Lakkotrypis: another milestone in Cyprus’ energy programme

Cyprus on Thursday granted the first hydrocarbon exploitation licence to the consortium that owns the Aphrodite concession, with a view to pipe gas to Egypt and export it in the form of LNG.

The licence, granted to Noble Energy, Shell, and Delek, is for 25 years.

It is based on a production and development program agreed between the government and the companies.

The plan provides for the gas to be piped to a liquefaction facility in Idku, Egypt and later exported to Europe and elsewhere in the form of LNG.

Shell, operators of the Idku facility, in which they also have a 35 per cent stake, will be the buyer of the gas.

“I believe that today’s development is yet another milestone in Cyprus’ energy program, demonstrating that, despite all the difficulties, our program is proceeding as planned,” said energy minister Giorgos Lakkotrypis at the signing ceremony.

Production from Aphrodite is slated to begin in 2025.

But several steps will precede actual production. The first is drilling a second appraisal well at the gas reserve, followed by a FrontEnd Engineering Design and, lastly, a final investment decision by the concessionaires.

Lakkotypis said the companies intend to drill a second appraisal well over the next 18 months.

Once production begins, Cyprus estimates to generate approximately $9.3bn (€8.4bn) over an 18-year time frame – or some $500m a year.

The estimated revenues are based on a revised production sharing agreement (PSA), also signed Thursday in tandem with the concession agreement.

The Aphrodite prospect holds 4.1 trillion cubic feet of gas.

The $9.3bn in revenues for the Republic are derived from a scenario forecasting an average of $70 per barrel of Brent oil in 2022.

The revised PSA is the outcome of year-long talks between the government and the companies.

Under it, the companies’ share of revenues rises when oil/gas prices are low; conversely, the share of the Cypriot state goes up when oil prices are high.

Lakkotrypis said the government agreed to this formula in exchange for iron-clad commitments from the concession holders.

The companies are contractually bound to adhere to strict development timetables, facing sanctions if they do not, including termination of the contract.

Overall, the companies will be spending approximately €7bn on well infrastructure, borehole drilling and maintenance and operation costs.

The signing ceremony at the ministry of energy was attended by the ambassadors of the United States, the United Kingdom and Israel.

“Cyprus is poised to become a natural gas producer and an alternative source of energy supply to the EU,” Lakkotrypis said later.

“At the same time, one more decisive step has been taken toward realizing the shared vision of countries in our region to create a Mediterranean natural gas corridor to Europe.”

The benefits to Cyprus would be manifold: gas sales revenues, job creation, the acquisition of technical know-how and, last but not least, strengthened relations with the countries involved in the project – Egypt, the United States, Britain and Israel.

Regarding Israeli claims to the Aphrodite prospect, Lakkotrypis said talks are ongoing with Tel Aviv, but that their outcome would not affect the reserve’s development.

A part of Aphrodite’s gas lies within Israel’s exclusive economic zone. Since the gas in the neighboring Yishai prospect, on the Israeli side, is part of a single geological reservoir, its production depends on agreements between the two countries.

Israel and Cyprus signed a delineation agreement in 2010 but haven’t agreed so far on how to develop gas reservoirs straddling both economic zones.

Source: Cyprus Mail

Lakkotrypis on drilling

Eight offshore drills for hydrocarbons over next 24 months

Cyprus plans to carry out eight offshore drills for hydrocarbons over the next 24 months, the government revealed on Tuesday.

“Activities within the Exclusive Economic Zone are ongoing. For the next 24 months we are planning eight drills, six exploratory and two appraisal drills,” energy minister Giorgos Lakkotrypis said presenting an overview of his ministry’s work over the past year.

He did not disclose where the drills would be taking place, but said the targets have been identified.

The intention is for the drilling programme to commence by the end of this year or early 2020.

On block 7, which is currently unlicensed, Lakkotrypis said that talks are advancing to grant the concession to a joint venture of France’s Total and Italy’s ENI.

At the same time, the government is engaging with these two companies so that they form joint ventures in all the blocks in which they now hold concessions separately.

“We have reached a preliminary agreement… the legal details remain for them to cooperate in all the blocks in which they are not together,” the minister told reporters.

On the Aphrodite reservoir in block 12, discovered in 2011, he said the government is close to a deal with the concession holders – Noble Energy, Shell and Delek.

The companies have submitted a development and production plan which is to be discussed at a workshop this week.

Meanwhile negotiations on revising the Production Sharing Contract – as requested by the three companies – are at an advanced stage. More talks are scheduled for later this week.

“There remain certain legal points relating to the agreement between us, and on the optimal way of exploitation which concerns running a subsea pipeline to the LNG terminal in Idku [Egypt], liquefaction there and then transporting the LNG to world markets,” Lakkotrypis said.

