Presentation: "Oil & Gas Developments in the Eastern Mediterranean"

1. Offshore Cyprus:
Oil & Gas Developments in the Eastern Mediterranean
Solon Kassinis Ministry of Commerce, Industry & Tourism
Director - Energy Service Republic of Cyprus
Le Meridien Hotel, Limassol
23 June 2012

2. Cyprus: Geostrategic Facts
Third largest island in the Mediterranean Sea
Located at the crossroads of big international energy routes
Full member state of the European Union
Open services-oriented market economy
A strategic hub for business activities in the region
Greater Mediterranean region is a market with large
potential for oil and gas trading
REPUBLIC OF CYPRUS Energy Service – MCIT

3. Regional Hydrocarbon System: Potential
Undiscovered Oil & Gas Resources in the Eastern Mediterranean Assessment by USGS
Levantine Basin
Oil: 1.68 bbl
Gas: 122 tcf
Nile Delta Basin
Oil: 1.76 bbl
Gas: 223 tcf
REPUBLIC OF CYPRUS Energy Service – MCIT

4. East Med Hydrocarbon System: Israel
Leviathan
Natural Gas: 20 tcf
Oil: ?
Tanin
Natural Gas: 1.1 tcf
Tamar
Natural Gas: 9 tcf
Production: 2013
Dalit
Natural Gas: 0.5 tcf
Production: 2013
REPUBLIC OF CYPRUS Energy Service – MCIT

5. East Med Hydrocarbon System: Egypt
Gas Reserves (EGAS) Mean Annual Increase = 5.2%
REPUBLIC OF CYPRUS Energy Service – MCIT

6. Offshore Cyprus: An Emerging Area
A promising regional geological background Very thick sedimentary basins (12-15 km)
A great number and variety of “play concepts” for Multiple possible clastics and carbonate
Exploration associated to the different tectonic reservoirs
and stratigraphic domains 14 plays and many leads of considerable
Many attractive major “plays” have been size
identified Big hydrocarbon discoveries in the region
An efficient regional seal: the Messinian
evaporites
Geological Cross Section
REPUBLIC OF CYPRUS Energy Service – MCIT

7. Offshore Cyprus: 14 Recognized Hydrocarbon Plays
REPUBLIC OF CYPRUS Energy Service – MCIT

8. Hydrocarbon Exploration Activities: Benefits
Enhance the
Security of
the Energy
Supply
Enhance the Strengthen
Competiveness the Self-
of the National Efficiency
Economy
Hydrocarbon
Exploration
Activities
Reinforce the
Diversify the
Geostrategic
Energy
Role of
Supply
Cyprus
REPUBLIC OF CYPRUS Energy Service – MCIT

9. Offshore Cyprus: A Frontier Exploration Area
Deep-water frontier exploration area of about 51,000 km2 (part of Exclusive Economic Zone)
Located south of the island of Cyprus
13 Exploration Blocks
Promising frontier exploration area with proven potential in the vicinity
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1 2 3 4 5 6 7 8 9 10 11 12 13
Min. Depth (m) Max. Depth (m) Area (sq. km)
REPUBLIC OF CYPRUS Energy Service – MCIT

10. Geophysical Data
Multiclient Seismic Surveys
MC2D-CYP2006: 6,770 line km 2D
MC3D-CYP2007: 659 sq. km 3D
MC2D-CYP2008: 12,200 line km 2D
REPUBLIC OF CYPRUS Energy Service – MCIT

11. Legal & Regulatory Framework
The Hydrocarbons (Prospection, Exploration and Exploitation) Law L.4(I) of 2007
The Hydrocarbons (Prospection, Exploration and Exploitation) Regulations of 2007
and 2009
Hydrocarbon Exploration License
Granted initially for up to 3 years; ability for two renewals of 2 years
each
Includes gravity and magnetic surveys, 2D/3D seismic surveys, as
well as exploration drilling
On each renewal, 25% of the initial area is relinquished
In case of a discovery, the licensee has the right to be granted an
exploitation license
Hydrocarbon Exploitation License
Granted for an initial period of up to 25 years; ability for one
renewal of up to 10 years
REPUBLIC OF CYPRUS Energy Service – MCIT

12. Legal & Regulatory Framework
Model Production Sharing Contract
Model PSC to be used in the licensing procedure and concluded between the
licensee and the Republic of Cyprus
Main terms include:
Fundamental Obligations Fiscal Regime
Minimum Exploration Work Obligations Cost Hydrocarbon recovery (up to a
Work Programs & Budgets max. %)
Profit Hydrocarbon sharing % (based on
Appraisal & Development Plans
“R” factor)
Training Obligations Signature and Production Bonus
Annual Surface Fees
Guarantees
Accounting Procedure
Zero taxation
REPUBLIC OF CYPRUS Energy Service – MCIT

13. Legal & Regulatory Framework
Environment – Health & Safety
Republic 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 activities
Applicants are bound to follow and comply with the results and recommendations of
the SEA
Every 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 legislation
Every 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
REPUBLIC OF CYPRUS Energy Service – MCIT

