Offshore oil and gas activities take considerable time to develop even after a discovery announcement, so project timelines are often extended. Recently, announcements associated with ExxonMobil have led many to believe that previous discoveries made in Cyprus may be transitioning into the next phase of their life cycle.
Offshore discoveries to an identified path to development
Most of ExxonMobil’s activity in Cyprus is focused on Block 10, and specifically on Glaucus and Pegasus discoveries. Both of these discoveries had positive reviews upon initial release and provided hope for further development. However, the question remained: would there be sufficient evidence to allow development beyond just exploratory drilling?
It seems that this barrier is being removed. Cyprus’s energy regulatory body has determined the Pegasus discovery to be commercially viable. The determination supports the fact that the discovered resource is indeed available and capable of being developed based on current environmental regulations. The declaration by the energy regulators places the discovery into a much more serious category—namely, one that suggests that production of the resource will occur in the near term.
Glaucus is still considered a major portion of the overall portfolio of offshore discoveries related to Block 10. Collectively, the two discoveries provide insight into Cyprus’s overall potential for discovering additional reserves in offshore waters. They indicate that Glaucus and Pegasus represent a larger and potentially developing resource base for Cyprus rather than individual discoveries.
Next Steps as ExxonMobil moves ahead with its development plans
Following confirmation of commercial viability for Pegasus, it is natural for everyone to ask what ExxonMobil intends to do next. ExxonMobil will need to complete the planning stages relative to developing the gas discovered at Pegasus. The planning process includes identifying necessary infrastructure and possible methods of producing the gas.
According to reports from industry observers, ExxonMobil is currently working through detailed planning related to a large-scale gas project tied to the Pegasus discovery. Planning time frames for offshore gas developments is normally lengthy (often multiple years); however, this planning phase represents a critical step toward making a final investment decision regarding the project.
Cyprus has positioned itself as a player in the broader Eastern Mediterranean energy market. Discoveries such as Glaucus and Pegasus will help define how Cyprus will connect with regional energy supply lines. Ultimately, decisions regarding processing or exporting gas from the field will determine how competitive the project will become.
These complexities add to the uncertainty surrounding the project,t yet reinforce that the project has moved past the initial uncertainty and into a more defined developmental phase.
How does this signal a shift in Cyprus’ energy prospects?
Progression toward the development of Glaucus and Pegasus toward actual development indicates how Cyprus’ offshore resources may grow over the next several years. Rather than being merely individual discoveries, they are becoming an integral part of an overall strategy for developing Cyprus’s offshore resources.
This represents a move for ExxonMobil from successful exploration efforts toward strategic long-term planning. In order to advance a project of this size, coordination among three areas must exist — commercial viability, technical feasibility, and regional relevance — each of which now seems to be in motion.
On a macro basis, the development of these gas fields demonstrates how offshore gas developments contribute to international dialogue on regional energy issues. With continued demand for dependable energy supplies, developments like those described above can significantly affect how new energy supplies are incorporated into established distribution networks.
ExxonMobil’s work in Cyprus illustrates how offshore discoveries can transition toward structural development when appropriate. With development plans advancing, attention will likely turn toward implementation and long-term effects. As other projects develop similarly in the region, this will set precedents for future energy supply investments.
