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The Cypriot government has extended the deadline for a Chevron Corp.-led consortium to agree to consent to the development plan for the Aphrodite reservoir, for which Nicosia has refused to accommodate changes.
Chevron Cyprus Ltd., BG Cyprus Ltd. and NewMed Energy LP have until this Monday to consent to the plan to develop Cyprus’ first offshore gas discovery, located on Block 12 on the Cyprus-Israel maritime border. The government had approved the plan November 7, 2019. The deadline for the partners to strike an agreement to stick to the original plan had already been extended to November 20, 2023.
“The operator intends to continue its efforts to reach agreements with representatives of the Cypriot government with respect to the reservoir’s development plan”, said a regulatory filing November 2021 by 30-percent owner NewMed of Israel. Chevron Cyprus is the operator with a 35 percent stake, while BG Cyprus, part of Shell PLC, also holds a 35 percent interest.
The partners are proposing development alternatives that are less costly than the plan approved some four years ago. “The development plan, which was approved by the Cypriot Government on November 7, 2019, is subject to updates deriving, inter alia, from technical, commercial and financial conditions”, NewMed noted in its annual report March 28, 2023, unveiling the proposed development plan changes.
The new plan wants to connect the Aphrodite field to an existing processing facility in Egypt via an undersea pipeline. The initial number of production wells has also been proposed to be reduced to three from five, NewMed said at the time.
“In accordance with the current appraisal of the operator, which was delivered to the Partnership and to the Cypriot government, and before completion of the technical-economic feasibility tests, including performance of the FEED [front end engineering design], the estimated cost of the approved Development Plan, including the cost of installation of the pipelines to the target markets, is estimated at approx. $3.6 billion (100 percent)”, NewMed said in the yearly report for 2022.
But Bloomberg, citing Energy Minister Giorgos Papanastasiou, reported August 25, 2023, the government had rejected the new plan. The minister did not explain why, according to Bloomberg.
However, last year the government and Chevron Cyprus jointly expressed commitment to developing the reservoir, planned to serve the Egyptian and European markets. A joint statement July 21, 2022, acknowledged the operator was “in the process of finalizing the optimization of the ‘Aphrodite’ field’s development concept, through possible synergies with other facilities in the region, thereby recognizing the importance of Eastern Mediterranean gas resources”.
Besides the grace period for the consent to the original plan, the partners have also been given a deadline extension to agree to a final production sharing contract (PSC) by January 7, 2024, according to a November 7 disclosure by NewMed on the Tel Aviv Stock Exchange. A PSC had been signed between the companies and the Cypriot government simultaneously with the approval of the plan in 2019. That PSC was amended November 9, 2022, according to NewMed.
NewMed acknowledged in the annual report the partners may face sanctions under local law. “[N]on-compliance with the terms set forth in the Petroleum Law may lead to the loss of the interests, and all of the money invested in such interests may be lost”, it said.
Besides the disagreement between the partners and the Cypriot government, NewMed also acknowledged in the report that future deterioration in the relationship between Turkey and Cyprus, which came under Turkish occupation, may derail the project.
“Turkey is performing natural gas exploration activities in vast regions in the East Mediterranean, including in the exclusive economic zones of Egypt and Cyprus”, the report stated. “In this context, Turkey is performing various drilling and surveys in disputed offshore areas”.
NewMed though added that “in accordance with its official reports, the Government of Turkey is not claiming ownership on the areas in which Block 12 is located”.
With Israel, talks have been held on potential profit-sharing with Cyprus, according to a statement from Israel’s Energy and Infrastructure Ministry April 12, 2022. Most of Aphrodite lies in the exclusive economic zone of Cyprus according to NewMed.
To contact the author, email jov.onsat@rigzone.com
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