By Solon Kasinis, Director of the Energy Service of the Ministry of Commerce and Industry.
Past Surveys
The efforts on the hydrocarbon exploration in Cyprus were initiated since 1938, when the Iraq Petroleum Company Ltd conducted geological and geophysical surveys on the island. These surveys lasted until 1948, and afterwards during the period 1949-1970 four exploration wells were spudded onshore Cyprus in depths between 1,250-3,295 m. The local company Oil Prospectors Ltd drilled two wells at the Moni and Tseri areas, while the Forest Oil Corporation followed with other two wells in Archangelos and Lefkoniko areas. All these wells were assigned as dry holes.
The first seismic surveys offshore Cyprus acquired by Delta Exploration Inc. during 1970-1974 in the shallow waters up to 200m depth. In 1975, Sefel Geophysical Ltd proceeded in the acquisition of 8,000 line-km seismic survey in the Eastern Mediterranean covering most of its survey into Cypriot waters. Ten years later, during the 1985-1987 the Soviet Academy of Scientists carried out geological and geophysical studies offshore Cyprus.
The results of the past hydrocarbon prospection and exploration studies showed that a moderate potential for hydrocarbons onshore and in the shallow waters exists in Cyprus.
Recent Geophysical Surveys in the Exclusive Economic Zone (EEZ) of the Republic of Cyprus
The Energy Service of the Ministry of Commerce, Industry and Tourism of the Republic of Cyprus, in collaboration with PGS Geophysical AS, undertook in 2006 a multi-client 2D seismic survey (MC2D-CYP2006) amounting to approximately 6,770 line-km of new data on a 10 km by 20 km grid in an area of around 51,000 km2 offshore Cyprus. A multi-client 3D seismic survey (MC3D-CYP2007) of 659 km2 was also conducted by PGS in 2007. Following that, a new multi-client 2D seismic survey (MC2D-CYP2008) totaling approximately 12,200 line-km on a 10 km by 10 km grid on the western side and a 5 km by 5 km grid on the eastern side of the area has been acquired by PGS.
The almost 19,000 line-km of 2D seismic data made possible the definition of 14 plays and many leads on the basis of closed surfaces only. Some of them correspond to major structural features and display a closed surface of several hundred square kilometers. Thus, based on these data, offshore Cyprus shows great potential for hydrocarbon exploration.
Based on the above seismic surveys an integrated 2D Interpretation Report and a 3D Interpretation Report were prepared in collaboration with Beicip-Franlab.
Legislative Framework
The legal framework in Cyprus that determines the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons is being covered by the Hydrocarbons (Prospection, Exploration and Exploitation) Law and the Hydrocarbons (Prospection, Exploration and Exploitation) Regulations of 2007 and 2009.
According to the legislation, the Hydrocarbon Prospecting Licence is granted for up to one year and includes geophysical survey but no drilling. The Hydrocarbon Exploration Licence is granted initially for up to three years, with the ability for two renewals of two years each (maximum seven years). It includes gravity and magnetic surveys, 2D/3D seismic surveys, as well as exploration drilling. On each renewal, at least 25% of the initial licensed area is relinquished. In case of a discovery, the licensee has the right to be granted an exploitation licence for that discovery. The Hydrocarbon Exploitation Licence is granted for an initial period of up to 25 years with the ability for one renewal of up to ten years.
The conditions and requirements contained in the licence for exploration and in the licence for exploitation are stated explicitly in a Contract concluded between the Government of the Republic of Cyprus and the holder of a license. The type of the Contract used in the procedure for granting licences in accordance with the provisions of the Hydrocarbon Regulations is the Production Sharing Contract (PSC).
A number of agreements have been signed between the Republic of Cyprus and its neighbouring countries. The Delimitation of the Exclusive Economic Zone (EEZ) of Cyprus has been agreed and signed with the Arab Republic of Egypt in 2003, based on the median-line principle and in accordance with the provisions of the United Nations Convection on the Law of the Sea (UNCLOS ’82). Likewise, an agreement has been signed on a Ministerial level with the Republic of Lebanon in 2007 and the State of Israel in 2010. The Republic of Cyprus and the Arab Republic of Egypt have also signed, in 2006, a Framework Agreement concerning the development of cross-median line hydrocarbon resources.
First Licensing Round
Part of the Exclusive Economic Zone of Cyprus, that is located south of the island and covers an area of around 51,000 km2, has been divided into 13 Exploration Blocks. The Republic of Cyprus, represented by the Ministry of Commerce, Industry and Tourism, announced the 1st Licensing Round Offshore Cyprus in the 15th of February 2007 for the grant of Hydrocarbon Exploration Licences and subsequent Hydrocarbon Exploitation Licences (upon a commercial hydrocarbon discovery during exploration) in 11 Exploration Blocks within the EEZ of the Republic. Blocks 3 and 13 were excluded. The Licensing Round was based on the MC2D-CYP2006 seismic data that were acquired by PGS Geophysical in 2006.
Upon extensive negotiations after the submission of the applications in the framework of the First Licensing Round, an Exploration License for Block No 12 was granted to Noble Energy International Ltd on the 24th of October 2008.
Further to 3D seismic survey which was acquired in 2009, the findings for Block 12 focus into a significant geological structure known as Cyprus-A prospect. The first exploratory well is anticipated within the fourth quarter of 2011.
Strategic Environmental Study
The Energy Service completed in 2008 the preparation of the Strategic Environmental Assessment concerning Hydrocarbon Activities within the EEZ of the Republic of Cyprus, according to the provisions of the Assessment of Impact on the Environment from Certain Plans and/or Programmes Law, which is harmonized with Directive 2001/42/EC. The overall objective of this project was to identify, describe and evaluate the likely significant environmental effects of implementing hydrocarbon exploration and exploitation activities. The licensees are bound to follow and comply with the results and recommendations of this Strategic Environmental Assessment.
Second Licensing Round
The areas open for bidding in the forthcoming 2nd Licensing Round will include Explorations Blocks 1-11 and 13 within the Exclusive Economic Zone of Cyprus. The circumstances are very positive provided that recent hydrocarbon offshore discoveries in the Eastern Mediterranean have highlighted the enormous petroleum potential of this region. Moreover exploration and production of oil and gas in Cyprus enjoys a favourable legal and fiscal regime.
Conclusion
Cyprus is a promising new area for hydrocarbon exploration proved by recently gas discoveries in the vicinity of Egypt and Israel which testify that petroleum systems were active in the very thick Levantine and Herodotus basins. Especially, the recent huge discoveries offshore Israel (Tamar 8.4 tcf and Leviathan 16 tcf), could turn the whole East Med region to a new energy key-player in the global energy market.
No doubt that development of the gas fields in the eastern Mediterranean can change the nature of the region to an energy supplier, making a substantial contribution to Europe’s energy security. The factor of gas in the eastern Mediterranean can establish a new regional energy key-player, which can secure the energy supply to the EU, and Cyprus as a full member of the European Union is the physical path to the EU market. Moreover, the development of the gas resources in the region will also contribute to the development of the region and to the increase of the geopolitical stability. It is important to be highlighted, that energy is not a tug of war field, but a key sector for sustainable and balanced economic development based on comprehensive cooperation and solidarity, guaranteeing regional stability and peace.