Local
articles | 24 November 2015

BG Group secures 35% in Cyprus’ Block 12

British multinational oil and gas company BG Group has acquired a 35% stake in Cyprus’ offshore Block 12, following an agreement with concession holder and operator Noble Energy.

“BG Group today announces it has taken a 35% holding in Block 12 offshore Cyprus which includes the Aphrodite gas discovery. 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,” a press release said.

Under the deal, Noble retains 35% of equity in Block 12 and remains the operator.

The other stakeholders in Block 12 are Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership, each with a 15% working interest.

Speaking to reporters at the Presidential Palace, after briefing the president, Energy Minister Giorgos Lakkotrypis confirmed the deal between Texas-based Noble Energy and BG.

The agreement is subject to government approval, which Noble formally requested on Monday.

“It is an extremely important development which indicates a vote of confidence in Cyprus’ Exclusive Economic Zone (EEZ) and its prospects,” the minister said.

BG’s entry into the Cypriot EEZ, he added, “constitutes an alignment of interests in the natural gas production and distribution chain, as BG International, a company with considerable technical, financial and commercial capabilities, is part of BG Group, a partner and operator in the liquefied natural gas terminal at Idku, Egypt.”

He said talks were underway 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. But according to Lakkotrypis, some of the gas would be taken up by the Egyptian domestic market.

Responding to questions, the minister said Noble Energy had long sought to farm out part of its interest in Block 12, in order to spread out the capital investment risk.

Investment for developing the ‘Aphrodite’ field is estimated at between €2bn and €3bn, he added. “With the discovery of the Zohr field [in Egypt], question marks arose over our efforts to sell natural gas to Europe. With this move today, which was announced on the London and New York stock exchanges, we are a step closer to the exploitation of ‘Aphrodite’,” noted Lakkotrypis.

The next step would be commercial agreements between companies: “On the one hand there are the licence holders in Block 12 together with the Cyprus Hydrocarbons Company, which represents the state, and on the other hand potential buyers in Egypt.”

The ‘Aphrodite’ play, holding gross mean resources of 4.5 trillion cubic feet (tcf), was declared commercial in June, but a final development plan is still pending.

The introduction of BG into the equation, given the company’s financial wherewithal and technical proficiency, could now see those plans fast-tracked.

The development plan lays out the method of production and the timetable, with the concession holders finalising infrastructure and engineering designs. Following this, the partners must conclude gas sales agreements and line up the financing. The final – and most crucial – step is the Final Investment Decision (FID).

Cyprus and Israel are in direct competition over supplying energy-starved Egypt with gas. The Leviathan partners earlier signed a memorandum of understanding (MoU) with the Idku LNG plant, and the Tamar partners concluded a separate MoU to supply gas to the LNG plant at Damietta.

There were also developments on another front. An Israeli government technical team is due to arrive here for talks to push forward a unitisation agreement between the two nations.

Meetings will be taking place in Nicosia on Tuesday and on Wednesday.

Part of the ‘Aphrodite’ reservoir extends into the area of the ‘Yishai’ licence on the Israeli side.

It’s understood the chief reason for the delay in signing a unitisation agreement is a dispute over the quantity of gas in Israeli territory and Israel’s level of involvement in the reservoir’s development.

According to Israeli website Globes, “while sources in Cyprus assert that only 1% of ‘Aphrodite’ is in Israeli territory, Israel says that the number is much larger, and wants to be part of the development plan for the reservoir.”

Last week Israel declared that it was classifying the ‘Yishai’ licence as a gas discovery. The word ‘discovery’ means the reservoir is of commercial value, that is, the quantity of gas in it justifies its development.

Speaking to Globes, an unnamed Cypriot official involved in the negotiations between the two countries described the move as aggressive.

The official said Israel’s action “…is no accident; it is an attempt to exert pressure on Cyprus to show more flexibility concerning the unitisation agreement between the two countries.”

Meanwhile, the chairman of oil and gas giant Total is due to meet with President Nicos Anastasiades and top officials here on Tuesday.

Total are reported to be keen on having their concession on offshore Block 11 renewed. Their interest stems from their concession’s proximity to a major gas discovery – the Zohr prospect – in Egyptian waters.

Source: Cyprus Mail

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