Cyprus Signs Deal to Develop Offshore Gas Reserves via LNG Plant

The Republic of Cyprus , today signed a Memorandum of Understanding (“MOU”) in respect of the Cyprus Liquefied Natural Gas (“LNG”) Project with Noble Energy International Ltd  , Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership , that were granted in 2008 a Production Sharing Contract for Block 12.

The MOU provides for the negotiation between the State and the Contractor of a definitive Cyprus LNG Project Agreement that will specify the technical and commercial basis on which an onshore LNG plant will be built at Vasilikos, Cyprus (the “Project Agreement”). The LNG plant will initially process natural gas from the “Aphrodite Field” and other fields that may be discovered in Block 12 of the Cyprus Exclusive Economic Zone (“EEZ”) into LNG for export and delivery to international markets.

It is intended that the LNG plant will be capable of being expanded to accommodate additional natural gas discovered in the Cyprus EEZ, either in Block 12 or in other blocks which have been licensed to date (Blocks 2, 3, 9, 10 and 11) or may be licensed in the future, as well as natural gas from neighboring countries.

This MOU is the first in a series of agreements that will be required for the implementation of the Cyprus LNG Project. A target date of December 31, 2013, has been agreed between the State and the Contractor for completion and signing of the Cyprus LNG Project Agreement. On this basis, it is planned that the first LNG cargo would be delivered from the Vasilikos Plant to international markets in late 2019 – early 2020.

Cypriot Minister of Energy said:” The LNG Plant at Vasilikos composes the fundamental and necessary infrastructure that will allow for the export of Cypriot natural gas to the European and global markets. It is an ambitious project of strategic importance that will also be the largest investment in the history of the Republic of Cyprus. It marks for Cyprus and its citizens a very positive outlook for economic growth, especially given the fact that it will be expandable to serve not only the Cypriot natural gas deposits, but potentially the deposits of our neighboring countries.”

The signing and entry into force of a Project Agreement would require the approval of the State as well as the relevant corporate bodies of each of the Contractor.

The current working interests of the contractor parties are: Noble Energy (Operator): 70%; Delek: 15%; Avner: 15%