Green light for BG opens ex­port prospects from Aphrodite

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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