DECEMBER 13TH, 2016
Technocrats have completed and handed over to energy minister Giorgos Lakkotrypis a report recommending with which companies the government should begin negotiations in the third offshore licensing round.
The report is not binding on the minister, who will study it and make his own proposal to the cabinet.
This is expected to take place soon, Politis reports.
Based on the cabinet’s decision, the government will then name the preferred bidders and commence negotiations with them with a view to awarding exploration concessions in Cyprus’ Exclusive Economic Zone (EEZ).
The selection of the preferred bidders does not mean that the same will be awarded the concessions.
A final decision – awarding concessions or not, and for which offshore blocks – is expected around late February.
Cyprus launched its third offshore licensing round in May 2016. Three blocks (6, 8 and 10) have been put up for auction.
Eight energy companies filed six bids for the three offshore blocks as follows: Block 6: ENI/Total; Block 8: ENI, Cairn/Delek; and Block 10: ENI/Total, ExxonMobil/Qatar Petroleum (QP), Statoil.
The greatest competition revolves around Block 10, which attracted all four oil majors.
The importance of Block 10 stems from ENI’s discovery of the giant Zohr field off Egypt located just six kilometres from Cyprus’ EEZ.
The Zohr discovery, thought to hold a massive reserve of 30 trillion cubic feet (tcf) of gas, revolutionised the industry in the eastern Mediterranean as it was the first time that gas had been found in carbonate rocks rather than porous sands.
Energy companies are hoping that exploration in similar geological structures will produce discoveries in nearby Cypriot blocks.
In recommending which companies the government should begin negotiations with, the advisory committee – comprising technocrats across a number of ministries – took into account several factors.
These included the drilling programmes proposed by the companies (number of wells, timetable), the profit margin for the state, the companies’ technical expertise and financial wherewithal, and the signature bonus they propose in exchange for a concession.
During the two previous licensing rounds, Cyprus awarded concessions to Noble Energy (Block 12), ENI (Blocks 2, 3 and 9) and to Total (Blocks 10 and 11). Total subsequently relinquished Block 10 without drilling any wells.
To date, the only confirmed gas find in Cyprus’ EEZ is the Aphrodite prospect in Block 12, holding an estimated 4.5 tcf.