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4 March 2013

Cyprus Hydrocarbons #2

French energy giant Total was granted hydrocarbon exploration licenses in Cyprus’ Exclusive Economic Zone (EEZ ) to search for oil and gas in offshore blocks 10 and 11 as part of a second licensing round initiated last year, after signing on the 6th of February two production sharing contracts with the Ministry of Commerce.

Arnaud Breuillac, president of Total’s Middle East exploration and production said the company had two different plans for the two blocks “so basically we might proceed with drilling for oil and gas. It is very early to say but the possibility for the presence of oil has been examined.” That act concludes one of the most critical targets set by the government in its energy policy, the successful conclusion of the second licensing round.

The executive also said his company will carry out two-dimensional surveys in block 10 and three-dimensional in block 11 but could not yet say whether it will search for oil first.

An agreement of assignment of 30% of Noble’s hydrocarbons exploration rights on block 12 to Israeli companies Delek and Avner was signed in Nicosia on February 11th.

Agreement establishes a new era of strategic partnership between Cyprus and Israel, which has both economic and political aspects.

According to the preliminary agreement with the troika, the government is obliged to “undertake a study on the financial aspects of the transition towards the exploitation, use and export of natural gas, as a first step in the formulation of a comprehensive development plan for the rearrangement of the Cypriot energy sector.” It is also expected to prepare and adopt legal steps enabling the establishment of a resource fund, which should receive and manage the public revenues of offshore gas exploitation. The international lenders say the fund needs to benefit from a solid legal base and governance structure, drawing on internationally-recognized best practices if it is to ensure transparency, accountability and effectiveness.

Solon Kassinis, an executive director with KRETYK, said that talk of advance gas sales was premature. Appraisal drilling – which will determine how much gas there is in Block 12 – was not expected anytime before June. The drilling itself would take three months, and then another three to assess the data.

On January 24, the Republic of Cyprus signed contracts with the ENI/KOGAS consortium for hydrocarbons exploration in blocks 2, 3 and 9 in the EEZ of Cyprus.

In 2008 Cyprus signed its first hydrocarbon exploration contract with US Noble Energy for offshore block 12. Exploratory drilling conducted by Noble in late 2011 revealed a natural gas reservoir with an estimated gross mean of 7 trillion cubic feet, which is close to a major gas discovery by neighboring Israel.

 

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