14. Maritime Boundaries
International Bilateral Agreements
Arab Republic of Egypt
Delimitation of the EEZ (2003)
Framework Agreement concerning
the development of cross-median line
hydrocarbon resources (2006)
Confidentiality Agreement (2006)
Lebanon
Delimitation of the EEZ (2007)
Israel
Delimitation of the EEZ (2010)
REPUBLIC OF CYPRUS Energy Service – MCIT

15. 1st Licensing Round - Exploration Licence, Block 12
Oct. 2008: Exploration Licence and PSC with Noble Energy International Ltd
Sept. 2009: 469 sq km 3D seismic survey (Prospect: Aphrodite)
Jun. 2011: 4,000 km 2D seismic survey + Grav. & Mag. surveys
Sept. 2011: First Exploratory Well
Oct. 2011: First Renewal of the Exploration Licence – 25% Relinquishment
REPUBLIC OF CYPRUS Energy Service – MCIT

16. Exploration Licence, Block 12
Natural Gas Discovery 28 Dec. 2011
7tcf gross mean estimated resources
310 feet net natural gas pay (Miocene sand intervals)
40 sq. miles field area
5,860m total depth
1,688m water depth
REPUBLIC OF CYPRUS Energy Service – MCIT

17. Exploration Licence, Block 12
REPUBLIC OF CYPRUS Energy Service – MCIT

18. 2nd Licensing Round
Available Blocks: 1-11 & 13
2nd Licensing Round: 11 Feb. – 11 May 2012
Number of Applicants: 15 Companies/Consortia
Number of Applications Submitted: 33
Countries of Origin:
United Kingdom, France,
USA, Israel, Netherlands,
South Korea, Russia, Malaysia,
Italy, Australia, Norway, Canada,
Indonesia, Cyprus
Evaluation of the applications is carried out by a
Committee
The terms and conditions of the Contract shall
be negotiated with the selected applicant
The competent authority for the granting of
licenses is the Council of Ministers
REPUBLIC OF CYPRUS Energy Service – MCIT

19. Development in Block 12
(Subject to Approval)
REPUBLIC OF CYPRUS Energy Service – MCIT

20. Natural Gas Demand in Europe
Natural Gas Demand in EU27
Share of Natural Gas in EU27 Primary Energy Consumption
Natural Gas Production within EU declines
The share of Natural Gas in EU’s primary
energy consumption will remain high
Additional Supplies need to be defined
Source: Eurogas
REPUBLIC OF CYPRUS Energy Service – MCIT

21. Natural Gas Supply in Europe - Alternatives
Source: Enel
REPUBLIC OF CYPRUS Energy Service – MCIT

22. Natural Gas Projects (Subject to Political Decisions)
Domestic Market
• Gas Supply via
Pipeline
EU and International
Market
• Liquefaction Plant
• Gas export pipeline
REPUBLIC OF CYPRUS Energy Service – MCIT

23. 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
Noble Energy
Future Upstream Future Upstream
Gas Suppliers
2nd Licensing Round Producers Producers
(potential) Licensees
LNG buyers Asia – 65% Asia – 60% Asia – 50%
(contracted
destination) Europe – 35% Europe – 40% Europe – 50%
Independent LNG Plant Independent LNG Plant Independent LNG Plant
Company A Company B Company C
Operator (shareholders may be (shareholders may be (shareholders may be
same as owners) same as owners) same as owners)
Governed by a Joint Use and Operating Agreement
Total Cost (USD) 10 billion 8 billion 6 billion
Japan Crude Cocktail Japan Crude Cocktail Japan Crude Cocktail
(JCC) (JCC) (JCC)
Price Marker
Fuel Oil Fuel Oil Fuel Oil
Commercial
Tolling Tolling Tolling
Structure
REPUBLIC OF CYPRUS Energy Service – MCIT

24. Gas Export Pipeline (Subject to Political Decisions)
REPUBLIC OF CYPRUS Energy Service – MCIT

25. Integrated Gas Project in Cyprus – A Future Perception
Gas Export
Pipeline
Gas from other
upstream fields
REPUBLIC OF CYPRUS Energy Service – MCIT

26. Cyprus: Energy Perspective
Potential offshore natural gas discoveries:
Make Cyprus an exporter of natural gas
Modernize Cyprus economy and enhance energy outlook
Improve country's trade balance and lessen carbon dioxide emissions
Establish an industry related to natural gas technology
Provide the revenues to invest in renewable energy sources & energy saving
Create employment prospects
Develop 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 export
Radically contribute to the development of the region and to the increase of the geopolitical
stability
Turn the region into an area of sustainable and balanced economic development, enhance
political stability and improve bilateral relationships by developing synergies
REPUBLIC OF CYPRUS Energy Service – MCIT

27. Thank you for your attention!
REPUBLIC OF CYPRUS Energy Service – MCIT