Offshore Levant Basin: Time to re evaluate the prospectivity of the eastern Mediterranean region?

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1 Offshore Levant Basin: Time to re evaluate the prospectivity of the eastern Mediterranean region? Dr Sarah Haggas, IHS The offshore Levant Basin is located in the eastern Mediterranean Sea and extends into Cypriot, Egyptian, Israeli, Palestinian, Lebanese and Syrian territorial waters (Figure 1). It is bounded by the Nile Delta Cone to the south west, the East Mediterranean coast to the east, the Eratosthenes Seamount to the north west and the Larnaca Thrust Zone to the north (Roberts & Pearce, 2007). The deepwater section of the basin is largely unexplored and interest in previous licensing rounds in the eastern Mediterranean region has been limited. However, recent large gas discoveries in Israeli territorial waters have generated increased interest in the Levant Basin and may have an impact on future acreage releases. GEOLOGICAL BACKGROUND A variety of potential hydrocarbon play types have been identified in the basin and include Triassic and Lower Jurassic fault controlled highs and rift related traps; Middle Jurassic shallowmarine reservoirs; Lower Cretaceous deepwater siliciclastics; Tertiary canyon and channel systems; Cretaceous to Palaeogene anticlines and faulted anticlines; and Cretaceous to Miocene carbonate build ups (Gardosh et al., 2008; Roberts and Pearce, 2007). Reservoir potential exists in the Cenozoic, Cretaceous, Jurassic and Triassic. Potential sources rocks are generally of Mesozoic age, with oil prone sources in the Upper Cretaceous and gas prone sources in the Triassic and Jurassic, Pliocene shales also provide a source of dry biogenic gas in the south of the basin (Roberts and Pearce, 2007). In March 2010, a US Geological Survey report estimated the undiscovered oil and gas resources of the Levant Basin Province at 122 Tcf gas and 1.6 billion barrels of oil (Schenk et al., 2010). The Levant Basin Province as defined by the USGS encompasses approximately 83,000 sq km of the eastern Mediterranean area. The USGS report defined three assessment units within the composite petroleum system; Levant Margin Reservoirs, Levant Sub Salt Reservoirs and Plio Pleistocene Reservoirs. Of the 122 Tcf gas resource potential, 6 Tcf is estimated to be in the Levant Margin, 81 Tcf is in the Levant Sub Salt Reservoirs and the remaining 35 Tcf is in the Plio Pleistocene Reservoirs. EXPLORATION HISTORY To date, all the wells drilled in the offshore Levant Basin have been spud to the south east of the basin. No wells have been drilled in the Lebanese, Cypriot or Syrian portions of the basin. The majority of wells drilled are been located in water depths of less than 275m. The Tamar and Dalit new field wildcats, drilled in 2009, were the first wells to be drilled at water depths of >1,000m (Figure 2).

2 The first offshore well drilled in the Levant Basin was the Gal 1 new field wildcat drilled by Midbar in The well was plugged and abandoned after encountering gas shows. During the early 1970s, Sonol (Belco) drilled several new field wildcats on the Israeli shelf, all of which were plugged and abandoned as dry holes or with oil or gas shows. Unsuccessful wells were also drilled by Oil Exploration Investments Ltd in the late 1970s. Exploration then ceased until September 1985 when Total drilled the Mango 1 wildcat in Egyptian territorial waters. Mango 1 encountered oil, gas and condensate in the Cretaceous Burg El Arab Formation. Two subsequent appraisal wells drilled at the discovery, Mango 2 and 3, spudded in 1986 and 1988 respectively, were dry. The Mango field is estimated to contain recoverable reserves of 13.6 MMb of oil and 10 Bcf of gas, however to date the field remains undeveloped. Isramco Inc. scored Israel s first offshore oil discovery with the Yam 2 exploration well in July The field comprises an elongate, fault bounded anticline trending north north east to south south west. The Callovian Zohar Formation reservoir, which underlies the base of the Oxfordian unconformity, is also restricted by porosity/permeability barriers. Isramco made further discoveries at Yam Yafo 1 (oil) in 1994, at Noa 1, Or 1 and Or South 1 (gas) in 1999 and at Nir 1 (gas) in During 1999, Spectrum reprocessed 7,834km of its East Mediterranean regional seismic dataset, which ties offshore Turkey, Cyprus, Syria, Lebanon, and Egypt. In 3Q 2000 Spectrum then acquired 12,300km of new regional seismic data, which tied with and infilled the reprocessed grid, covering offshore Cyprus, Syria and Lebanon. The 1.5 Tcf (recoverable) Mari B gas field was discovered offshore Israel in March 2000 and commenced gas production in December The field produces approximately 330 MMcf/d from the Pliocene Yafo Formation and currently comprises the sole offshore producing gas field in Israel. Mari B is an elongate structure, orientated west northwest to east southeast, with two culminations, formed as a result of compactional drape of channel sands in the El Arish canyon. A stratigraphic element to trapping may also be present as a result of the pinch out of the reservoir sand stringers. Two new development wells have recently been spud and have been designed to maintain gas flows from the field. The Gaza Marine 1 wildcat was suspended as gas discovery by BG International Ltd in August The field s location in the Palestinian territories and disagreements over pricing of the gas have caused difficulties in developing and marketing the estimated 1.6 Tcf recoverable gas reserves reservoired in the Pliocene Noa Sand. Production from the field was originally planned to commence in 2003, averaging up to 145 MMcf/d, however, reports in June 2002 suggested that there was a discrepancy between the amount of gas that Israel Electric Corporation (IEC) wanted to purchase and what BG wanted to sell. Negotiations with BG and the Israeli government were reported to have initially resumed in early 2006, with the possibility raised of Israel beginning imports from A further possibility under consideration was export to Egypt to supply the proposed third train of the Idku LNG scheme. However, as of March 2010, BG was understood to be still continuing discussions with Israel on developing the field. Local media has reported that the gas price expected by BG (US$6 7 MMBtu) is still providing an

