Off Shore Hydrocarbon exploration in Crete: a review of the facts

Τετάρτη, 25 Μαΐου 2011 17:47
It is a well-known fact in the petroleum industry that hydrocarbon reserves estimated at the pre-discovery stage are traditionally grossly overestimated while at the same time the reserves uncertainty associated with these volumetric estimates tends to be underestimated. Unfortunately the recent presentation and comments made by Mr. Foskolos at the 15th Economist Conference May 17-19 regarding possible reserves offshore Crete do not escape the above predicament.
Let us not forget that currently Greece has no established proven or probable hydrocarbon reserves in the offshore region of Crete as no drilling whatsoever has been conducted to date in Greek territorial waters in the area. Therefore, at this pre-discovery stage we can only talk about possible reserves waiting to be confirmed by drilling. The presence of favorable geological structures in the area, e.g. mud-flow volcanoes, is encouraging.
The recent wave of optimism regarding hydrocarbon potential in the southern/eastern Mediterranean has been triggered in part by the recent discovery of the Leviathan field offshore Israel in 2010. Therefore it is only prudent to use the metrics associated with this major gas field discovery as a benchmark for comparison purposes. Proven reserves as a result of the discovery well ‘Leviathan-1’ stand at 16 Tcf (Trillion cubic feet) or 0.45 trillion cubic meters. At the time of the discovery (June 2010) the Leviathan field was the largest gas field ever discovered in the under-explored area of the Mediterranean Sea and the largest discovery in the history of US based Noble Energy which operates the field with a 40% working interest. Listening to the comments made by Mr. Foskolos in the above mentioned Conference, stating that there are 3.5 trillion cubic meters of natural gas in the waters surrounding Crete, one would be led to believe then that a discovery of a magnitude almost eight times the size of the Leviathan field is well at hand! Unfortunately, with no drilling results in the above mentioned area offshore Crete, such claims cannot be substantiated at the present time.
Talking about the economics of the potential find, one can certainly be tempted to multiply the volume of the possible reserves by the current market price of the underlying commodity - $4 /Mcf- for natural gas- and attempt to derive a total expected revenue figure. Such calculations however must also take into account the very substantial capital expenditures required to explore, discover and develop an oil and gas field. As an example, a well drilled in the 1,500 m deep waters offshore Crete to a total depth of 5.5 Km would cost well over $100 million. The technical challenges and environmental risks associated with such deep water drilling were clearly underscored during the recent blowout and ensuing oil spill disaster in the Gulf of Mexico, in April 2010. The cost for the high density 3D seismic surveys that will be needed to pinpoint the optimal drilling locations will be an additional $50 million. Following a discovery well several more wells will need to be drilled to fully delineate the reservoir. It is only at that stage and with the aid of sophisticated computer based methods integrating seismic, wellbore and geologic data that a more complete picture of the porosity distribution and the degree of compartmentalization within the reservoir will start to emerge. And it is only at that stage when an accurate estimation of the recoverable proven hydrocarbon reserves can be made.
Vice-Admiral Mr. Kalogerakis correctly emphasizes, in his article, the importance of delineating our EEZ (Exclusive Economic Zone) with our neighbors, to ensure that the exploration and production effort offshore Crete can proceed in a timely fashion and without costly interruptions. Once again the Leviathan field offers a good benchmark for comparison and a few words of caution. This field straddles the Israeli-Lebanese maritime border. Upon discovery of the field in June 2010, Lebanon warned Israel not to drill within their maritime borders. Israel then escalated the rhetoric and threatened to use force to protect the natural gas fields. All this underlines how crucial it is for Greece to delineate its EEZ zones as soon as possible and before any offshore drilling is undertaken south and east of Crete.

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