Green light for BG opens export prospects from Aphrodite
The ENI-Kogas consortium has been granted a two-year extension to its exploration license in Blocks 2, 3 and 9 of the Cyprus Exclusive Economic Zone (EEZ), as its current permit expired on January 23.
The joint venture was close to abandoning its plans after two unsuccessful exploration drills but had a change of heart after the recent discovery of the vast deposits estimated at 30 trillion cubic feet at the Zohr gasfield within the Shorouk concession of the northern Egyptian EEZ which is expected to come on stream in 2020. The discovery by ENI is almost ten times the estimated deposits in the Aphrodite gasfield in Block 12, the only concession with proven deposits in the Cyprus EEZ.
According to the Ministry of Energy, the ENI-Kogas consortium will conclude studies within the next two years aiming at better evaluating and recalibrating the geological model of the region, in order to identify prospects necessary to complete its drilling obligations.”
“This development is especially important, as it reaffirms and advances Cyprus’ energy prospects during a period in which the international oil and gas industry is experiencing challenging conditions,” the MoE announcement said.
Energy Minister Yiorgos Lakkotrypis was quoted as saying last month that the Italian-South Korean joint venture had asked for more time in order to “re-assess the energy potential”.
According to a preliminary plan shown to the government a few months ago, the consortium would place their next drill around mid-2017 depending on its re-evaluation of its geologic model.
Meanwhile, a proposal tabled to the Cabinet by Lakkotrypis for the participation of British Gas Group in the Block 12 concession has been approved.
According to the proposal, US-based Noble Energy will continue to be the main operator in the block with a share of 35%, while BG will acquire 35% from the American company and the Israeli group Delek will retain the remaining 30% through its Delek Drilling (15%) and Avner Oil (15%) subsidiaries. The total cash consideration for the deal was $165 mln.
In a statements after the Cabinet meeting on Monday, Lakkotrypis said that in the coming days certain conditions put before the ministerial body will have to be implemented in order to go ahead with the final signature of the deal.
He said there are procedural matters, such as the government receiving letters of acceptance on the part of the companies and letters of guarantee for activities to be undertaken.
According to Lakkotrypis this is a very i mportant development because it strengthens the joint venture of Block 12 in view of the commercial exploitation of the Aphrodite reserves.
Once the deal is sealed, British Gas will be expected to offer its own comments on how to speed up planning and even on how to save resources, he noted
He said that the British company has also expressed interest in the Cyprus EEZ but has not specified yet for which particular block.
Lakkotrypis added that since BG is also a possible buyer of natural gas it will be able to speed up processes since it will be able to use the liquefaction terminal at Idku in Egypt which it manages and co-owns.
He told reporters that as planning stands today 2020 will be the year for development and production of natural gas from Cyprus offshore fields.
Block 12 contains the Aphrodite gas field estimated to hold a gross mean resource of 4.5 trillion cubic feet of natural gas. Announcing the transaction on November 23, Minister of Energy Yiorgos Lakkotrypis said this a “was very significant development which shows the increased confidence in Cyprus’ EEZ and its prospects, from a company with huge technical and commercial-economic potential.”
“This upstream position provides a potential source of gas to Egypt where BG Group holds equity in the two-train LNG export facility at Idku as well as LNG offtake rights to lift 3.6 mtpa,” BG said in a statement announcing the transaction.
Cyprus is in talks with the stakeholders in the two LNG terminals in Egypt – Idku and Damietta. Cypriot gas piped to the terminals would be primarily destined for re-export to Europe.
As global oil prices continue to slide, Lakkotrypis said, and as companies cut back on costs and disengage from projects, “certainly it is a very positive development for Aphrodite that such a large company is joining the consortium, aligning interests across the chain, while their interest in the EEZ is highly encouraging.”
Asked whether falling oil prices affect Cyprus’ plans, the minister said they did.
“It is one thing to make plans based on price X, and quite another to subsequently plan based on a price that is onethird of that.”
Previously, the Cyprus Mail quoted energy expert Charles Ellinas as saying that Noble, though farming out a part of Aphrodite on the cheap, had improved its cash-flow position, following disappointing results in 2015 in its North America shale oil and gas operations.