3 obstacle to a successful conclusion of the negotiations. IEC is believed to be offering US$5 MMBtu. TAMAR & DALIT DISCOVERIES On 17 January 2009, Noble Energy Mediterranean Ltd announced that it had made a significant natural gas discovery at the Tamar 1 wildcat in its Matan (309) block. The well, which was drilled in water depths of approximately 1,690m to test a subsalt, Lower Miocene structure in the Levant Basin, encountered more than 140m (460ft) of net pay in three high quality Tertiary reservoirs. Production testing was performed over a 18m (59ft) section in the lowest reservoir and yielded a flow rate of 30 MMcfg/d. The flow was restricted by available testing equipment and Noble's performance modeling has indicated that the well may ultimately achieve a production rate in excess of 150 MMcfg/d. Tamar 1 had a revised cost of approximately US$140 million (up from US$69 million). The Tamar structure was originally identified as having the potential to contain approximately 3 Tcf recoverable reserves. Post drilling the gross mean resource potential of the Tamar discovery was revised upwards from 3.1 Tcf to 6.3 Tcf. Noble followed up their success at Tamar in March 2009 with the Dalit 1 wildcat in the Michal (308) block. Formation logs identified more than 33.5m (110ft) of net gas pay in a high quality reservoir. Testing was performed over a 13m (43ft) section of the reservoir and yielded a flow rate of 33 MMcf/d of natural gas, limited by testing equipment on the rig. Performance modeling by Noble has indicated that the well may be completed to achieve a production rate of approximately 200 MMcf/d. The gross mean resources of this discovery have been estimated at approximately 500 Bcf of gas. Noble is targeting first gas sales from the Tamar discovery in Production will be approximately 400 to 600 MMcf/d which is expected to be transported via one or two pipelines either directly to the Yam Thetis consortium's onshore terminal at Ashdod or to Yam Thetis' offshore platform located close to the producing Mari B field. Noble is operator of the Yam Thetis consortium. The cost of developing both the Tamar and Dalit gas discoveries has been estimated as US$2 to 3 billion. Noble has already signed a number of letters of intent to sell gas from the Tamar field, however, the LoIs are non binding and the relevant parties are intending to enter into exclusive negotiations with the aim of executing binding supply agreements later in UPCOMING LICENSING ROUNDS Offshore boundaries between the Eastern Mediterranean countries are currently poorly defined. On 17 January 2007, it was reported that Lebanon had signed an exclusive economic zone agreement with Cyprus to demarcate the two countries offshore borders in the Mediterranean Sea. The agreement is designed to mark the underwater areas where each country can undertake exploration and development work once oil or gas is discovered. A similar agreement was signed between Cyprus and Egypt in Lebanon has also announced plans to demarcate an economic zone in the Mediterranean Sea to determine whether Israel's

