Cyprus & World News

Next 6-12 months ‘crucial’ for Cyprus LNG terminal

10 July, 2014

 * Talks with Noble-Delek for additional supply to Vassiliko “going well” *

The next 6-12 months will be crucial for the decision whether to proceed or not with the land-based LNG liquefaction plant at Vassiliko, as exploration gets underway by ENI-Kogas and French Total, while Noble Energy is expected to proceed with a second drill within a year’s time, according to the national oil and gas company.
Toula Onoufriou, President of the Cyprus Hydrocarbons Company (EYK), the successor to the National Hydrocarbons Company of Cyprus (KRETYK) that was restructured in March, told a press briefing on Tuesday that “indications are encouraging” and that the next six to 12 months will be crucial for the viability fo the LNG terminal.
“The first priority remains the development of the Vassiliko terminal, even though a floating LNG (FLNG) or a combination of both is one of many options still on the drawing board,” she said.
In her first media appearance as head of the government’s commercial arm that will oversee the revenue sharing agreements (RSAs), Prof. Onoufriou, who has vast industry experience and is at present vice rector of the Technologcal University of Cyprus (TEPAK), said that “ENI will commence is own exploratory drilling in September, followed by Total and Noble resuming with secondary probes in 2015.”
Intially, Noble Energy announced a first estimate of 7 trillion cubic feet of natural gas reserves and the LNG terminal needs an upstream supply from a reserve basin of 5 trln in order to make it viable.
When Noble revised down its first estimates to 3.5 tcf, Cyprus government officials and politicians started getting nervous that an LNG terminal and the potential revenues from liquefaction and sales to international markets could dwindle.
Ideally, Cyprus wants to have access to ample reserves in order to operate the liquefaction plant and enter the export business.
But Block 12 operators Noble and their joint venture partners Delek and Avner have struck a 15-year deal to deliver 20% of their upstream capacity or 3.75 tcf from the adjacent Leviathan gasfield in Israeli waters to the BG-operated plant in Egypt.
“Noble and Avner are investigating if they can deliver more reserves from their Leviathan gasfield in order for the Cyprus terminal to reach 5 tcf. We are still negotiating,” Onoufriou said.
Board member Lenas Mylonas said that “we are at a very good stage of negotiations with both Noble and Avner in the last three meetings, which themselves were 3 days long each.”
As regards press reports that Noble may be seeking new investors in order to reduce its stake in the Block 12 ‘Aphrodite’ gasfield within the Cyprus Exclusive Economic Zone (EEZ), the EYK president said that “there is a possibility that can encourage other investors as well.”
Energy giant China National Offshore Oil Corp. (CNOOC) was reportedly in talks to buy 30-40% of the Aphrodite gas field operation. Noble Energy owns 70% of the rights of the field, and Avner Oil and Delek Drilling own 15% each.
Reports suggest that Aphrodite field gas reserves are enough to justify developing a floating liquid natural gas (FLNG) plant, which would allow the Chinese company to export gas back to China.
As regards the funding for the terminal at Vassiliko and if Deutsche Bank is still interested to finance the project, Onoufriou said that “there us international interest, but our main concern right now is the size of the reserves, and only then will we start negotiations to consider financing.”
EYK is also about to hire a General Manager, notice for which will be posted by the end of this week, while hirings will take place at two levels – those with international experience who will actively contribute to the company’s operations and young blood with little or no experience who will learn during their employ.
The Italian-Korean consortium ENI-Kogas has been granted exploration licence for the blocks 2, 3 and 9 and it will carry out four exploration drillings starting in September.
The French Total will begin its exploration programme on blocks 10 and 11 in the second half of 2015, while Noble energy will carry out an additional drilling.