Noble Energy and Cyprus National Hydrocarbons Company to enter an LNG Project Agreement
The Israeli company Delek has expressed its interest in participating in the construction of an LNG plant in Cyprus. Delek’s chairman says he is hopeful for ‘a long-lasting cooperation between our company [Delek], the State of Israel and Cyprus’. Delek and subsidiary Avner Oil exploration hold a 30% stake in Block 12 (also known as Aphrodite) which is located offshore Cyprus and is estimated to contain between 5 and 8 trillion cubic feet of gas (tcf). Noble Energy operates Block 12 with a 70% interest.
In the first week of June, Noble announced it had started its A-2 appraisal well in Block 12. Noble added that drilling the well will take approximately three months to reach 5,600 meters below sea level. The first well A-1 was drilled in 2011. The resource size for the natural gas discovery in Block 12 was estimated between 5 tcf to 8 tcf, with a mean of 7 tcf. The results of the A-2 appraisal well will be announced in three to four months and will be key in determining the next stages of the development.
Cyprus is currently in early stages of planning the construction of a Liquified Natural Gas terminal (LNG) that would allow Cyprus to export its gas. Technip, a French company specialized in the building and operating of natural gas and oil terminals, conducted a study on behalf of Noble for the construction and operation of the LNG terminal in Cyprus. The results of the study, shared with Cyprus National Hydrocarbons Company (CNHC), confirmed Noble’s wish to accelerate the process of building the LNG terminal before a possible drop in the price of LNG.
Charles Ellinas, Chairman of CNHC, told Natural Gas Europe that CNHC will be entering into an LNG Project Agreement with Noble Energy. ‘Such a joint venture will have three main components, said Ellinas: shared facilities, an LNG train and marketing and sales. It will be designed to accommodate other players as we expand the facility to accept more gas and build more trains. The capacity of each train will be 5 million tonnes per year.’ Natural Gas Europe asked Ellinas about the options for funding the LNG terminal. He responded that once the joint venture is fully established next year, Noble and CNHC will seek appropriate funding and highlighted the fact that various parties have already expressed their interest to participate in the project putting forward interesting offers.
To the question of whether disappointing results from the A-2 appraisal well could challenge Cyprus’ plans to build an LNG terminal, Charles Ellinas responded that the Cypriot Government’s decision to proceed with the LNG terminal was final. He added that ‘there are strong indications of the existence of another gas field in Block 12 that is being explored as we speak. If the results of the appraisal drilling are negative, we will accelerate the development of the second field in Block 12 to make up for the shortfall. However, and given the Israeli success story with the Tamar and Leviathan fields which have similar formations to Aphrodite, we are very hopeful. A final investment decision will be taken between the end of 2015 and the beginning of 2016. Cyprus will be able to start exporting its natural gas by 2020’.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.
Follow Karen on Twitter: @karenayat