October 1, 2015
Authors: Olga Kerimova, Analyst, and Theodora Batoudaki, Analyst, Rystad Energy
Publisher: PESGB Newsletter, November Edition
The Mediterranean E&P landscape has been historically dominated by large developments in offshore Egypt, Israel and Libya. Eni’s recent Zohr discovery is slated to significantly increase the Mediterranean’s gas supply, with Egypt joining Israel as a significant player in shaping the region’s growth potential over the next decade. This article assesses the outlook for the Mediterranean E&P industry (including Egypt, Israel, Libya, Tunisia and Cyprus), illustrated by three key drivers: production, exploration success and spending.
Figure 1 shows the total production from the Mediterranean, split by project, from 2010 to 2025. Egypt, Libya and Israel are the largest contributors to the region’s historical and short-term expected production, with the West Delta Deep Marine (WDDM) project, Tamar project and the Western Libyan Gas Project (WLGP) accounting for almost 50% of the 2015 volumes. Production is expected to grow substantially after 2020 as Noble’s Leviathan project and the expansion of the Tamar field come online. Additionally, the BP-operated West Nile Delta (WND) project, is expected to add to the production volumes from 2017. Eni’s 2015 Zohr discovery will further contribute to the production growth, making up about 20% of the 2025 production. Thanks largely to the game-changing discoveries made by Noble and Eni over the past five years, total production from the Mediterranean is expected to grow from almost 1000 kboe/d in 2015 to 1800 kboe/d by 2025.
Figure 2 shows the discovered volumes in the Mediterranean by project from 2009 to 2015. In 2009 and 2010, two large natural gas discoveries, Tamar (Matan block) and Leviathan, were made in offshore Israel. Noble Energy is operating both fields. The Tamar field was discovered in the Levantine Basin of the Eastern Mediterranean Sea, 90 km west of the Israeli coast, in January 2009. Leviathan, which has at least double the resource potential of Tamar was discovered in the Levantine Basin, 130 km west of the Israeli coast, in December 2010. In late 2011, Noble Energy made the largest discovery in Cyprus, the Aphrodite field. After a three-year period of low exploration success in the region, Eni announced the most significant discovery ever made in Egypt, the Zohr gas field, in late August 2015. Eni estimates that the Zohr offshore prospect could hold resources of 5.5 billion boe. Of these, around 3.5 billion boe could be recoverable based on Rystad Energy analysis.
Figure 3 shows total spending in the Mediterranean over the period 2010-2020. Investments (capex and exploration capex) were increasing from 2010 to 2011 and peaked at 5.4 BUSD. Since then investments have been following a declining trend, with a noticeable drop in capex in 2013 that is explained by the completion of the first phase of the Tamar field, which came online in March of the same year. The sanctioning of the second phase of Bahr Essalam (WLGP) signals a new investment cycle from 2015 and onwards, which is expected to be the largest in the history of the Mediterranean region. During this period investments are estimated to grow with an annual growth rate of about 25%. The growth will be driven mostly by the fast-tracked Zohr, Leviathan, WND project, the expansion phase of Tamar and Tamar SW. Earlier this year, BP finalized the agreement for the development of the WND project, with total cost estimated at 12 BUSD. Although Noble’s Leviathan and Tamar developments were suspended at the beginning of this year pending regulatory approvals, a deal was signed in August 2015 mandating an investment of 1.5 BUSD over the next two years into the Leviathan project. The operating costs (opex) are expected to increase to 4.3 BUSD by 2020, consistent with the production trend shown in Figure 1.
The production from the Mediterranean is expected to decrease to 900 kboe/d over the next four years. In the longer term, the most promising discoveries in the Mediterranean, Tamar, Leviathan and Zohr, will bring about significant changes in the production and spending outlook for the region. Production is expected to grow with an annual growth rate of 13% from 2020 to 2025, possibly reaching 1,800 kboe/d, production levels the area has never seen before.
Olga Kerimova, Analyst
Phone: +47 24 00 42 00
Theodora Batoudaki, Analyst
Phone: +47 24 00 42 00
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), Africa as well as South East Asia.