A Closer Look at BG's Plans to Acquire 35% of Cyprus' Block 12
Noble Energy announced on Monday 23 November, 2015, that it is selling a 35% interest in Block 12 of Cyprus’ Exclusive Economic Zone to BG Group for a total cash consideration of $165 million (USD). The transaction has an effective date of April 1, 2015 and is expected to close by the end of 2015.
Block 12 includes the Aphrodite field, discovered in 2011 and estimated to hold a gross mean resource of 4 trillion cubic feet (Tcf) of natural gas. According to the agreement, Noble Energy will maintain operatorship of Block 12 with a 35% interest. Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership hold a 15% stake each.
The agreement is subject to approval by the Council of Ministers of the Republic of Cyprus. The deal is considered an important step towards the commercial development of the Aphrodite field, moreover because BG is the operator of the Idku LNG facility in Egypt. The Cypriot government has been engaged in talks with the Egyptian Government for the purpose of exporting gas from the Aphrodite field to the Egyptian market. Cyprus has also been eyeing Egypt’s underused export terminals to liquefy its gas and ship it to far-reaching export markets.
The discovery of the Zohr field by Eni in Egypt’s maritime zone has triggered fears that Egypt may no longer be interested in Cypriot gas to serve its pressing need for natural gas. An energy crisis has been weighing on Egypt's domestic market and causing frequent power outages. Egyptian officials reassured their Cypriot and Israeli counterparts that Egypt will still be on the lookout for a regional supply of natural gas as an interim solution before the gas from the Zohr field--estimated at up to 30 Tcf of natural gas--reaches the domestic market.
The development of Cyprus’s Aphrodite field has been delayed by the lack of progress in Cyprus’s exploratory efforts. Eni has drilled two holes in Block 9 of the island’s waters without encountering hydrocarbons. TOTAL, licensed to drill in Blocks 10 and 11 of Cyprus’ EEZ, has been hesitant to commence its exploratory drilling. The French giant is, however, said to be regaining interest in commencing exploratory searches off Cyprus’s coast in the short term encouraged by Eni’s success in Egypt in close vicinity to Cyprus’s waters.
The deal signed between Noble and BG is no doubt a great boost to Cyprus’s efforts. The Levant basin is believed to be rich in hydrocarbons. The agreement promotes a greater collaboration between the Eastern Mediterranean countries as an export deal between Cyprus and Egypt now seems more likely.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat