ENERGY: Cyprus signs first gas exploitation deal worth $9.3 bln

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Cyprus on Thursday signed its first natural gas exploitation deal worth $9.3 bln over 18 years with a consortium involving industry giant Shell, US-based Noble and Israel’s Delek, the energy minister said.

The official signing in Nicosia comes after cabinet approval of the revised product sharing contract for the commercialisation of the Aphrodite gas field in Cyprus’ block 12.

“Today's signatures for the 25-year Aphrodite natural gas exploitation license, as well as the revised production sharing contract are especially significant developments for the Cyprus energy programme,” Energy Minister George Lakkotrypis said at the signing.

“Noble Energy, Shell and Delek now have in their hands the first exploitation license granted by the Republic of Cyprus so they can commercialize the deposit,” he added.

He said the deal – which took a year to negotiate – means Cyprus will become a producer offering an alternative source of gas supply for the EU while helping to create a “gas corridor” in the Eastern Mediterranean to Europe.

A re-working of the production contract ensures Nicosia receives an average yearly income of 520 million dollars over the 18-year lifespan of the gas field.

The figures were based on the average price of oil being around $70 a barrel.

Lakkotrypis said under the new deal, the consortium is obliged to keep to a tight deadline to extract the gas reserves by 2025 when first revenues are expected.

Natural gas is expected to flow from Aphrodite and be pumped to Egypt via a subsea pipeline where it can be exported as LNG to Europe and international markets.

It is described as the “biggest development project” on the island with around 7.9 bln dollars invested in infrastructure.

Lakkotrypis said once operational, the gas field will boost jobs while “strengthening Cyprus's strategic relationship” with Egypt, US, Netherlands, the UK and Israel.

Texas-based Noble Energy in 2011 made the first discovery off Cyprus in the Aphrodite block estimated to contain around 4.5 trillion cubic feet of gas – it has yet to be extracted.

The discovery of nearby Egypt’s huge Zohr offshore reservoir in 2015 has stoked interest that Cypriot waters hold the same riches.

Cyprus has pushed ahead with exploring for offshore energy resources despite the collapse in 2017 of talks to end the country's decades-long division.

That has angered neighbouring Turkey, which has had troops stationed in the country since 1974 when it invaded and occupied its northern third in response to a coup sponsored by the military junta then ruling Greece.

Turkey was widely condemned after sending two drillships inside Cyprus’ exclusive economic zone after announcing it would begin its energy exploration.

A Turkish vessel is currently conducting operations in block 7 of Cyprus’ designated EEZ licensed to Italy’s Eni and France’s Total.

“Today's development is yet another milestone in the energy programme of Cyprus which demonstrates that despite all the difficulties our programme is proceeding as planned,” said Lakkotrypis.

In February, ExxonMobil and Qatar Petroleum discovered a huge natural gas reserve off the coast of Cyprus, the Mediterranean island's largest find to date, holding an estimated five to eight trillion cubic feet.

The Italian state-controlled Eni and Total are heavily involved in exploring offshore Cypriot oil and gas.