articles | 28 August 2016

Cyprus-Egypt gas deal on the cards

Egypt and Cyprus are expected to sign the first of three bilateral agreements on natural gas when Egypt’s energy minister Tarek El Molla visits the island on August 31, 2016.

It’s a move that will lay down the legal framework for companies to be able to sign contracts on exporting natural gas from the Cyprus Aphrodite field in Block 12 to Egypt.

“This is a bilateral agreement, one of three, which are necessary to create the conditions for the commercial agreement that is going to come from the companies and is under negotiation as we speak,” Energy Minister Yiorgos Lakkotrypis told the press.

The other two bilateral agreements under discussion involve cross-boundary pipelines and host agreements between the companies and each of the two governments.

“It is something that the companies have asked for…These are agreements that need to be in place for the framework to work for the sale of the gas.

“The commercial negotiations are happening in parallel,” he explained. Referring to the agreement to be signed, he said: “We are one step closer to creating asafer and more predictable, more transparent framework for the commercial agreements to take place”.

There are still a number of steps to be taken, before a final investment decision is taken to export the gas. Predicting a precise date is complicated by low gas prices, however. “The conditions in the market right now are the ones that are affecting us the most. We have seen how international prices are suppressed, so it will depend a lot on those conditions,” said Lakkotrypis.

Difficult conditions have not prevented the companies from carrying on talks.

“Negotiations are ongoing, they continue, as they should, away from the spotlight, and we hope that we will be able to conclude with those as well in due course.”

The minister is confident that the absence of the long-awaited framework agreement between Israel and Cyprus will not hold things up.

“There is an agreed process between the two countries. We are following it and we hope we will be able to reach a mutually-acceptable solution as soon as possible,” he said.

Cyprus and Egypt signed a Memorandum of Understanding (MoU) on gas cooperation in February 2015.

The agreement mandated the state-run Egyptian Natural Gas Holding Company (EGAS) and the state-run Cyprus Hydrocarbons Company (CHC) to examine technical solutions for the transport of natural gas through a direct marine pipeline to Egypt from the Aphrodite field in offshore Block 12.

Since January 2016 the Aphrodite licence has been held by Noble Energy (35%), BG (35%) and Delek (30%).

If an export agreement is signed, the expectation is that the gas would go to the BG-run Idku liquefied natural gas (LNG) plant in Egypt which is currently idle. BG merged with Shell earlier this year.

Source: InCyprus

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