March 30, 2017
AFTER energy giants Total, it looks like ENI will likewise operate – albeit grudgingly – out of the port of Limassol for their scheduled drilling operations, slated to get underway later this year.
“Larnaca port is definitely out,” Alecos Michaelides, permanent secretary of the transport ministry and former president of the Cyprus Ports Authority (CPA) board, told the Cyprus Mail.
Michaelides confirmed news reports that DP World, the concession holders operating the multi-purpose terminal of Limassol port for the next 25 years, plan to have an onshore logistics base supporting hydrocarbons activities up and running by this summer.
ENI are contractually bound to start drilling two more wells before February 2018, when their offshore exploration licence expires.
If they are to accomplish that, drilling should commence by around November of this year at the latest. Leaving precious little time from now until then for the company to close contracts for leasing the drilling and support vessels, and for securing materials such as piping.
Like Total, ENI would have preferred to have its onshore support base at Larnaca. There are a variety of technical reasons why oil companies prefer Larnaca: the water depth is more than sufficient for support vessels to wade into the harbour. Also, the port at Larnaca is nowhere near as congested as Limassol’s.
But citing health concerns over the mud plant and potentially toxic chemicals at the port, Larnaca residents last year pressured their municipality not to extend a permit for Medserv, an oil and gas services company which supported ENI’s prior drilling operations.
But the Mail understands that, for the new wells, ENI proposed to have their mud plant not at the port, but offshore Larnaca – effectively aboard the drilling vessel they would lease.
That would obviate the need for permits from local authorities.
“But with presidential elections looming next year, any talk of hydrocarbons activities out of Larnaca – even with no environmental impact – would be political suicide,” a source apprised of the matter commented.
The source, who requested anonymity, said ENI would now be forced to relocate to Limassol the equipment left over from their first drilling schedule. The equipment is being held in storage at Medserv’s facilities in Larnaca.
Yet more trouble may be brewing at Limassol harbour.
In early October 2016, Total and EDT, an oil and gas services company, signed a contract where the latter would provide the former onshore logistics services out of the port of Limassol supporting Total’s drilling programme
In the meantime, the marine services concession at the port of Limassol – after it was privatised – was granted to a partnership comprising P&O Maritime and G.A.P. Vassilopoulos for the next 15 years.
But the concession, granted by the ports authority, included a monopoly clause in favour of the concessionaires.
EDT’s facilities, which will serve as an onshore support base for Total’s drilling operations, lie in the government-retained areas of the port, administered by the ports authority.
Nevertheless, the concession agreement entered into by the government and the private concession holders held that any activity relating to oil and gas at the port would need to go through the concessionaires – including if those activities took place in the government-retained areas.
Apparently this complication came to the transport ministry’s attention belatedly. Largely as a result of this, Total’s drilling schedule – initially slated for April 2017 – had to be pushed back to June.
Eventually EDT and P&O Maritime came to an arrangement, allowing the former to operate an onshore logistics base until the end of 2018.
The deal provides that by then EDT has to dismantle a floating platform it has at the site.
“Effectively, DP World and P&O Maritime are seeking to shut out anyone from providing services in the government-retained areas of the port, and to double-dip into the oil and gas activity,” another source said.
This would deprive the state of potentially significant revenue streams.
The same source said DP World planned to build a mud plant next to the new passenger terminal at Limassol port, and wondered whether they would – or should – secure an environmental permit.
Asked about this, the transport ministry’s Michaelides said the mud plant would not be located close to the passenger terminal, but “at a distance.”
He added: “In any case, the configuration will be such that passengers will not have direct view of the mud plant.”