World Review: Cypriots Should Feel Lucky About Aphrodite Gas Discovery

In the following article, which Offshore Energy Today is sharing with permission from World Review, Dr. Carole Nakhle, an energy economist, based in London, UK, specialising in international petroleum fiscal regimes, world oil and gas market developments, provides her view on Cyprus’ Aphrodite gas discovery and its effect on the Mediterranean country’s economy.

Written by Dr. Carole Nakhle

Cyprus’ discovery of the Aphrodite gas field has been described as providing a lifeline for the Cypriot economy. Contracts recently signed with international oil companies could help Cyprus turn the page on its vulnerable indebted economy and energy supplies.

The Cypriots should feel lucky. The Aphrodite field, the country’s first gas discovery – made in 2011 – could not be more timely.

In June 2012, Cyprus became the fifth Euro-area member (after Greece, Ireland, Italy and Spain), to request international financial aid equivalent to the country’s GDP of 17 billion euros.

Meanwhile, Cyprus has signed several contracts with international oil and gas investors. Such a major development can significantly improve the island’s image as a credible borrower and could convince Europe’s finance ministers to release the rescue funds. Cyprus’s new right-wing president, Nicos Anastasiades, stated that revenue from future sales of natural gas should be used for reducing debt, while the rest would go into national growth initiatives.

Future oil and gas production in this traditionally resource-poor country will reduce fuel import bills substantially. The development of the oil and gas sector will also bring large capital investment, creating many jobs and generating both fiscal and export revenues.

Cyprus’ energy mix is dominated by oil and its products. The island has the second least diversified primary energy mix in the EU, behind Malta.

Although Cyprus ranks number one in the world in solar energy use for water heating in households, only around 1.4 per cent of electricity is generated from renewables (solar and biogas), the rest, 97.6 per cent from oil. There are three power plants, all oil-fired, and more than 100 dams, but none is used for electricity generation.

Cyprus largely depends on oil imports. The reliance of the Cypriot economy on energy imports is the third highest within the EU, behind Malta (100 per cent) and Luxembourg (97 per cent). In 2010, Cyprus faced an energy imports bill of 1.27 billion euros – the equivalent of 19.7 per cent of total imports cost or six per cent of GDP.

The use of natural gas will create a more balanced and diversified energy mix and will enhance the country’s security of supply.

According to the US Geological Survey (USGS), the Levant basin, which straddles the territorial waters of Cyprus, Israel, Lebanon, Syria and the Palestinian Territories, could be sitting on 1.7 billion barrels (bnbl) and 122 trillion cubic feet (tcf) of recoverable oil and gas respectively. Some argue that a significant part of that potential – around 60 tcf of gas – falls within the Cyprus Exclusive Economic Zone – an area of water south of the island in which Cyprus has claimed legal rights to explore and drill. If that potential materialises, it will be enough to satisfy domestic consumption for decades and the island’s ambition to become an energy exporter.

Cyprus held its first licensing round in 2007. One exploration licence was granted in 2008 for Block 12 to American Noble Energy International Limited. Three years later, Noble Energy discovered the Aphrodite field, which could hold between 5-8 tcf of gas.

The field has yet to be appraised before it is declared commercial and developed.

The second licensing round, in 2012, was more successful in attracting international interest. Twelve offshore blocks were offered; 15 bids were submitted by 29 international companies (one-third of which were from Israel).

So far, the Cypriot authorities signed five contracts with the following companies and their partners in the consortium: Italy’s Eni and South Korea’s Kogas (Blocks 2, 3 and 9) and Frances’s Total SA (for blocks 10 and 11). Other contracts are being negotiated.

If development goes ahead, first gas production is not expected to reach domestic market before 2018.

Political tensions between neighboring countries may complicate things further.

Turkey opposes exploration by the Greek Cypriot Government until reconciliation with the Turkish Cypriot authorities has been negotiated.

There is also the dispute between Cyprus and Lebanon over maritime borders. This means that Cyprus cannot fully begin its own oil and gas exploration activities until the matter is resolved.

Read the original article here: https://www.worldreview.info/content/cyprus-gas-find-boost-islands-ailing-economy

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