Noble Energy Makes Bloc 12 Discovery Offshore Cyprus
Energy Brief
7th January 2012

Houston-based Noble Energy on 28 December announced the discovery of 5 to 8 trillion cubic feet (tcf) of natural gas in Block 12 offshore Cyprus. Noble said in a statement that the Cyprus A-1 well encountered some 94 meters of net natural gas pay in multiple high-quality Miocene sand. Using the Homer Ferrington semi-submersible rig, the well was drilled to a depth of 5,860 meters in a water depth of 1,689 meters. The company, which has made several significant discoveries offshore Israel, said “results from drilling, formation logs and initial evaluation work indicate an estimated gross resource range of 5 to 8 tcf, with a gross mean of 7 tcf (198 billion cubic meters).” Noble said further appraisal of the field, which covers around 100 square kilometres, is needed prior to its development.
“We are excited to announce the discovery of significant natural gas resources in Cyprus on Block 12,” Charles D Davidson, Chairman and CEO of Noble, said in the statement. “This is the fifth consecutive natural gas field discovery for Noble Energy and our partners in the greater Levant basin, with total gross mean resources for the five discoveries currently estimated to be over 33 tcf (934 bcm). This latest discovery in Cyprus further highlights the quality and significance of this world-class basin,” he said.
In Cyprus the discovery was well received by the Greek-Cypriot population and media, which has shown considerable excitement over the prospect of potential hydrocarbon deposits offshore. Demetris Christofias, President of the Republic of Cyprus, which is recognized internationally as the sovereign government on the divided island, called the discovery “historic,” saying that it “opens great potential for Cyprus and its people, which with prudence and in a spirit of collectiveness we will utilize in the service of public interest.” He added: “New favorable economic prospects have opened for the future of the country. Both the present as well as the next generations will benefit.”

The Cyprus A-1 well was the first ever drilled offshore Cyprus, which imports all of its energy needs and still uses heavy fuel oil for power generation. Noble Energy and its key partner offshore Israel, the Delek Group, have proposed to the Cypriot government the creation of a LNG facility on the southern coast of the island with a capacity of 15 million tons/year. Such a facility would be designed to process not only Cypriot gas but also that in the Leviathan and Tamar gas fields offshore Israel. The Israeli fields hold reserves of 17 tcf and 9 tcf respectively. The Cyprus A-1 discovery is located near the maritime delimitation line with Israel, with the Leviathan and Tamar fields located less than 100 kilometers away. The Block 12 well is located some 180 kilometers south of the island.

Exploration work in Block 12 sparked a mini-crisis with Turkey during the second half of 2011 after the Cyprus Energy Department announced last August that Noble was scheduled to begin drilling in October. Turkey, which invaded Cyprus in 1974 and which continues a military occupation of some 40% of the island, demanded that exploration work stop until a settlement between the divided Greek-Cypriot and Turkish-Cypriot communities is agreed. Ankara’s argument is that the government of the Republic of Cyprus, which is a member of the United Nations and the European Union, does not represent the Turkish-Cypriots, who, Ankara reasons, have an equal right to the island’s natural resources.

The start of drilling in late September brought profound protests from Turkey, which sent warships into the Cyprus exclusive economic zone (EEZ), along with an ageing seismic exploration vessel. Turkey and the Turkish-Cypriot administration signed in September in New York during the UN General Assembly a document demarcating the northern waters between the island and Turkey’s southern coast, and in November the two signed an agreement giving Turkey’s state-owned Turkish Petroleum (TPAO) a license to explore offshore Cyprus in an area that includes Block 12 and much of the Cyprus EEZ.

The Greek-and Turkish-Cypriot sides are due to meet with the UN Secretary General in New York in late January in a last-ditch attempt to find a settlement to the 37-year-old ‘Cyprus Problem.’ After three years of negotiations, the two sides have failed to make any major advance towards a resolution.

Commenting on the discovery in Block 12, President Christofias said the gas find “can and should become a tool to promote peace and cooperation in the region. The exploitation of hydrocarbons can become an incentive for a solution to the Cyprus Problem, a solution that will terminate the illegal occupation and the illegal colonization that will reunify our country and our people, and will restore the human rights and the basic freedoms of our people, Greek-Cypriots and Turkish-Cypriots alike.”

Meanwhile, the Ministry of Commerce and Industry, which oversees the Energy Department, is preparing to launch the island’s second licensing round. It will include the 12 remaining blocks in the Cyprus EEZ. The Energy Department has revised the terms of the model production sharing agreement and the documents are to be delivered to the European Commission in early January for translation and subsequent publication in the EU’s official gazette. The round is expected to be announced within the next few weeks. Cyprus had been waiting for the results from the Noble well before launching the bidding round, which is expected to attract the participation of some major international oil companies.

During the course of 2011, relations between Cyprus and Israel have improved with a particular focus on energy cooperation. Minister of Commerce and Industry Praxoulla Antoniadou is due to visit Israel in late January for further discussion on the topic. The LNG plant in Cyprus proposed by Noble Energy and Delek Group is expected to be a near the top of the agenda.