* Proposes pipeline by 2014 * Giants set sights on LNG deals *
Noble Energy, the Texas-based exploration company that is expected to start drilling for gas deposits in an offshore block south of Cyprus in a few week’s time, is keen to bid for a second block once the government starts auctioning some or all of the remaining 12 parcels next year.
However, the government wants to wait and see before it invites bidders. On the home front, a gas find similar in size to the giant deposits that Israel found near the Cyprus Exclusive Economic Zone (EEZ) could bolster the Christofias administration’s economic status and on the prospect of future earning alone, ease its way to a recovery and reduction of its bloated public debt.
On the political front, a war of words between Turkey and Israel could spill over much closer to Cyprus’ shores as the Foreign Minister in Ankara has already been making veiled threats that the Republic of Cyprus has no right to explore for hydrocarbons, unless it shares its resources and wealth with the Turkish Cypriots.
Energy industry experts suggest that a fresh round of bidding could produce far better results than the first time in 2007 when little interest pushed the government to nearly abandon all interest in oil and gas exploration.
The huge gas discovery in Israel’s adjacent Leviathan field was a game changer and some of the leading international oil and gas companies are now keen to establish consortia in order to grab a share of the island’s prospective deposits. However, full production out of Cyprus’ offshore gasfields is not expected to start any time sooner than 2020.
Already, “Triple 5” was reportedly ready to pay a signature bonus of 80 mln dollars to the Cyprus government just to have access to two of the offshore blocks.
PIPELINE BY 2014
Energy Services Director Solon Kassinis told a parliamentary hearing this week that Noble is prepared to build a pipeline from the Israeli gasfields adjacent to Block 12 in the Cyprus EEZ and pump liquid natural gas (LNG) to the Vassiliko power station by 2014.
The Electricity Authority of Cyprus is determined to repair the dual-use units 4 and 5 at Vassiliko and resume power production by next summer, while the power station that will be able to accommodate LNG is expected to return to full production by 2013.
Kassinis said that the Cyprus government’s agreement with Noble is far better than what the Israeli government concluded with the same company.
He added that the government should decide very soon to proceed with plans to import gas, as had been discussed between Presidents Christofias and Shimon Peres in May. The three options had been to use the output from Cyprus Block 12, the second was to import gas from Israel’s gasfields and the third was to jointly develop gasfields.
Costas Ioannou, chairman of the Cyprus Natural Gas Co. (DEFA) said that a political decision on the matter has been pending since last December. He added that DEFA has secured a 10 mln euros grant from the European Union to pay for a land-based distribution network, while the whole project could cost 50-60 mln euros.
Meanwhile, House President Yiannakis Omirou told Austria’s Ambassador Martin Weiss during a meeting on Tuesday that Cyprus has a sovereign right to explore and exploit its natural gas resources located in its EEZ.
Turkey’s EU Affairs Minister Egemen Bagis issued a number of threats at Cyprus including sending naval vessels to the drilling area.
Bagis was quoted in Zaman newspaper as saying that when explorations were made in the past, ships from the Turkish military fleet “were quick to make their way to the area”.
The Cyprus government said it is ready to take “all necessary and appropriate measures” to tackle the Turkish threats.
“The government, acting in concert with Athens, is closely monitoring developments and takes all necessary actions on all levels as appropriate,” said Defence Minister Demetris Eliades.
Foreign Minister Erato Kozakou-Marcoullis told the EU foreign ministers’ summit in Poland at the weekend that Turkey’s threats were unacceptable, and that the EU is obliged to block Turkish efforts to cause a crisis in the Eastern Mediterranean, since this issue concerns the EU’s energy interests.
Meanwhile, the oil and gas exploration trade magazine "Offshore" reported that Noble Energy has reached agreement for a license on its Cypriot concession Block 12 with Israel’s Delek Group units Avner Oil and Gas LP and Delek Drilling LP.
Noble Energy has had the concession to Block 12 since 2008, and under a March 2010 agreement, Avner and Delek Drilling have an option to 30% of the concession.
Under the terms of the exploration license, Delek Drilling and Avner will bear 15% of Noble’s expenditures for Block 12, including exploration and appraisal wells, development or production, and/or other operations, in accordance with the Production Sharing Contract.
The deadline for the Cypriot authorities to approve the transfer of rights to Block 12 has been extended to August 1, 2013. Until then, Avner and Delek Drilling can transfer their rights to a third party acceptable to Noble Energy and subject to approval by the Cypriot authorities.
Noble Energy has never disclosed estimates about the potential natural gas reserves in Block 12. However, Solon Kassinis has said that the potential reserves are 10 trln cubic feet. Leviathan has an estimated 16 trln cubic feet.
Noble Energy and Delek are partners in Leviathan, as well as in other Israeli offshore licenses, including Yam Tethys, which is in production, Tamar, Dalit, and Noa.