Cyprus Opts for Third E&P Round

Shortly after deciding that importing LNG would be too expensive even as an interim measure, Cyprus has set in train the process for a third offshore licensing round for hydrocarbon exploration in its exclusive economic zone (EEZ).

According to government spokesman Nikos Christodoulides speaking on February 16, the ministerial council authorized the energy minister to submit the necessary proposals to implement this decision as soon as possible.

It looks as if the catalyst for making this decision were a number of meetings the Cyprus’ president had during the economic forum in Davos. At the time the government announced potential developments in Cyprus EEZ. These meetings included the CEOs of Eni and Total, who confirmed their interest for further exploration in Cyprus EEZ. 

The energy minister Yiorgos Lakkotrypis confirmed this announcement but said he “cannot give more details until the completion of the relevant procedures.” He also confirmed great interest from a number of energy companies. He said that the government carried out a total re-evaluation of the energy potential of Cyprus EEZ following Eni’s discovery of the Zohr gas field, offshore Egypt. It is on the basis of these results that the government decided to proceed to a third licensing round.

The timing of this process in a barely stable region, with increasing concerns about Syria, is important. It also comes at a time when the price of oil and the oil companies' ability to invest in new exploration are low. Cyprus may also need to restore confidence in the hydrocarbon prospects in its EEZ, following Eni’s earlier disappointing drilling results in Block 9.  However the discovery of Zohr has created new interest in the eastern Mediterranean region and it is already attracting new companies. It is also understood that Total is quite interested in taking back Block 10.

With careful preparation and presentation of the new EEZ evaluation results, tenders should be issued late 2016 or early 2017. By that time oil prices should be on the way to recovery and the talks on the Cyprus problem should have taken their course, creating the right environment for a successful new licensing round.

Dr Charles Ellinas  @CharlesEllinas

Nonresident Senior Fellow – Eurasian Energy Futures Initiative, Atlantic Council