Mediterranean activity rebounds after unsettled 2012

March 27, 2013

Oilfield activity in the Mediterranean region was disrupted by extreme political events last year across northern Africa. The ‘Arab Spring’ revolutions in Egypt, Libya, and Tunisia, as well as the continuing conflict in Syria shut down most non-essential activity. With offshore operations slowed or delayed in the southern half of the sea, the industry has continued operations mainly in the east with modest activity across the northern Mediterranean.

Activity has been greatest in the Black Sea where companies are seeking new reserves around established fields, and linking Russian gas reserves to southern Europe through the construction of the South Stream pipeline, a sister system to the earlier completed Blue Stream pipeline that was completed in 2002.

Black Sea

The merger of Petroceltic International and Edinburgh-based Melrose Resources was completed in October 2012, with Melrose as the successor. The merged company says that the integration process has gone smoothly. Last year, Melrose gathered reservoir data over the Galata field (shut-in) off Bulgaria and determined that it holds at least 6bcf of natural gas reserves.

Melrose finished interpreting 3D seismic data it acquired last year over the Galata block (1790 sq km, 691 sq mile). The company has identified seven structures with P50 reserves (unrisked) of 125bcf (3.5bcm). It plans to drill two wells this year and four wells next year to test targets. The most prospective structure, Kamchia, estimated at 27bcf. The Kamchia-1 well is scheduled to spud in April.

Melrose plans to drill one well on each of its (formerly Petroceltic) Romanian concessions, Est Cobalcescu and Muridava. Older 2D seismic revealed Cretaceous and Eocene oil plays along with Miocene and Pliocene gas plays. Reserves are estimated to be 1-2tcf.

Last year, South Australia-based Beach Energy acquired a 30% interest in Est Cobalcescu. The 1000 sq km area lies in less than 100m (328ft) water depths and contains proven hydrocarbon plays and multiple exploration play types. Beach holds two consecutive three year licenses, the first of which is compulsory. The company has the right to extend the term an additional four years. A year ago, ExxonMobil announced a 3tcf discovery at its Domino-1 well on adjacent acreage.

According to Beach, the western Black Sea had several periods of strike-slip deformation and inversion during the Palaeogene. The Middle Miocene section is characterized by subsidence with carbonate platforms separated by deeps. This was followed by compression during the Pliocene that formed large anticlinal structures. The shelf has at least two different petroleum systems. The Mesozoic system has an oil-rich source, likely Early Cretaceous, which charged Mesozoic and Eocene limestones and sandstones. The Pontian dry gas system is found in deltaic sands. Some of this biogenic gas is from Pontian shales, with some Oligocene thermogenic gas also charging the sands.

Romania-based Midia Resources discovered gas in its Eugenia-1 well drilled to 2276m TD in the Pelican block (2312 sq km) off Romania. The well penetrated two gas reservoirs, totaling 22m net pay, in Late Cretaceous sandstone from 1938-2038m MD. Porosities ranged 10-20% and gas saturations ranged 55-62%. An Eocene limestone section had gas shows.

Midia is a wholly-owned subsidiary of Sterling Resources (65% WI). It is the operator of the Midia and Pelican blocks with partners Hungary-based Petro Ventures Europe (20%) and Netherlands-based Gas Plus International (15%). In addition, Midia has gained Romanian government approval to buy 50% interest in block 25 (Luceafarul), which covers 1000 sq km. Petro Ventures will retain 50% in the block. In an independent evaluation, RPS Energy estimated Luceafarul’s potential reserves at 104bcf (2.9bcm).

Romania-based OMV Petrom (operator) and ExxonMobil (deepwater farm-in of 50%) are shooting a 6000 sq km, 3D program over the Neptun block in the Romanian Black Sea. The 1600 sq km shallow-water survey is being shot by CGG Veritas with the Oceanic Champion’s eight-streamer array.

Eastern Mediterranean

The Levant Basin, between Republic of Cyprus and the Mediterranean’s east coast, has produced multiple natural gas discoveries since 2009 including: Tamar (10tcf), Dalit (0.5tcf), Leviathan (16tcf), Cyprus (5tcf), Tanin (1.2tcf), Dolphin (0.6tcf), and Shimshon (2.3tcf), for a total discovered reserve base of 35.6tcf. Noble Energy continues a drilling program in the basin using the ENSCO 5006 semisubmersible.

These recent discoveries have accelerated infrastructure development in the eastern Mediterranean. US-based Radius Oceanic Communications and the Cyprus Telecommunications Authority (Cyta) launched the Poseidon project, a high-capacity undersea cable system intended to provide advanced telecommunications facilities to the offshore oil & gas industry in the region.

The system will extend for 800km from two shore landings in Cyprus, creating a ring that borders the Cypriot Exclusive Economic Zone (EEZ), enveloping the offshore oil and gas lease blocks established for development. Cyta provides landing facilities and collocation services at its cable stations in Pentaskhinos and Yeroskipos. Through the system, Radius will offer managed broadband services on a subscriber basis to offshore exploration, production and support facilities in the EEZ. Through Cyta’s telecommunications hub, Radius says it will be able to provide its offshore customers with secure, low-latency, broadband connections to key locations worldwide.

Cyprus’ second offshore licensing round was completed in May 2012. Officials announced winners starting in January. Eni and South Korea-based Korea Gas Corp (Kogas) in consortium won blocks 2, 3, and 9 in the deepwater portion of the Levant Basin, which covers 15,530 sq km. Eni will operate with 80% interest.

Total was awarded two production sharing contracts (PSC) for blocks 10 and 11. The licenses extend over 2572 sq km and 2958 sq km respectively, southwest of Cyprus, in water depths from 1000-2500m. The company will begin acquiring 3D seismic over block 11 and 2D seismic over block 10; each program targets a different play.

Most recently, Israel-based Delek Drilling and Avner Oil Exploration signed a PSC with Cyprus for exploration rights, appraisal, development, and production in block 12. With the signing, Noble retains 70% interest in the block, while Delek and Avner each hold 15%.

Israel

Toronto-based Adira Energy is exploring three licenses off Israel that have significant potential: Gabriella (110mmbo), Samuel 66mmbo), and Yitzhak (79mmbo), but is having issues with its partners. Recently, it suspended operations on the Gabriella license due to lack of funds. Adira is designated operator of that license with 15% WI. Its partners include Israel’s Modi’in Energy (70%), Canada’s Brownstone Energy (15%), and Israel’s Tohar Hashemesh Energy (5%).

The Gabriella license is about 10km northwest of Tel Aviv and covers 392 sq km in water depths from 100-425m. Last year, Netherland, Sewell & Associates estimated up to 110mmbbl of unrisked oil on the license.

Egypt

In January, Aberdeen-based Dana Petroleum received approval from the Egyptian government to further develop the Nefertiti oil field in the Gulf of Suez following a successful appraisal well.

Dana, in partnership with Japanbased Inpex, successfully drilled the Nefertiti-2X exploration well at the end of 2012. The well tested at a maximum stabilized flow of 1850b/d using an electrical submersible pump. The field is expected to produce 2500b/d when it comes onstream later this summer.

Italy

Italy’s government lifted its offshore exploration and production moratorium after ratifying Legislative Decree 83/2012 last August, opening its formerly closed territory within 12 nautical miles of the coast to renewed activity. The decree also raises prior royalty rates by 3%, increasing them to 7% for oil and 10% for natural gas production. The increase will fund marine environmental protection and safety for offshore operations.

Ireland-based Petroceltic International was affected by the drilling ban as operator of the B.R.268.RG permit (126.68 sq km, 31,302 acre) in the Adriatic Sea. Its Elsa discovery on the shallowwater block is estimated to hold 100mmbo and 31.5bcf of gas.

Calgary-based Cygam Energy had two exploration projects that were affected by the decree, BR268RG permit (30% partner in Elsa) and CR148VG permit (336.98 sq km), off Sicily, the company’s Aretusa prospect. The Sicilian license expired during the moratorium, but its term was extended to November.

Mediterranean Oil & Gas (MOG) will now be able to seek a production concession for its Ombrina Mare field in BR269GC permit. The Adriatic Sea field is estimated to hold 40mmbo and 6.5bcf of gas.

Noble Energy continues its drilling program in the Levant Basin using the ENSCO 5006 semisubmersible.

Malta

Last December, the government of Malta awarded three offshore blocks totaling 6400 sq km to Capricorn Malta, a subsidiary of Edinburghbased Cairn Energy. Cairn CEO Simon Thomson is looking to balance the company’s portfolio of frontier exploration assets. Capricorn Malta will conduct a study, acquire additional data, and assess the exploration potential of the acreage under an exploration study agreement.

The offshore areas granted are blocks 1, 2, and 3 of Area 3, located north of Malta. The term of the exploration study agreement is two years and requires Capricorn to invest at least US$2.5 million on exploration operations. The work program consists mainly of the reprocessing of existing 2D seismic data, the acquisition and processing of a minimum of 1500km of new, 2D seismic data and technical studies.

MOG was granted a oneyear extension (to January 2014) for Offshore Area 4 by the government of Malta. An evaluation of the block identified four prospective structures: Hagar Qim, Tarxien, Skorba, and Dalam at the Eocene/ Palaeocene level. The Hagar Quim structure has mean unrisked reserves of 109mmbo in the El Garcia formation, which MOG plans to test in 4Q 2013 by drilling the Hagar Qim 1 well. AGR Well Management will provide engineering and rig procurement support.

This year, activity should begin to recover in northern Africa as new governments stabilize. New opportunities in the Adriatic will be stimulated by Italy’s return to normal offshore operations, as well as by the new pipelines being built from the east. Most significantly, the Levant Basin will see growing investment as companies work to develop the worldclass discoveries found in recent years.



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