Thursday, December 7, 2023

Cyprus inks major deals with foreign energy giants

The involvement of ExxonMobil, ENI, Total raises hopes for more energy finds in the future

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France’s Total, Italy’s ENI, US ExxonMobil and Qatar Petroleum signed agreements in Nicosia this week to explore and produce hydrocarbons offshore Cyprus. Total signed on April 6 the contract for the exploration and production sharing of Block 6 and Block 8 in Cyprus’ exclusive economic zone (EEZ). Total and ENI had won the concession for Block 6, while ENI alone was awarded Block 8. Total and ENI have also joined forces in Block 11. On April 5, Cyprus’ government signed a contract with the consortium of ExxonMobil and Qatar Petroleum granting them to explore Block 10.

Cyprus Natural Hydrocarbons Company CEO Charles Ellinas told New Europe on April 7 the deals are excellent news for Cyprus. “Cyprus third licensing round was concluded successfully earlier this week with ExxonMobil and Qatar Petroleum signing Block 10, ENI Block 8 and the Total-ENI JV signing Block 6. With this, a new exploration era starts, led by some of the world’s top majors. They have the technology and financial might to convert any significant gas discoveries into projects and exports,” Ellinas said. “After a difficult year in 2016, in terms of reduced production and reserves write-off, ExxonMobil is looking for secure and quick-return replacements, in comparison to difficult places such as Nigeria and Equatorial Guinea,” he said, adding that Cyprus, being an EU-Member State and within the prolific East Med, offers such an opportunity.

Constantinos Filis, director of research at Institute of International Relations, told New Europe on April 7 “the involvement of such companies gives us good reason to expect more energy finds in the future”. At the same time, exploitation has many preconditions that need to be met and also depends on other factors, including oil prices, regional security and joined ventures in order for East Med to become more competitive.

Ellinas stressed that the prospects for discoveries similar to Egypt’s giant Zohr field in Cyprus’ Blocks 6, 8, 10 and 11 are good, with Total starting drilling in Block-11 in July. “However, this needs to be tempered with a dose of reality. The world is awash with gas and LNG and with US shale on the resurgence, and renewables penetration unstoppable, competition to secure markets will be fierce,” Ellinas said, predicting that prices are low and will stay low.

He noted that gas discoveries in the East Med are deep-water and expensive to develop. “They are also far from the likely markets in Asia. Collaboration will be key to keeping development costs down. In a low price environment, only integrated projects, which minimise costs from well to export, will stand a chance to become financially viable and secure export markets. And even then it will be challenging,” he said.

Meanwhile, in Tel Aviv on April 3, Israel, Cyprus, Greece and Italy with EU support signed an accord to move ahead with plans for the East Med pipeline to transport gas from that region to Southern Europe. “The East Med project got a boost with the signing but still has to persuade involving parties that it worth looking at it as a priority,” Filis said. “It is not only a matter of feasibility – a number of studies prove that – but whether East Med can be considered as a project that offers geopolitical and geo-economic advantages, putting aside any complications/risks that other alternatives have,” he added.

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media


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