Cyprus and TOTAL: break or break-up?

The news that France’s TOTAL may be pulling out from Cyprus for not having found potential drilling targets has not yet been fully confirmed. It remains unclear whether TOTAL is pulling out all together, reconsidering its participation or postponing its drilling activities until it finds signs of the existing reserves in the licensed areas of blocks 10 and 11. The plunging oil prices may have also played a role in TOTAL’s reluctance to drill in Cyprus in 2015 and invest large amounts of funds without the certitude of the commerciality of the endeavour. It is expected that the arrangement discussed between the Cypriot Government  and TOTAL will be finalised and announced soon, but it is not to be dismissed that instead of breaching its agreement with the Cypriot government and not getting involved in Cypriot waters, TOTAL has decided to commence its exploration activities in more favourable times.

TOTAL’s (perhaps momentary) withdrawal does not mean all hydrocarbon related activities have halted off the island’s coast. Noble energy is in fact in talks with the Cypriot government over the exploitation of the Aphrodite field discovered by the Texan company in 2011 in Block 12 of the island’s Exclusive Economic Zone and estimated at 4.54 trillion cubic feet (tcf). Despite the commercial size of the field, the island has not yet developed the adequate infrastructure to export its newly-found riches. An onshore LNG terminal project has been put on hold until further quantities are discovered.

In the meantime, Cyprus may be looking into the regional market as a destination for the natural gas discovered in its Aphrodite field. Neighbouring Jordan is struggling to meet its domestic demand as it undergoes a severe energy crisis triggered by the disruption in the flow of natural gas from Egypt to Jordan. Reliant on imports to satisfy 96% of its energy needs, Jordan is a potential customer for Cyprus and Israel. In 2014, Cyprus’ minister of energy Yiorgos Lakkotrypis met with senior officials in Jordan where he signed a memorandum of understanding to the effect of cooperating in the field of energy.

Despite the continued presence of a Turkish vessel in its waters, Cyprus also continues its offshore activities. The Italian and South Korean consortium ENI/KOGAS is pursuing its search for gas in Block 9 of Cyprus’ EEZ. Additional encounters would allow the island to invest in the necessary infrastructure to access far-reaching export markets.

Published by:

Date: 29.01.2015