Lakkotrypis Awaits TOTAL's Decision on its Involvement in Cyprus' EEZ
Cyprus’ Minister of Energy, Commerce, Industry and Tourism said in an interview given to CNA that he was awaiting a decision by France’s TOTAL regarding the company’s involvement in Cyprus’ Exclusive Economic Zone (EEZ). The company’s exploration licence in Block 11 expires in February 2016 but the French giant is believed to be interested in renewing its contract. Early in 2015, TOTAL had announced it was withdrawing from Cyprus’ waters for not having identified “drillable prospects”. The possible change of heart may be due to the discovery by Italian ENI of a giant field, Zohr, in Egyptian waters, in very close vicinity to Cyprus’ maritime zone. The field is estimated to hold up to 30 Tcf (trillion cubic feet) of natural gas. The significance of the discovery is substantial, not only for Egypt undergoing severe energy problems, but for the wider Eastern Mediterranean as it comes as a boost for future explorations.
ENI is already involved in Cyprus’ EEZ. The company holds licences to drill in Blocks 2, 3 and 9. Its two drillings in Block 9 have been unsuccessful to date, but the Italian company is said to be determined to pursue its exploration activities off the island’s coast. Despite Cyprus’ offshore troubles, having only discovered the Aphrodite field in Block 12 estimated to hold 4.54 Tcf of natural gas, there seems to be a renewed interest in the island’s hydrocarbon potential. On 23 November 2015, Noble Energy announced it was selling to Britain’s BG Group a 35 percent stake in Block 12 of Cyprus’ EEZ with rights over the Aphrodite field for a total cash consideration of $165 million (USD). The deal is expected to close before the end of the year.
BG’s entry into Block 12 is a positive development that may fast-track the production plan of the Aphrodite field. BG operates the Idku liquefied natural gas (LNG) plant near Alexandria in Egypt, which means that the company’s involvement in the Aphrodite field may secure a customer for Cypriot gas. Egypt is in desperate need for natural gas to supply the domestic market, due to a rising demand and a falling production, despite the discovery of the giant Zohr field that is not expected to reach production stage before 2020.
Israel has also its eyes on the Egyptian markets. The proximity of Egypt to its immediate neighbour Israel and to Cyprus makes it an ideal customer for Cypriot and Israeli gas. The gas would reach the Egyptian customers via an undersea pipeline. The gas could also continue its way towards lucrative Asian markets in a liquefied form via Egypt’s LNG plants at Idku and Damietta. A potential cooperation between Cyprus and Israel is on the table as the two countries have been exploring options for the joint exploitation of their riches. Ultimately, the importance of Cyprus’ role in the region will depend on the size of its discoveries. The involvement of ENI, BG and potentially TOTAL, and the expected increased activity level in Cyprus’ waters will certainly shortly determine the importance of Cyprus’ role in the Eastern Mediterranean.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat