Vassilikos LNG Terminal Construction Negotiations Reach Final Stages

Negotiations over the building of an LNG terminal in Vassilikos between Cyprus and its partners Noble and Delek have reached final stages. An MOU was signed between Cyprus, Noble, Delek and Avner on 26 June 2013 for the planning of the LNG terminal on the island. The current talks cover the structure and share capital of the terminal. A final agreement is expected to be achieved by December 2013.

The multi-billion dollar project will allow the island to reach export phase by 2020. Construction will start in 2016 and is expected to last three years. The LNG plant could be made of up to 8 trains to accommodate and process gas from the island’s Eastern Mediterranean neighbours. 

In 2011, and as a result of its exploratory drilling, Noble announced the Aphrodite discovery in Block 12 offshore Cyprus containing 5 to 8 Tcf with estimated gross mean resources of 7 Tcf. An appraisal well is being carried out by Noble with results expected to be announced by September 2013. The results of the appraisal well will however not affect Cyprus’ determination to move ahead with its LNG project.

An ENI/KOGAS consortium will also be involved in gas exploration activities offshore the island. The consortium signed an exploration and production-sharing contract with the Cypriot government in early 2013 covering 3 offshore areas (Blocks 2, 3 and 9). France’s Total also signed contracts with Cyprus for Blocks 10 and 11 of the island’s Exclusive Economic Zone. 

Energy Ministers of Israel and Greece are currently in Cyprus to sign an MOU with the island that will constitute “the framework of a tripartite dialogue on energy issues and water resources with specific suggestions for actions such as the protection of the environment and the management and development of water resources”, said Minister of Energy, Commerce, Industry and Tourism George Lakkotrypis.

Meanwhile in Israel, export routes and destinations remain unclear. While Woodside recently reaffirmed its interest in buying 30% of the stake in the 18 Tcf Leviathan for $1.25 billion to transport and sell the gas to East Asia customers, Delek and Avner, partners in the field, revealed their plan to export the gas via a sea-based pipeline to Turkey, Greece, and Cyprus instead. They also shared their plan to supply Jordan and the Palestinian Authority via a land-based pipeline with no mention to East Asia. Israel has not yet reached a final decision on the amounts of gas to be exported. The decision is currently in the hands of Israel’s High Court of Justice. The court could be transferring the decision-making power in regards to gas export to the Knesset (Israel’s Parliament) as opposed to the government given the importance of the issue. It is not until a decision is final that it will be clear how Israel will choose to proceed.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.

Follow Karen on Twitter: @karenayat

 


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