Cabinet authorises talks with Exxon, Qatar, Eni, and Total on 3 offshore blocks (Update-3)

10

(Adds more background to sixth paragraph)

By Stelios Orphanides

The cabinet decided on Wednesday to enter negotiations with energy giants Exxon-Mobil, Qatar Petroleum, Eni, and Total, on hydrocarbon exploration and exploitation in three blocks offshore Cyprus, the energy minister said.

LakkotrypisExxonMobil and Qatar Petroleum will be negotiating for block 10 and Italy’s Eni and France’s Total on the exploration and exploitation rights in block 6, Energy Minister Yiorgos Lakkotrypis said. Separate talks will he held with Eni regarding block 8.

The companies had submitted bids as part of Cyprus’s third oil and gas licensing round that was announced earlier this year, six months after Egypt made public a 30 trillion cubic feet gas find in Zohr, an offshore field administered by Eni, which reinvigorated interest in the Eastern Mediterranean.

Eni, together with South Korea’s KoGas, already have permits for blocks 2, 3 and 9. Total has the licence for block 11 and had relinquished the rights for block 10 last year. ExxonMobil and Qatar are newcomers to Cyprus’s energy scene.

“Licences will be issued following successful negotiations and approval of the contract by the cabinet,” Lakkotrypis said. “Otherwise, runners-up will be invited to negotiations.”

Exxon Mobil CEO Tillerson tipped as US Secretary of StateA successful conclusion of talks with the ExxonMobil and Qatar Petroleum, could potentially further strengthen Cyprus’s access to the administration of US president-elect Donald Trump. Trump picked Rex Tillerson, chief executive at ExxonMobil, the world’s largest energy company, after selecting Wilbur Ross, Bank of Cyprus’s vice chairman to head the department of commerce.

The energy minister, whom the cabinet appointed together with his colleague, finance minister Harris Georgiades, to head the negotiating team, said he was optimistic after the government received three bids for block 10, one from Eni and Total and another one from Norway’s Statoil.

While the energy companies will have to drill exploratory wells to prove the energy potential of every block, “the fact that we have received bids for investment in such a difficult financial environment for the hydrocarbon sector, makes us cautiously optimistic.”

Energy prices fell more than 50 per cent since mid-2014 putting pressure on the budgets of energy companies worldwide. The price of a barrel of Brent was at $55.56 on Wednesday afternoon.

Conclusion of the negotiations with the winners of the third round depended on “many factors, the distance the two sides will have to cover in negotiation,” he said. “We would like to conclude by the end of January, early February”.
Each contract will have a duration of seven years split in three periods, three years for the first, and two years for the second and third, which will be subject to negotiation, he said.

third round resultsOne of the basic criteria of the technical evaluation will be the number and speed of drills proposed by every company or consortium, he added.

The first oil and gas licencing round, held in 2007, attracted a consortium led by the Houston-based Noble Energy which announced Cyprus’s so far single gas discovery five years ago. Noble’s drilling in the Aphrodite field prompted an angry reaction from Turkey which objects to Cyprus’s hydrocarbon development and had sent warships to the area in response. Production in Aphrodite which contains 4.5 tcf of natural gas is not expected to begin before 2020.

The second round which attracted Total, which plans to drill for hydrocarbons in April, and Eni, was completed in 2012. The Italian energy giant failed to make a discovery when it drilled on two separate occasions in 2014 and 2015.

The energy minister said that Cyprus’s efforts to develop its hydrocarbon industry are unrelated to reunification talks.

“We are going ahead based on our planning because our basic priority is more exploratory programme and if possible, further discoveries, something which will help evaluate our energy potential,” Lakkotrypis said. “Beyond that, our strategy to exploit natural wealth in the Cypriot EEZ is one thing and procedures for the Cyprus Problem are another”.

nicos-anastasiades-mustafa-akinciPresident Nicos Anastasiades is scheduled to meet Turkish Cypriot leader Mustafa Akinci in Geneva in three weeks’ time to discuss the last remaining aspects in their reunification talks which include the territorial question. Representatives from Greece, Turkey and the UK are also expected to join them two days later to discuss security and guarantees.

Lakkotrypis said that Cyprus which is currently in talks with Egypt to sell gas from Aphrodite for its two largely mothballed liquefaction plants, has also requested geological data on Zohr, as “every drilling in our area offers important data for our efforts to interpret the geology of the Cypriot EEZ”.

Share.

About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: stelios@cyprus-mail.com

  • Ozay Mehmet

    Is the “Cabinet” trying to sabotage the Geneva Talks? Why Now?
    Does any one really expect Turkish side not to react?

    • Jon Snow

      ROC will not stop functioning because of talks which may, or may not end with success

      • Ozay Mehmet

        No one said STOP functioning….
        Someone is putting a Time Bomb under the Geneva Talks.

        • Rissole Bland

          It’s no different from the development plans we keep hearing from the north or the fact that after Annan Plan the “trnc” decided to speed up the colonisation of Morphou knowing that the Greek Cypriots would want it returned one day.

        • Jon Snow

          I think it gives a nice push for the talks to succeed. Since Block 10 was given to the next US Secretary of State (CEO of ExxonMobil) it may change the minds of TCs to make more reasonable demands or be left out of the game forever

  • Arnt Otto Østlie

    Good!

  • Alex

    Note to the cabinet – read “The Art of the Deal” over the Christmas holidays.

  • alexander reutersward

    speed of drill as a criteria seems like a good idea, so far the drillings has been extremly slow…

    • costas

      we have been waiting for drilling since 2012 or before

  • Mist

    Can someone explain to the government that you need a very long cord on the Black and Dceker, to plug in to the mains on shore to drill for oil.