articles | 28 July 2016

Cyprus' future gas strategy depends on next findings

Cyprus’ future strategy in developing its hydrocarbon industry will depend on the quantities that exploratory drilling in its exclusive economic zone will reveal over the next years, Energy Minister Yiorgos Lakkotrypissaid.

“We have looked at every option,” said Lakkotrypis, was speaking on state-radio CyBC a day after disclosing the names of hydrocarbon companies that applied in Cyprus’ third oil and gas licencing round. “We know exactly what every option means in terms of natural gas quantities”.

Whether Cyprus will set up a land-based liquefaction plant, or sell natural gas liquefied on floating platforms, or in a compressed form, or to resort to laying pipelines to Greece or Egypt, will ultimately depend on the gas quantities that hydrocarbon companies will discover, he said.

Lakkotrypis said on Wednesday that the third round attracted bids from U.S. energy giant ExxonMobil, which filed a bid together with Qatar Petroleum for Block 10 in Cyprus’ exclusive economic zone, and from a consortium of Italy’s ENI and France’s Total, which also applied for block 10 and block 6. In addition, a consortium of Capricorn, a subsidiary of Scotland’s energy company Cairn, with Israel’s energy companies Delek and Avner, applied for block 8, for which ENI also applied.

Total already has the licence to explore and exploit hydrocarbons in block 11 while ENI has, together with its partner KoGas, the South Korean energy company, the licence for blocks 2, 3 and 9. ENI-KoGas is expected to present the government its exploration plan for the awarded blocks after receiving an extension of the deadline until February 2018. Total, which last year relinquished block 10, is preparing to drill in block 11, the minister said. ENI announced in September the discovery of Zohr, a reserve in Egypt’s exclusive economic zone, adjacent to Cyprus’ block 10, containing 30 trillion cubic feet of natural gas.

“We know exactly what kind of quantities are required to justify these projects,” Lakkotrypis said adding that following Egypt’s recent mammoth discovery, Cyprus decided to launch a third round by offering three blocks around the subsea Eratosthenes mountain to increase the chances of new findings.

The minister added that Egypt is for the time being the “most advantageous” option regarding the development of Aphrodite, Cyprus’ so only gas finding to date, containing 4.5 trillion cubic of feet natural gas.

Egypt, with which Cyprus is in talks about selling Cypriot gas, “is de facto the only realistic option which is also (financially) marginal judging from talks we have with potential buyers,” the minister said. “The sales agreement is still pending but this is not that easy given the global oil and natural gas price situation”.

Production in Aphrodite, owned by the U.S. Noble Energy Inc., British Gas, a subsidiary of Royal-Dutch Shell, and Delek, is not expected to commence before 2020.

The Cypriot Energy Minister said that financial and political considerations relating to low energy prices and the outstanding Cyprus problem discouraged companies from bidding in the third round.

Some energy companies decided against bidding “mainly because they have large investment projects in Turkey,” he said. “This is the reality”.

Regarding Israel’s interest in exploring the possibility of laying a pipeline linking its gas findings to Turkey, which last month normalised its relations with both Israel and its largest energy provider, Russia, Lakkotrypis said that Cyprus cannot veto such a project. “The Law of the Sea is clear,” he said.

He added that according to the Law of the Sea, while “a country cannot veto such a project, it is clearly stated that a state has to give its consent about the route of the pipeline”.

Therefore, “states involved, in this case Israel, Cyprus and Turkey, will have to come to an arrangement about the environmental issues,” he continued. “Will Turkey ever come to talk to the Republic (of Cyprus) in theabsence of a settlement of the Cyprus problem?”

Source: Cyprus Mail

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