The cabinet on Tuesday appointed a committee that will enter talks with energy companies over the revenue sharing agreement for the 4.5 trillion cubic feet (tcf) Aphrodite gas finding in an offshore block.
“The best option is to try and find a mutually acceptable solution with the consortium so that the Aphrodite reserve is developed as soon as possible,” Energy Minister Giorgos Lakkotrypis said after the meeting.
The minister said development of the reserve would have a lot of financial and geopolitical benefits.
Aphrodite lies in block 12 of Cyprus’s exclusive economic zone and it is Cyprus’s first gas finding, discovered in 2011.
The Houston-based Noble Energy Inc. is the leader of a consortium with the participation of Israel’s Delek and Britain’s Shell.
Lakkotrypis said the government had been informed at the end of last year that the consortium had come to a preliminary agreement with Shell, which operates an LNG terminal in Egypt, to sell gas to them.
The consortium also said that because of the low international price of oil, the project would not be viable and they had asked for a review of the financial conditions in the existing agreement.
The negotiating team will be made up by the ministers of energy and finance and consultants from the hydrocarbons company and the legal service as well as any others who may be deemed necessary.
Lakkotrypis said the effort will be to wrap it up as soon as possible since the window of opportunity was small as conditions in the sector changed on a daily basis.
“From then on the progress of the negotiations will define the course of the talks,” he said.
If all goes as planned, natural gas will start flowing to Egypt in 2022, Lakkotrypis said.
He warned that as time passed, that date was also pushed further and that was why it was important to find a mutually acceptable solution as soon as possible.
Lakkotrypis said political parties will be briefed about the results of the talks.
While the decline in energy prices that set off in mid-2014 has negatively affected investment in hydrocarbons, in recent months they started to recover.
The price of a barrel of oil had fallen from over $100 per barrel four years ago to as low as below $40. Currently, Brent oil is traded at around $50.
Lakkotrypis urged the media to show understanding in the next few months since it was a sensitive matter and information made public should be scarce.
“We will have the opportunity to talk if and when we conclude,” he said.
The decision to renegotiate the agreement with Noble Energy comes weeks before the ExxonMobil – Qatar Petroleum consortium begins drilling for gas in block 10 of Cyprus’s EEZ, which could be a potential game changer in the development of offshore hydrocarbons. Earlier this month, the government struck a preliminary agreement with Egypt that will allow Aphrodite to be linked with Egyptian liquefaction plants via pipeline, expected to be signed this autumn.