The option of a land-based LNG facility in Cyprus was still on the table, Lakkotrypis added. To that end, land has been secured in the area of Vasilikos for the prospective construction of a five-train LNG plant.

However the facility would require massive amounts of natural gas to make it financially worthwhile.

During the previous week, government officials met successively with all the energy companies active in the EEZ to discuss common planning for such an undertaking.

This dialogue for an LNG facility was at its initial stages.

Regarding the envisioned EastMed pipeline – an EU Project of Common Interest with €34.5m in co-financing pledged by the European Commission – Lakkotrypis said that a tender is underway for a detailed technical study.

The study’s purpose would be to gauge how competitive the mooted pipeline can be.

On Italy’s stance on the EastMed – following recent reports that Rome was getting cold feet – the minister said Nicosia has yet to receive an official briefing from the Italians.

The government expects the Italians to clarify their position after the European Parliament elections.

Regarding the use of FLNG (floating liquefied natural gas), Lakkotrypis said the technology is yet to be proven. But he did not rule out any method for developing Cyprus’ natural gas resources.

As for the newfangled East Mediterranean Gas Forum, the “vision” is for it to evolve into an international energy organisation that will discuss infrastructures and project timetables.

The minister noted that in view of the increased demand for natural gas and thus heightened competition, Cyprus and the eastern Mediterranean must become competitive in the global market.

Asked about the Turkish provocations in Cyprus’ EEZ, he said Nicosia is deploying both diplomatic and legal measures, whether these pertain to Turkey itself or the companies assisting.

“We are using all the tools at our disposal.”

On ‘Green Growth’, the minister said that the share of renewable energy sources (RES) in gross total energy consumption in Cyprus currently stands at 9.72 per cent; the goal is for this to reach 13 per cent by the year 2020.

The share of RES in energy consumption in road transport alone was at 2.6 per cent in 2018, with a target of 10 per cent for 2020. This target would be achieved by a steady increase in the use of biofuels.

Source: Cyprus Mail

TOTAL FOR BLOCK 8 OF CYPRUS

TOTAL may expand presence into block 8

French energy giant Total, wants to expand its presence into block 8 of Cyprus’ exclusive economic zone (EEZ) Energy Minister Yiorgos Lakkotrypis said on Monday.

Speaking to reporters at the presidential palace after the meeting between President Nicos Anastasiades and the Regional Director of Total, Stephane Michel, Lakkotrypis said the discussion had been constructive. “The next steps in the exploration programme were discussed and one of the most important issues was the interest by Total in participating in block 8,” he said.

Block 8 was licensed to Italy’s ENI and “now we see interest by the French company to grow in this segment. It is a very important development that strengthens the [ENI-Total] consortium and expand its presence in Cyprus’ EEZ,” Lakkotrypis added. The consortium has 50 per cent stake each in blocks 6 and 11.
Michel, who is in charge of production and research activities in the Middle East region, echoed the minister saying: “We applied as well to enter block 8 owned by ENI and wanted to come to support that demand which is currently being examined by the Minister,” he said.

He did not give any further information on the share that the French company wished to acquire in block 8 or on the timetable for confirmation drilling in Calypso field in block 6.

Asked about Calypso, Lakkotrypis said the consortium’s work was continuing there but the government planned to secure an independent assessment of quantities in the field.

In February, ENI announced that it made a discovery of lean gas after drilling an exploratory well at Calypso. The company said it believed the gas play to hold around 6 to 8 trillion cubic feet.

“We discussed the next steps. We are not ready yet to say anything. We are in discussions on other issues, which will be announced as they develop,” he said.

Michel, asked if the company would proceed with confirmatory drilling in Calypso, said there was a lot of technical work to be done before this happened. He said so far results had come only from the first borehole and noted there would certainly be confirmatory drilling.

To another media question, Lakkotrypis referred to the navy blockade imposed by Turkey on ENI’s drillship in February this year, which prevented it from carrying out its work in block 3, the minister said: “After everything had occurred in Block 3, what we see is that one of the most important partners of the Republic wants to expand its presence in our EEZ, especially in a field such as block 8 which is largely still unexplored.” He said 3D surveys had already been carried out in block 8. “They are currently being processed to determine targets,” he said.
Turkey has repeatedly warned Cyprus against taking “unilateral steps” in exploring and developing hydrocarbons without factoring in the Turkish Cypriots with whom Ankara signed a ‘continental shelf delineation agreement’ in 2001.

Turkey’s claims on the island’s EEZ partly overlap with Cyprus’ blocks 1, 4, 6 and 7. Ankara also supports the north’s claims on blocks 1, 2, 3, 8, 9, 12 and 13, including within few kilometres from the Aphrodite gas field in block12.

Source: Cyprus Mail