Cyprus plans to sell the entire output from one of its two mature offshore gasfields, Chevron’s Aphrodite, to Egypt which has recently seen its own output decline and in order to meet drastically rising local demand.
This could also help overcome a deadlock between the US energy giant and the Cyprus government, after Nicosia warned that delays in exploitation of the gasfield were in breach of contract, and threatened to cancel its license.
According to the Middle East Economic Survey, Egypt is set to sign two deals in Cairo on February 17 that it hopes will help secure gas from the two offshore Cyprus gas discoveries that are closest to development: the Chevron-operated 3.5 tcf Aphrodite, and the Eni-operated 2.5 tcf Cronos.
Egypt’s Petroleum Ministry expects to sign a host government agreement (HGA) with Eni and 50:50 partner TotalEnergies which envisages the export of all Cronos output as LNG from the Eni-operated Segas facility at Damietta, the authoritative MEES report said.
“This would be a very, very important moment. We will jointly be signing a very important agreement which will help [set] the scene for a strategic collaboration between Cyprus and Egypt to unlock the subsurface potential, existing in Cyprus, leveraging the infrastructure of Egypt to be able to export gas,” Egypt oil minister Karim Badawi told a press conference in Nicosia in January.
The minister said the HGA will encompass “all the different elements [including] the commercial aspects to enable our partners to proceed with their various final investment decisions to unlock the potential of Cronos field in the very near future.”
The finer details of the HGA are still to be ironed out, whilst Eni/Total are also yet to agree a development plan with Nicosia, which hopes to achieve first gas in 2027.
Nicosia expects the plan to be filed by end-March. This is set to propose a 60 km tie-back to Eni’s Zohr field on the Egypt side of the maritime border where declining output has left plentiful ullage.
Last month’s discussions between Badawi and his Cypriot counterpart, Energy Minister George Papanastasiou, also touched on the potential of building a new pipeline linking the Zohr onshore facilities to the Damietta LNG plant, according to MEES.
President Abdel Fatah el Sisi himself committed earlier in January during a trilateral meeting in Cairo with the leaders of Cyprus and Greece that Cronos gas would all be exported.
However, although the HGA will be a binding agreement according to both ministers, it contains provisions whereby a proportion of the Cronos gas could be redirected to the domestic market under certain conditions, MEES understands.
Egypt will be in dire need of more gas in two years’ time and this will likely remain the case despite growing renewables’ capacity potentially reducing demand for natural gas for power generation and the potential for increased gas imports from Israel – though likely not before 2026.
Having committed to exporting all Cronos gas, Egypt has also moved to secure further Cypriot gas for its domestic market.
On this, “an MoU will be signed between three parties, which will be Cyprus, Egypt and the Aphrodite partners [Chevron 35%op, Shell 35%, Israel’s NewMed Energy 30%]. This MoU is another serious agreement that signals the direction that Aphrodite’s development will take,” Papanastasiou said.
The deal, MEES understands, secures all Aphrodite gas for the domestic Egyptian market. While the field was discovered some 13 years ago, it has now seemingly been overtaken by Cronos (which was only discovered in 2022), as the prime candidate to become Cyprus’ first gas producer.
Chevron submitted a draft development plan in August that envisages tie-back to Port Said in Egypt after Nicosia had issued the partners with a notice of breach of contract.
In mid September, both sides decided to freeze the notice of breach period for fourth months in order to try and find an amicable agreement on how best to proceed, a period that has been extended until mid-February.
Talks are in the final stretch, MEES learns, with Nicosia likely to approve the development plan before the deadline, once it has received a finalised version. If Cyprus approves the plan, it will withdraw the notice of breach and amend the contractual milestones, although even if terms can be agreed, FID is unlikely before 2027.
While the signings will provide Nicosia with the opportunity to show it has a growing influence in the region, the focus for now is firmly on US major ExxonMobil’s ongoing drilling at the highly-anticipated Elektra prospect on Block 5, with pre-drill resource estimates as high as 30 tcf.