Nicosia and Cairo have agreed to build a gas pipeline from the Aphrodite field in Block 12 to Egypt, but those reserves could remain untapped in a row over profits.
The deal could come unstuck if the government does not strike a compromise on profit sharing with the consortium licensed to exploit Block 12.
CyBC TV said the agreement, already approved by Brussels, is undergoing the finishing touches before it is signed at an official ceremony in the Autumn.
An Energy Ministry official has briefed the political parties on new demands by US firm Noble, UK-Dutch Shell and Israel’s Delek to exploit Aphrodite gas.
They want a change in the product-sharing contract which outlines the percentage of revenues to be received by the state in any commercial deal.
The three companies have proposed a ratio change of 60-40 in favour of the Republic of Cyprus be reversed so that Noble, Shell and Delek receive the lion’s share of the 60% instead.
Such a reversal in the profit ratio would see the state lose in the region of €2.5 bln to the consortium.
The government has rejected this position but “realistic and honest” negotiations over the profit share with the energy firms will begin in September. Nicosia is open to a new agreement, with added stipulations, to ensure the extraction and supply of gas is timely.
In drawing up a new contract with the companies the government will also have in mind the ExxonMobil exploration off the island in block 10 during the latter part of the year.
Any delay in negotiations with Noble, Shell and Delek would scupper the government’s deal to supply energy-hungry Egypt with gas via a pipeline.
It is estimated that Aphrodite could generate $19 bln in revenue over an 18-year period of which the Cyprus government would see a net profit by $7.6bln and the companies $4.3 bln under the current agreement. The estimates are based on crude oil selling at $60 a barrel in 2020.
Under the consortium’s new proposal, the profits would switch leaving a large hole in the government’s expected gas revenue.
Texas-based Noble Energy in 2011 made the first discovery off Cyprus in the Aphrodite block estimated to contain around 4.5 trillion cubic feet of gas – it has yet to be commercialised.
Cyprus has also issued exploration licenses to Italy’s ENI and France’s Total.
The discovery of nearby Egypt’s huge Zohr offshore reservoir in 2015 has stoked interest that Cypriot waters hold the same riches.