4 recently discovered gas basin extends into its territorial waters. There is currently no offshore boundary defined between Israel and Lebanon. The Lebanese government has established a committee commissioned with implementing the demarcation work. Syria The Syrian Ministry of Petroleum and Mineral Resources finished dividing Syria's Mediterranean waters into four offshore blocks in October 2006 after completing the analysis and interpretation of a 5,000 km multi client 2D survey acquired by Norway s Wavefield Inseis. Subsequently, on 9 May 2007, the Syrian Ministry of Petroleum and Mineral Resources and the Syrian Petroleum Company (SPC) invited international companies to bid for four offshore blocks to be explored under production sharing agreements (PSA). The companies were invited to submit their qualification documents before participating in the bid round, which had a revised closing date of 29 November The four blocks covered a total area of 5,014 sq km and were located in different petroleum basins, including the Levant Basin, where the expected undiscovered petroleum resources are very high. Interest in the 2007 licensing round was extremely low with only one bid being received and no awards made. Due, in part, to the successes in the Israeli portion of the basin, the Syrian authorities are planning to re release the four offshore blocks in a 2010 licensing round Terms for the planned 2010 round are assumed to be similar to those in the original 2007 round. In the 2007 round, each of the four blocks had the same technical and financial commitments, with each being split into two separate exploration stages. The first stage was for a 30 month period during which the minimum work requirement was to carry out and process a 3D seismic survey for the whole block. At the end of this stage, the operator would have to decide whether to enter into the second stage or relinquish the whole block. The second stage involved drilling and exploration, which was also for a period of 30 months, during which the operator would be obliged to carry out the drilling of at least one exploratory well. Each licence had the option of two further extension periods. These extension periods were both for two years and require the drilling of at least one well. The operator was required to begin development drilling within two years of a commercial well discovery. The 2010 Syrian offshore licensing round is expected to be launched in late Lebanon On 18 September 2002 Spectrum completed the acquisition of a 2,000km 2D seismic survey, offshore Lebanon, using Fugro Geoteam's 'Dmitriy Nalivkin' S/V. Lebanon hoped to begin the marketing of its offshore acreage in July/August 2004 after plans to do so in early 2004 fell through. Schlumberger signed a Strategic Alliance Agreement with Lebanon in early 2004, and once the blocks were delineated planned to display them on the internet and take responsibility for the bidding process. However, Schlumberger's opportunity broke down in late 2004 following a change of personnel in the Ministry of Energy and Water, leaving the process once again in a state of limbo. In March 2007, Petroleum Geo Services ASA (PGS) completed a 2,400 sq km multi client 3D (MC3D) survey offshore Lebanon. The survey is divided into two parts, one survey of 1,000 sq

5 km over the Levant Basin and one of 1,400 sq km to the north of the Levant Basin, close to the Latikia Basin. The prospects identified will be the basis for Lebanon s first offshore licensing round. Potential drilling targets are understood to be distributed throughout the territorial waters; however it is understood that the structures encountered within the Levant Basin of Lebanon may be different to those found in the Levant in neighbouring countries, like Egypt and Israel. At the time of writing, the Lebanese Government has still not made an announcement regarding the opening of its licence round. The continuing delay is assumed to be the result of the recent political difficulties in the country. President Emile Lahoud's term ended on 23 November 2007 and his successor, General Michel Suleiman, was only elected to the presidency on 25 May Lebanon is also planning to present to parliament a draft law to regulate exploration activity in the country. The legislation is not expected to be ready until 2011 suggesting exploration in the country is unlikely to commence until at least 2012/2013. Cyprus Cyprus s first offshore licensing round was launched on 15 February 2007 with a bid deadline of 16 August Eleven offshore blocks were offered for bidding ranging in size from 2,557 to 5,741 sq km and totalling approximately 46,000 sq km. Blocks 2, 9 and 12 included acreage in the Levant Basin. Applications were filed for three of the blocks, however only one block was awarded, Block 12 to Noble Energy. A consortium of Increased Oil Recovery, DNO ASA and Larsen Oil & Gas withdrew their application for two blocks in late Cyprus is planning to launch its second offshore licensing round in Twelve blocks will be offered, including ten tracts which were offered but not awarded in the 2007 round. SUMMARY Until recently the offshore Levant Basin in the eastern Mediterranean was relatively unexplored due to economic, political and logistical complexities. However, the discovery of the Tamar and Dalit gas fields in Israel has opened up the area as a frontier basin with significant gas potential. These recent gas discoveries may have a significant impact on interest in future licensing rounds in other eastern Mediterranean countries. REFERENCES Gardosh, M., Druckman, Y., Buchbinder B., and Rybakov, M., 2008, The Levant Basin Offshore Israel: Stratigraphy, structure, tectonic evolution and implications for hydrocarbon exploration, Revised Edition. GII Report 429/328/08, GSI Report GSI/4/2008, 119p. Roberts, G. and Pearce, D., 2007, Hydrocarbon plays and prospectivity of the Levant Basin, offshore Syria and Lebanon from modern seismic data, GeoArabia v12 No p Schenk, C.J., Kirschbaum, M.A., Charpentier, R.R., Klett, T.R., Brownfield, M.E., Pitman, J.K., Cook, T.A., and Tennyson, M.E., 2010, Assessment of undiscovered oil and gas resources of the

6 Levant Basin Province, Eastern Mediterranean: U.S. Geological Survey Fact Sheet , 4 pp. Dr Sarah Haggas is the Regional Coordinator for Middle East North, IHS Energy, Tetbury, sarah.haggas@ihs.com For more information on IHS, please contact paul.webber@ihs.com Tel: +44 (0) Website: