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Cyprus gas field project still on despite Israeli claim: minister

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Cyprus gas field project still on despite Israeli claim: minister

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London — Cypriot energy minister Yiorgos Lakkotrypis is adamant the development of the Aphrodite gas field will proceed despite objections raised by Israel over the lack of a unitization agreement with Israel for the 4.1 Tcf resource.

A senior official at the Israeli energy ministry sent a letter to the partners in Cyprus's Aphrodite field advising them not to proceed with development until the two countries had resolved the issue of Israeli company assets in the structure which extends into Israel's adjacent Yishai block.

Ehud Adiri, director general at the ministry, said in the letter -- a copy of which was obtained by S&P Global Platts -- that the two countries had "not concluded the necessary agreement that would facilitate the fair exploitation and development of the field for the benefit of all the involved parties".

Beset as it has been for the past year with encroachment by Turkey into the internationally recognized Cypriot Exclusive Economic Zone (EEZ), the Israeli letter sparked alarm in the Cypriot media.

Speaking to Platts late Monday, Lakkotrypis stressed three points:

  • First, that development of the Aphrodite gas resource by operator Noble Energy would continue as planned;
  • Second, that a procedure for what the minister identified as a "special agreement" concerning unitization of the block was in progress and would continued to be followed;
  • And third, that as far as Cyprus understood, there was no link between Aphrodite development and the procedure for the special agreement.

Lakkotrypis also said that if it as shown that the gas reservoir extends into the Yishai block then Cyprus would compensate the Israeli side.

"Cyprus will not deprive anyone of their rights."

Israeli letter

Adiri sent his letter to Aphrodite partners Noble, Shell and Delek Drilling, saying Aphrodite was a "cross-border natural reservoir".

"I wish to advise you that the State of Israel has not relinquished its share of the Aphrodite-Yishai natural gas reservoir and has no intention of doing so," he said.

"I also wish to advise you of the position of the State of Israel that the development and exploitation of the Aphrodite-Yishai field by the licensees of both states must not commence prior to reaching an agreement between the governments of Israel and Cyprus."

Adiri said he looked forward to the companies' reply.

Noble, also the operator of the Leviathan and Tamar gas fields offshore Israel, told Platts that "questions pertaining to relations between countries and inter-governmental discussions pertaining to natural resources in the Eastern Mediterranean basin should be addressed to the respective governments."

"As an operator in the Cyprus EEZ we are subject to the laws of the Republic of Cyprus," it also said.

Delek and Shell both declined to comment.

FID timeline

Cyprus awarded a development license for Aphrodite in November and, over the next two years, the partners are to drill appraisal wells and conduct front-end engineering and design (FEED) work.

A final investment decision is anticipated in 2022.

In the meantime, a commercial agreement is being sought to export up to 800 MMcf/d to Egypt via a pipeline that will be constructed as a separate project.

Aphrodite gas will then be processed at the Shell-operated Idku facility and re-exported as LNG by 2025.

Noble discovered Aphrodite in December 2011 and drilled an appraisal well in mid-2013, estimating the resource at 4.1 Tcf (116 Bcm).

The Yishai partners claim some 7 Bcm of the resource and have said the Israeli government was not protecting their interests.

The Yishai partners are comprised of Israel Opportunity Energy Resources, Nammax Oil and Gas Ltd, Eden Energy Discoveries and AGR Petroleum Services Holdings AS. The group holds five licenses in the Israeli offshore known as the Pelagic group.

The Aphrodite partners have previously suggested that the Israeli group drill an appraisal well in the Yishai block to substantiate their claim but, so far, they have not taken steps to do so.

Noble, Shell and Delek hold 35%, 35% and 30% stakes in Aphrodite, respectively.

The development and exploitation license involves an investment of up to $3.5 billion over six years. The resource is valued at $9 billion over 18 years.

-- Stuart Elliott, stuart.elliott@spglobal.com

-- Edited by Dan Lalor, daniel.lalor@spglobal.com