Cyprus Approves BG's Block 12 Deal
Cyprus has approved UK BG Group’s purchase of a 35% stake in Block 12 from Noble Energy.
The island’s energy minister Yiorgos Lakkotrypis described the deal as a “significant development that will bring the field closer to its commercial development.”
Noble Energy discovered the Aphrodite field in Block 12 of Cyprus’ Exclusive Economic Zone (EEZ) in 2011. The field is estimated to hold 4.54 Tcf of natural gas.
BG bought the stake from Noble Energy for an estimated $165mn in November 2015, subject to government approval. Noble is left with 35% in Block 12 and the operatorship. Noble’s Israeli partners Delek Drilling and Avner Oil Exploration each hold 15%.
BG will be an official partner in the consortium once it has met the government’s conditions, including agreeing to the production-sharing agreement and a letter of guarantee of proper performance of the contract. BG is reviewing the production plan written by the partners in the Aphrodite field and will submit its own comments. The joining of BG is significant as it could facilitate a deal between Cyprus and Egypt.
BG is the operator of the little-used, two-train LNG plant at Idku and its entry into Block 12 was seen as a way to restart them, as its own production in Egypt is being taken by the government to meet domestic demand.
Cyprus is eyeing the Egyptian domestic market as a destination for the natural gas produced from the Aphrodite field.
Cyprus’ original plan to build its own onshore LNG terminal at Vassilikos was put on hold owing to the limited quantities of natural gas discovered thus far in its waters. Neighbouring Israel is also considering the Egyptian market as a potential customer for Israeli gas, but recent tensions between the two countries may jeopardise this deal. French Total, Italy’s Eni and Korean state Kogas have recently renewed their exploration licences and are set to resume exploration activities off the island’s coast.
Eni’s discovery of the giant Zohr field offshore Egypt has revived hopes that more gas may be found off Cyprus. Zohr, in the Shorouk Block, lies close to Cypriot waters and holds an estimated 30 Tcf. Production is estimated to begin sometime between 2018 and 2020 as Eni said it will fast-track the development of the field which it found last autumn. In the meantime, Egypt is looking to import gas from the neighbouring countries as an interim solution before its own gas comes to market.
BG itself is the object of an acquisition, however: Anglo-Dutch major Shell is expected to complete the purchase in the coming weeks.
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