Mediterranean hot with Eastern promise

The turnaround in the Mediterranean region's fortunes is almost entirely due to the massive surge of interest in the Mediterranean Sea's eastern margins, thanks to giant discoveries made in the previously sleepy backwaters offshore Israel and Cyprus.

The proximity to neighboring Egypt's productive offshore and onshore sectors, where western operators such as BG Group, Eni, BP, and others have had substantial success in finding and producing onshore, shallow-water, and deepwater gas reserves, has long led explorationists to believe the trend extended further east. Little or no offshore activity was carried out, however, until virtually the turn of the century due to a lack of interest and in some cases political pressure.

Noble Energy has drilled six out of six consecutive discoveries offshore Israel and Cyprus, three of which are world-class in terms of size. (Map courtesy of Noble Energy)

How things have changed. Out of the top 10 deepwater gas discoveries made globally between 2001 and 2010, the largest two were both offshore Israel. Noble Energy and its domestic partners Delek Drilling and Avner Oil & Gas have almost single-handedly delivered energy self-sufficiency to the country after the discoveries of the "elephant-sized" Leviathan and Tamar gas fields (around 17 Tcf and 9 Tcf gross recoverable reserves, respectively) in the Levant basin around 100 km (62 miles) offshore. Tamar and the nearby Dalit discovery are estimated to hold reserves sufficient to meet Israel's gas needs for the next two decades.

Six out of six

Noble has gone six out of six since 2008 in terms of drilling successful consecutive subsalt discoveries so far, three of which are world-class in resource size and total more than 35 Tcf (5.8 Bboe) of gross gas reserves (12 Tcf net to Noble). The company also has what it describes as an "extensive inventory" of natural gas prospects in the area as well as 3.7 Bboe of gross unrisked resources in a deep oil play.

Noble's most recent addition was an estimated 7 Tcf discovery (the Cyprus A-1 well) offshore neighboring Cyprus in Block 12, informally named Aphrodite, which has sparked massive interest in that country's second and currently ongoing offshore licensing round offering 12 frontier blocks off its southern coast. Successful bidders will be confirmed by November, with 29 companies (10 consortia and five independently) having bid for various blocks including Total, Petronas, KOGAS, Delek Group Ltd., ATP Oil & Gas, and others.

With spending of around US $750 million

planned for this year in the eastern Mediterranean, Noble is leading the way in terms of investing in the region, with its focus at present on the development of the Tamar and nearby Alen gas fields with first production on schedule for 2013.

Earlier this year, the company also confirmed its sixth consecutive find in the region on its deepwater Tanin prospect in the Alon A license offshore Israel, hitting approximately 40 m (130 ft) of gross natural gas pay in high-quality lower Miocene sands. Tanin holds an estimated 1.2 Tcf of gas and lies approximately 21 km (13 miles) northwest of Tamar in 1,550 m (5,100 ft) water depth. It is expected to be tied into the latter's infrastructure at a later date.

Balancing domestic and export options

The development of all these assets will be something of a balancing act for the various participants, with the majority of the larger field projects being developed to initially supply growing domestic demand in Israel and Cyprus but also incorporating combined plans for LNG export developments.

The Noble Paul Romano also is drilling in the eastern Mediterranean for Gujarat State Petroleum Corp. offshore Egypt. (Images courtesy of Noble Drilling)

Noble is not exactly inexperienced offshore Israel, however; the company has been operating there with its local partners since 1998 and has a 47% operated interest in the shallow-water Mari-B field, the country's first offshore gas production facility, which it discovered in 1999 along with the Noa field. The field has had almost 100% reliability since its start-up in 2004. But the operator is closely managing its production levels at present to conserve deliverability while it brings production onstream this summer from its nearby Noa and Pinnacles discoveries, which should increase production by around 150 MMcf/d of gas during the latter half of this year to a total field output of more than 300 MMcf/d.

Noble's first phase of its Tamar field – the largest deepwater gas field discovered globally in 2009 – will eventually deliver around 700 MMcf/d by mid-2013. The project is on schedule, development drilling has been completed, and final well completions will conclude in 1Q 2013. Subsea pipeline installation also is complete, and expansion of the Ashdod onshore receiving terminal is under way. Commissioning is planned before year-end 2012, and first gas sales are pencilled in for April 2013, just four years after its discovery. With contracts signed with seven customers for 4.9 Tcf of the field's reserves, the total gross revenue from the field will total up to $33 billion.

CEO Charles Davidson said in the company's most recent quarterly results briefing in April that Tamar was on schedule, that a pre-FEED study for FLNG options was nearing completion, and that it could "transition to a FEED study later this year," most likely in 3Q 2012.

World's largest offshore gas find

The Noble Homer Ferrington is in the Mediterranean Sea drilling a wildcat well for GeoGlobal Resources offshore Israel.

At a slightly earlier stage in the development process is the company's giant Leviathan find, the world's largest offshore gas discovery in 2010 and Noble's own biggest exploration success.

An appraisal well (Leviathan-3) earlier this year, more than 5 km (3 miles) east of the discovery well, encountered approximately 88 m (290 ft) of natural gas pay in multiple intervals. The probe confirmed better reservoir characteristics and gas/water contact, and the company already has project and commercial teams in place and various field development concepts being screened.

These include a possible FPSO for an early phase development of the field located in the Rachel and Amit licenses, with a number of floating production contractors expecting the start of a prequalification process this summer that could see a potential contract award by mid-2013. If the FPSO project does go ahead, the unit is expected to be a converted crude carrier rather than a newbuild vessel that would have to handle up to an expected 1 Bcf/d to 1.2 Bcf/d of dry gas. There would, however, be no requirement for storage because of the dry nature of Leviathan's gas, which would be piped directly to shore after the removal of condensates and liquids. Leviathan sits in 1,670 m (5,480 ft) water depth and is expected to be onstream by year-end 2016.

But the sheer scale of what has been found in the eastern Mediterranean is naturally driving additional LNG export plans, with the region's prime location favoring access to both the European and Asian markets.

The fields in the eastern Mediterranean are ideally positioned to form the basis of a world-class LNG hub to supply both the European and Asian markets. Noble Energy is evaluating both onshore and floating LNG options for its giant discoveries, including Leviathan (17 Tcf), Tamar (9 Tcf), and Aphrodite (7 Tcf). (Map courtesy of Noble Energy)

Pre-FEED studies on various LNG export options are under way, with multiple pipeline-to-shore sites being evaluated in the Mediterranean and the Gulf of Aqaba and with a heads of agreement also signed with the Daewoo/Hough consortium for floating LNG options, initially on Tamar.

Recognizing the challenge of this scale of LNG project and the importance of previous experience on similar schemes and access to markets, Noble has begun the process of selecting a strategic farm-in partner to participate in both the upstream and downstream aspects of the project.

Commented Davidson in the same quarterly briefing, "Domestic Israel gas demand continues to grow, and we're evaluating options to meet that demand. With respect to Leviathan, we're continuing our partnering efforts. Our preferred partners are expected to bring value through significant LNG expertise, financial strength, and global gas marketing expertise."

With Israel now leading the way, Cyprus fast emerging, and Egypt's offshore sector expected to slowly build upstream activity following the Arab Spring, the eastern Mediterranean is expected to establish itself as a prominent LNG hub well before the end of this decade.