Next 6-12 months ‘cru­cial’ for LNG ter­mi­nal

Financial Mirror (Cyprus) - - FRONT PAGE -

The next 6-12 months will be cru­cial for the de­ci­sion whether to pro­ceed or not with the land-based LNG liq­ue­fac­tion plant at Vas­si­liko, as ex­plo­ration gets un­der­way by ENI-Ko­gas and French To­tal, while No­ble En­ergy is ex­pected to pro­ceed with a sec­ond drill within a year’s time, ac­cord­ing to the na­tional oil and gas com­pany.

Toula Onoufriou, Pres­i­dent of the Cyprus Hy­dro­car­bons Com­pany (EYK), the suc­ces­sor to the Na­tional Hy­dro­car­bons Com­pany of Cyprus (KRETYK) that was re­struc­tured in March, told a press brief­ing on Tues­day that “in­di­ca­tions are en­cour­ag­ing” and that the next six to 12 months will be cru­cial for the vi­a­bil­ity fo the LNG ter­mi­nal.

“The first pri­or­ity re­mains the de­vel­op­ment of the Vas­si­liko ter­mi­nal, even though a float­ing LNG (FLNG) or a com­bi­na­tion of both is one of many op­tions still on the draw­ing board,” she said.

In her first me­dia ap­pear­ance as head of the govern­ment’s commercial arm that will over­see the rev­enue shar­ing agree­ments (RSAs), Prof. Onoufriou, who has vast in­dus­try ex­pe­ri­ence and is at present vice rec­tor of the Tech­nolog­cal Univer­sity of Cyprus (TEPAK), said that “ENI will com­mence is own ex­ploratory drilling in Septem­ber, fol­lowed by To­tal and No­ble re­sum­ing with sec­ondary probes in 2015.”

In­tially, No­ble En­ergy an­nounced a first es­ti­mate of 7 tril­lion cu­bic feet of nat­u­ral gas re­serves and the LNG ter­mi­nal needs an up­stream sup­ply from a re­serve basin of 5 trln in or­der to make it vi­able.

When No­ble re­vised down its first es­ti­mates to 3.5 tcf, Cyprus govern­ment of­fi­cials and politi­cians started get­ting ner­vous that an LNG ter­mi­nal and the po­ten­tial rev­enues from liq­ue­fac­tion and sales to in­ter­na­tional mar­kets could dwin­dle.

Ideally, Cyprus wants to have ac­cess to am­ple re­serves in or­der to op­er­ate the liq­ue­fac­tion plant and en­ter the ex­port busi­ness.

But Block 12 oper­a­tors No­ble and their joint ven­ture part­ners Delek and Avner have struck a 15-year deal to deliver 20% of their up­stream ca­pac­ity or 3.75 tcf from the ad­ja­cent Leviathan gas­field in Is­raeli wa­ters to the BG-op­er­ated plant in Egypt.

“No­ble and Avner are in­ves­ti­gat­ing if they can deliver more re­serves from their Leviathan gas­field in or­der for the Cyprus ter­mi­nal to reach 5 tcf. We are still ne­go­ti­at­ing,” Onoufriou said.

Board mem­ber Le­nas My­lonas said that “we are at a very good stage of ne­go­ti­a­tions with both No­ble and Avner in the last three meet­ings, which them­selves were 3 days long each.”

As re­gards press re­ports that No­ble may be seek­ing new in­vestors in or­der to re­duce its stake in the Block 12 ‘Aphrodite’ gas­field within the Cyprus Exclusive Eco­nomic Zone (EEZ), the EYK pres­i­dent said that “there is a pos­si­bil­ity that can en­cour­age other in­vestors as well.”

En­ergy gi­ant China Na­tional Off­shore Oil Corp. (CNOOC) was re­port­edly in talks to buy 30-40% of the Aphrodite gas field oper­a­tion. No­ble En­ergy owns 70% of the rights of the field, and Avner Oil and Delek Drilling own 15% each.

Re­ports sug­gest that Aphrodite field gas re­serves are enough to jus­tify de­vel­op­ing a float­ing liq­uid nat­u­ral gas (FLNG) plant, which would al­low the Chi­nese com­pany to ex­port gas back to China.

As re­gards the fund­ing for the ter­mi­nal at Vas­si­liko and if Deutsche Bank is still in­ter­ested to fi­nance the project, Onoufriou said that “there us in­ter­na­tional in­ter­est, but our main con­cern right now is the size of the re­serves, and only then will we start ne­go­ti­a­tions to con­sider fi­nanc­ing.”

EYK is also about to hire a Gen­eral Man­ager, no­tice for which will be posted by the end of this week, while hir­ings will take place at two lev­els – those with in­ter­na­tional ex­pe­ri­ence who will ac­tively con­trib­ute to the com­pany’s op­er­a­tions and young blood with lit­tle or no ex­pe­ri­ence who will learn dur­ing their em­ploy.

The Ital­ian-Korean con­sor­tium ENIKo­gas has been granted ex­plo­ration li­cence for the blocks 2, 3 and 9 and it will carry out four ex­plo­ration drillings start­ing in Septem­ber.

The French To­tal will be­gin its ex­plo­ration pro­gramme on blocks 10 and 11 in the sec­ond half of 2015, while No­ble en­ergy will carry out an additional drilling.

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