• 18 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 20 hours Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 22 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 23 hours Schlumberger Warns Of Moderating Investment In North America
  • 1 day Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 1 day Energy Regulators Look To Guard Grid From Cyberattacks
  • 1 day Mexico Says OPEC Has Not Approached It For Deal Extension
  • 1 day New Video Game Targets Oil Infrastructure
  • 1 day Shell Restarts Bonny Light Exports
  • 1 day Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

Why U.S. Crude Exports Are Booming

U.S. crude oil exports are…

Alt Text

Is OPEC Considering Deeper Output Cuts?

You could argue OPEC and…

Why This Mega NatGas Project Might Not Go To The Oil Majors

Offshore Oil Rig

The upcoming Cyprus bid round may be one of the best opportunities of the year — to build a new oil and gas empire.

When the tiny Mediterranean nation offers up its offshore acreage this summer, all eyes will be on the “usual suspects” in this part of the world. Namely, Italian major Eni — who operates the massive Zohr natgas discovery next-door in Egyptian waters. And others mid-tiers like Noble Group, who work nearby in the Israeli offshore.

And there could well be some surprises when it comes to bidders for the Cyprus licenses. Especially from Russian firms — with that nation having shown a surprising level of interest in the eastern Mediterranean energy scene. Don’t be surprised to see a Gazprom or Rosneft pop up in the mix.

Of course, there’s also a chance that the Cyprus round could attract some heavier hitters. With names like Shell and BP possibly being drawn in by the sheer scale implied by East Mediterranean discoveries like Zohr (30 trillion cubic feet of natgas).

But here’s the thing. When you really look at it, there are issues with all these players.

Start with the most likely bidders — like Eni and Noble. They’re already in the area, right? Why wouldn’t they take what they know about the emerging carbonate reservoir plays of the Mediterranean and run with it in a new area?

But the problem is, they’re already in the area.

Eni already owns a mega-field in Zohr. Noble owns a Leviathan (as well as already-licensed acreage in the Cyprus offshore). Both fields are going to be expensive and complex to develop (although likely very profitable in the end).

So do these firms really have the funding and manpower bandwidth to go after another mega-field? Especially one that comes with all the exploration risk of a greenfields play? At a time when things are tight in the global E&P sector in terms of capital deployment?

The big surprise of the Cyprus round might turn out to be — both of these groups stay on the sideline. Quite simply, they’ve got a lot on their plates.

So, who else could step up? Certainly the Russian E&Ps have capital, and probably the necessary risk appetite. Related: OPEC’s Latest Failure Creates Opportunities For Traders

But will Cyprus want Russian influence here? And more importantly, will the neighbours stand for it?

An Eastern Mediterranean state like Lebanon would almost certainly be happy to see the Russians step in. Especially since Beirut has been jockeying for a share of the precious natural gas that’s going to come from all the new discoveries.

But the very existence of cozy Russia-Lebanon relations may make Russian involvement in Cyprus an uncomfortable idea for other players in the area. Most notably Israel — a country that has been quietly deflecting not-so-subtle attempts by Vladimir Putin to get involved in the offshore natgas sector.

Does Israel have enough clout with Cyprus to influence a decision on the license awards? Hard to say for sure — but it’s certainly possible. In which case, Russian firms could find themselves effectively disqualified for political reasons.

And the super-majors? In theory, Shell is a logical fit — through its recently acquired BG Group division, which knows natgas and Europe well.

But again, most of the big E&Ps are cutting back on capital spending these days. Especially when it comes to rank exploration plays — with these companies favouring development projects where they can deploy capital with little risk.

All of which breaks down like this: the already-in Mediterranean players might be too all-in on the region, the outsiders might be too sensitive to bring in, and the big players may be too conservative to want in.

So who’s left?

How about… someone completely unknown?

Although it sounds unlikely in the utmost, the Cyprus bid round may actually be the perfect place for a junior E&P to swoop in. With such a firm having no political strings, and also carrying the right risk-reward incentives for a project like this — which is still a make-no-mistake exploration play, albeit with some very strong indications of mega-discovery potential.

That “proven” nature of the play might be enough to attract equity capital to a Cyprus-focused start-up. As I noted before, there’s $161 billion in private equity money for natural resources right now — and the world’s top-performing PE fund the last decade was a Europe-focused energy investor.

Might backers in the PE sector pay up $50 million for a shot at a Cyprus mega-find? They just might. Especially if they were injecting capital into a freshly-minted junior, where they could command major ownership — and be involved in designing the firm and the management team from the ground up.

The team would certainly be key in such a scheme. With a big-name president or CEO being a requirement in order to attract the big capital needed here. Related: Colombian Oil Patch Needs $70 Billion To Survive

But that kind of thing has happened before in the E&P world. With high-profile executives forming blind-pool cash box companies with hundreds of millions or even billions of dollars — to then go out and hunt for projects.

And investors might be all the more interested given that European natgas pricing is still some of the strongest on the planet. Making a potential Cyprus natgas field one of the most attractive projects on the planet in terms of commodities pricing.

It’s an outside chance — but the dynamics here could make this one of the big shockers in energy for 2016. And it could make billions for someone with the vision to put the pieces together correctly. Let’s see if there are any takers.

Here’s to filling the gap.

By Dave Forest

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News