Aphrodite row needs quick fix

Israeli claims over potential output from the Aphrodite gas field arose from the demand by the owners of the Israeli offshore block Ishai, bordering Cyprus’ block12; they are entitled to a share of the Aphrodite gas reserves – estimated at 120 billion cubic metres (bcm).

They claim the Aphrodite gas reservoir straddles the EEZ delineation boundary between the two countries, extending into Ishai.

Together with the governments of Cyprus and Israel, the two sides have been in negotiations for over ten years and have not been able to reach an agreement, which risks straining relations between the two friendly countries.

The energy ministers of Cyprus and Israel agreed on a framework in March 2021 to resolve the dispute but left it to the companies to agree on how to share the reserves.

The Israeli energy ministry said that if the companies did not reach an agreement within 180 days, it would be referred to an international expert to develop reserve sharing recommendations over another 180 days.

It is now close to a year since that understanding, but with time to the March 4 deadline running out, the companies do not appear to have been able to agree.

It is, therefore, not surprising that the Israelis are now pressing the issue.

It is time to return and implement the framework agreed upon last March, with the two states taking action and referring the case to expert arbitration, with a horizon of six months to settle it.

It should not be an insurmountable problem. A consortium of small Israeli companies owns Ishai.

Their latest reported position, which the Israeli Ministry of Energy supports, is that the quantities of Aphrodite gas extending into Ishai are about 10-12bcm – but, I believe, likely less.

This is based on a well, the Ishai consortium called Aphrodite-2, drilled about 1km from the EEZ boundary.

This was completed in 2013 and showed the presence of hydrocarbons, but not in marketable quantities.

However, the Ishai consortium used this as proof that Aphrodite is extending into their block.

In 2015, Israel formally approved Ishai as a gas discovery, a step that showed it was taking the issue seriously.

Block 12 owners disagree

The owners of block 12, Noble Energy – taken over by Chevron in 2020 – Delek and Shell disagreed with Ishai’s claim.

Their position was that Aphrodite does not extend into Ishai and that even if it does, it involves only negligible quantities of gas, less than 1%.

Such differences are not uncommon in the oil and gas industry.

To avoid disputes, neighbouring countries usually enter into ‘unitisation agreements’ immediately after the EEZ delimitation agreements.

This happened, for example, between Cyprus and Egypt.

Such agreements safeguard the rights of both countries and companies and set out the methods for resource sharing and resolving disputes.

Unfortunately, this did not happen between Cyprus and Israel, although the EEZ delimitation agreement was signed in 2010, leading to the current situation.

Now, without an agreement between the companies involved to resolve this problem, referral by the two states to international expert arbitration is the right way to reach a final solution – unless, of course, the companies reach a last-minute agreement.

Cyprus can proceed with the development of Aphrodite without a solution.

But it runs the risk of Ishai and Israel resorting to international courts, with likely negative political implications.

Based on the announcement of February 8, without a solution, the Ishai consortium seems determined to move in that direction.

Given the small amounts of gas involved in this dispute, it must be avoided.