Will Aphrodite Save Cyprus?
John Tomich, head of US Noble Energy, announced Noble will carry out an appraisal well in Cyprus’ Block 12 gas field. Noble announced the Aphrodite discovery in Block 12 offshore Cyprus in late 2011 with estimated gross mean resources of 7 Tcf. The appraisal well will be carried out by Noble later this month with results expected to be announced by September 2013. Following this discovery, Cyprus granted concessions for natural gas exploration to ENI/KOGAS consortium in blocks 2, 3 and 9 within Cyprus’ EEZ and Total for blocks 10 and 11.
Commerce and Energy minister Lakkotrypis said once the results of the appraisal well are announced, Cyprus will be able to go to international markets to obtain financing for its LNG plant and pre-sell its natural gas. Contracts can be signed as early as 2014 even though Cyprus will only be able to deliver natural gas by 2020. The results of the appraisal drilling will be key in deciding whether Cyprus should go ahead with its decision to invest in the LNG plant. The decision for such a project would be made by 2016. An LNG plant in Vassiliko would enable Cyprus to play the role of a regional energy hub by 2020. The minister added that the commercial viability of the plant will depend on the quantities found.
The President of Cyprus National Hydrocarbons Company, Charles Ellinas, seems optimistic about the progress achieved by Noble. He said that Noble’s appraisal well in Cyprus’ Block 12 may boost previous estimates from 7 to 8 trillion cubic feet (Tcf). As a way of example, the Tamar and Leviathan fields offshore Israel were both underestimated in size at the beginning. Noble Energy announced in the first quarter of 2013 that it raised the gross mean resource estimate of the Tamar field to 10 trillion cubic feet (Tcf), 1 Tcf over the previous estimate. The gross mean resource estimate of Leviathan was also raised from 17 to 18 Tcf. Charles Ellinas hopes that the Aphrodite field will also prove larger than expected.
The amount of proven reserves will determine whether Cyprus can justify the commercial viability of an LNG plant in Vassiliko and whether it can go ahead with its plans without the help of its neighbours. An LNG plant would offer Cyprus the flexibility to choose its export markets. Charles Ellinas revealed that Israeli, European and Far Eastern investors have expressed an appetite to finance the $6 billion LNG terminal in Cyprus (Reuters). The amount of interest shown gives Cyprus the confidence that it can become a net energy exporter, save its debt-crippled economy and transform its fate.
One question mark remains: will the newly found riches reunite the island or constitute a setback to the Turkish-Cypriot conflict?
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.
Follow Karen on Twitter: @karenayat