatural Gas: 20 tcfOil: ?

DalitNatural Gas: 0.5 tcfProduction: 2013

TaninNatural Gas: 1.1 tcf

East Med Hydrocarbon System: Israel


Mean Annual Increase = 5.2%Gas Reserves (EGAS)

East Med Hydrocarbon System: Egypt


Offshore Cyprus: An Emerging AreaA promising regional geological backgroundA great number and variety of “play concepts” for Exploration associated to the different tectonic and stratigraphic domainsMany attractive major “plays” have been identifiedAn efficient regional seal: the Messinian evaporites

Very thick sedimentary basins (12-15 km)Multiple possible clastics and carbonate reservoirs14 plays and many leads of considerable sizeBig hydrocarbon discoveries in the region

Geological Cross Section


Offshore Cyprus: 14 Recognized Hydrocarbon Plays


Hydrocarbon Exploration Activities: Benefits

Hydrocarbon Exploration Activities

Enhance the Security of the Energy

Supply

Strengthen the Self-Efficiency

Diversify the Energy Supply

Reinforce the Geostrategic

Role of Cyprus

Enhance the Competiveness of the National

Economy


Offshore Cyprus: A Frontier Exploration AreaDeep-water frontier exploration area of about 51,000 km2 (part of Exclusive Economic Zone)Located south of the island of Cyprus13 Exploration BlocksPromising frontier exploration area with proven potential in the vicinity

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,000

1 2 3 4 5 6 7 8 9 10 11 12 13Min. Depth (m) Max. Depth (m) Area (sq. km)


Geophysical DataMulticlient Seismic Surveys

MC2D-CYP2008: 12,200 line km 2D

MC2D-CYP2006: 6,770 line km 2D

MC3D-CYP2007: 659 sq. km 3D


Legal & Regulatory FrameworkThe Hydrocarbons (Prospection, Exploration and Exploitation) Law L.4(I) of 2007The Hydrocarbons (Prospection, Exploration and Exploitation) Regulations of 2007 and 2009

Hydrocarbon Exploration LicenseGranted initially for up to 3 years; ability for two renewals of 2 years eachIncludes gravity and magnetic surveys, 2D/3D seismic surveys, as well as exploration drillingOn each renewal, 25% of the initial area is relinquishedIn case of a discovery, the licensee has the right to be granted an exploitation license

Hydrocarbon Exploitation LicenseGranted for an initial period of up to 25 years; ability for one renewal of up to 10 years


Legal & Regulatory FrameworkModel Production Sharing ContractModel PSC to be used in the licensing procedure and concluded between the licensee and the Republic of CyprusMain terms include:

Fundamental ObligationsMinimum Exploration Work ObligationsWork Programs & BudgetsAppraisal & Development Plans

Zero taxation

Fiscal RegimeCost Hydrocarbon recovery (up to a max. %)Profit Hydrocarbon sharing % (based on “R” factor)Signature and Production BonusAnnual Surface Fees

Training ObligationsGuaranteesAccounting Procedure


Legal & Regulatory FrameworkEnvironment – Health & SafetyRepublic of Cyprus has carried out a Strategic Environmental Assessment (SEA) to identify, describe and evaluate the likely significant effects on the environmental effects of implementing hydrocarbon exploration and exploitation activitiesApplicants are bound to follow and comply with the results and recommendations of the SEAEvery licensee shall carry out hydrocarbons operations in a proper, safe and workmanlike manner and in accordance with good hydrocarbon field practices and the relevant national legislationEvery licensee shall ensure that hydrocarbon operations are conducted in an environmentally acceptable and safe manner, consistent with the environmental legislation and the good international industry practice


Maritime Boundaries International Bilateral AgreementsArab Republic of Egypt

Delimitation of the EEZ (2003)Framework Agreement concerning the development of cross-median line hydrocarbon resources (2006)Confidentiality Agreement (2006)

LebanonDelimitation of the EEZ (2007)

IsraelDelimitation of the EEZ (2010)


1st Licensing Round - Exploration Licence, Block 12Oct. 2008: Exploration Licence and PSC with Noble Energy International LtdSept. 2009: 469 sq km 3D seismic survey (Prospect: Aphrodite)Jun. 2011: 4,000 km 2D seismic survey + Grav. & Mag. surveysSept. 2011: First Exploratory WellOct. 2011: First Renewal of the Exploration Licence – 25% Relinquishment


Exploration Licence, Block 12Natural Gas Discovery 28 Dec. 20117tcf gross mean estimated resources310 feet net natural gas pay (Miocene sand intervals)40 sq. miles field area 5,860m total depth1,688m water depth


Exploration Licence, Block 12


2nd Licensing RoundAvailable Blocks: 1-11 & 132nd Licensing Round: 11 Feb. – 11 May 2012Number of Applicants: 15 Companies/ConsortiaNumber of Applications Submitted: 33Countries of Origin:United Kingdom, France,USA, Israel, Netherlands,South Korea, Russia, Malaysia,Italy, Australia, Norway, Canada,Indonesia, CyprusEvaluation of the applications is carried out by a CommitteeThe terms and conditions of the Contract shall be negotiated with the selected applicantThe competent authority for the granting of licenses is the Council of Ministers


Development in Block 12 (Subject to Approval)


Natural Gas Demand in Europe

Share of Natural Gas in EU27 Primary Energy Consumption

Natural Gas Demand in EU27

Source: Eurogas

Natural Gas Production within EU declinesThe share of Natural Gas in EU’s primary energy consumption will remain highAdditional Supplies need to be defined


Natural Gas Supply in Europe - Alternatives

Source: Enel


Natural Gas Projects (Subject to Political Decisions)

Domestic Market• Gas Supply via

Pipeline

EU and International Market• Liquefaction Plant• Gas export pipeline


Liquefaction Plant – Commercial Perspectives (Subject to Political Decisions)

Train 1 Train 2 Train 3 Year online 2018-2019 Future Far Future

Capacity (mtpa) 5 5 5

Gas Suppliers Noble Energy

2nd Licensing Round (potential) Licensees

Future Upstream Producers

Future Upstream Producers

LNG buyers (contracted destination)

Asia – 65%

Europe – 35%

Asia – 60%

Europe – 40%

Asia – 50%

Europe – 50%

Independent LNG Plant Company A

(shareholders may be same as owners)

Independent LNG Plant Company B


Independent LNG Plant Company C


Operator

Governed by a Joint Use and Operating Agreement

Total Cost (USD) 10 billion 8 billion 6 billion

Price Marker Japan Crude Cocktail

(JCC)

Fuel Oil

Japan Crude Cocktail (JCC)

Fuel Oil

Japan Crude Cocktail (JCC)

Fuel Oil

Commercial Structure Tolling Tolling Tolling


Gas Export Pipeline (Subject to Political Decisions)


Integrated Gas Project in Cyprus – A Future Perception

Gas Export Pipeline

Gas from other upstream fields


Cyprus: Energy PerspectivePotential offshore natural gas discoveries:Make Cyprus an exporter of natural gasModernize Cyprus economy and enhance energy outlookImprove country's trade balance and lessen carbon dioxide emissionsEstablish an industry related to natural gas technologyProvide the revenues to invest in renewable energy sources & energy savingCreate employment prospectsDevelop alliances increasing the national security

The natural gas resources in the region could:Make a substantial contribution to Europe’s energy security through development of relevant infrastructures for gas exportRadically contribute to the development of the region and to the increase of the geopolitical stabilityTurn the region into an area of sustainable and balanced economic development, enhance political stability and improve bilateral relationships by developing synergies


Thank you for your attention!

solon kassinis wista med conference presentation 2012

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