2020 Cyprus Country Report

Energy: Oil & Gas
Sector Profile
Royal Dutch Shell, have all secured exploration
rights in Cypriot waters.
In July 2020, Chevron Corp announced an
agreement for the acquisition of Noble Energy
Inc, including its shares in Cyprus’ Aphrodite gas
field. This is a positive development improving
project realisation prospects, as after ExxonMobil,
Chevron is the second biggest international oil
company in terms of market capitalisation.
Although the global energy sector is undergoing
dramatic change due to the impact
of the Covid-19 pandemic and currently delaying
exploration plans around the Eastern
Mediterranean until 2021-2022, the commitment
and interest remain strong to capitalise on the full
hydrocarbons potential of this region.
DEPOSIT DISCOVERIES
The first natural gas discovery in Cyprus’ EEZ
was made in 2011 by US firm Noble Energy and
Delek Group in the Aphrodite gas field in offshore
Block 12, which is estimated to have 4.5
trillion cubic feet (tcf) of gas. Following a successful
appraisal programme, Aphrodite was declared
commercial in 2015.
The next discovery was made by the consortium
of Total and ENI at the Onesiphoros prospect
in Block 11 in 2017. But it was a small, technical
and non-commercial discovery. This was followed
by the discovery of the Calypso gas field in
Block 6 by Italian ENI in late 2017. The discovery
is currently under appraisal.
The most recent success was the discovery
in February 2019 of the Glaucus gas-field in
the promising Block 10 by the ExxonMobil and
Qatar Petroleum consortium, estimated to hold
5 to 8 tcf of gas. This was great news because
Glaucus, Calypso and Onesiphoros were discovered
in geological formations similar to the giant
30 tcf Zohr gas field discovered by ENI in 2015 in
the Egyptian EEZ and adjacent to Cyprus’ Block
11. These more recent discoveries confirm that
the Zohr geological model extends more widely
in the Eastern Mediterranean region.
These results bode well for Cyprus and the
region, adding to its reputation as an emerging
gas region. Combined with other discoveries, they
are rousing interest amongst major players hoping
to secure a piece of the action in the Eastern
Mediterranean. ExxonMobil has already extended
its interests with licences for two blocks southwest
of Crete and in Egypt, where it has secured Block
3 in Egypt during the recent licensing rounds. It
is eyeing more prospects, including opportunities
in Israel. Chevron has also extended its interest in
Egypt, gaining rights to three offshore blocks, and
in Israel taking over Noble Energy’s shares in the
Tamar and Leviathan gas fields.
Our aim is to have a
clear picture of our
EEZ’s energy potential
and, subsequently,
proceed with the first
transfer of gas to
Egypt for liquefaction
and export by 2024-
25. Specialised firms
are already operating
in Cyprus, servicing
regional hydrocarbon
activities. Depending
on the discoveries
made, a number of
multibillion-euro
infrastructure projects
will be undertaken, which
apart from the direct
underwater pipeline
to Egypt to transport
gas, may also include
an onshore liquefaction
terminal at the Vasilikos
Energy Centre. The
EastMed gas pipeline,
another project of
regional significance, is
currently at the stage
of final FEED studies
(Front End Engineering
Design) and is intended
to connect Eastern
Mediterranean resources
to continental Europe.
Natasa Pilides
Minister of Energy,
Commerce and Industry
Re-analysis of seismic survey data using the
knowledge gained from these discoveries has
shown good prospects for new, potential discoveries
also in Cyprus’ EEZ. As a result, ENI
and Total plan to drill at least three more wells in
their licenced blocks in 2021-2022. ExxonMobil
is also planning to drill one more exploration
well and an appraisal well at Glaucus in Block
10, likely in 2021-2022. Any new discoveries
would further strengthen potential exploitation
of Cyprus’ gas resources.
FUTURE REVENUES
The oil and gas sector is certainly set to become
a key driver of economic growth, with Cyprus
actively considering options to exploit its natural
gas, hoping for high revenues in the future.
Cyprus’ Energy Minister confirmed in March
2018 discussions with Shell to buy around 8
billion cubic metres (bcm) of gas per year, over
a 15-16-year period, from Aphrodite for liquefaction
at the Idku plant in Egypt and to export
this to European and global markets. These discussions
have since progressed, with the signing
in 2018 of an inter-governmental agreement
between Cyprus and Egypt to build a subsea
pipeline connecting Aphrodite to Egypt’s liquefaction
plants, and a revised production-sharing
agreement with Noble Energy – soon Chevron –
and its partners over the Aphrodite gas reservoir.
The plan provides that the consortium will
be responsible for the extraction platform at the
site of the field. Analysts describe the deal as a redistribution
of profit, increasing the share of the
companies when oil prices are low, but conversely,
when global oil prices rise, Cyprus’ share will
increase. Based on the plan, first gas was expected
in 2025, and according to the Energy Ministry it
would be the biggest infrastructure project ever
undertaken in the Republic of Cyprus. Even
though the plan may experience some delays due
to the coronavirus pandemic, Cyprus and Egypt
are committed to it.
Since then, the Cypriot and Egyptian governments
have intensified discussions on the
gas pipeline and Chevron, the new operator of
Aphrodite, reaffirmed the importance of developing
the gas-field and intention to proceed with
plans on how to exploit it as soon as possible.
The recent discovery of Glaucus in Block 10
by ExxonMobil and Qatar Petroleum could also
become a game-changer. ExxonMobil has repeatedly
stated that should more discoveries be made,
its preferred option is to build a gas liquefaction
plant at Vassilikos for liquefied natural gas (LNG)
exports to Europe and Asia. This would require
total gas discoveries to approach 15 tcf and global
gas prices to justify commercial viability. All eyes
80 Country Report CYPRUS 2020