French energy major Total S.A. (Euronext: FP; NYSE: TOT) is interested in buying rights in Cyprus's Block 12 from Noble Energy Inc. (NYSE: NBL) and its partners Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling Limited Partnership (TASE: DEDR.L), Charles Ellinas, CEO of state-owned Cyprus National Hydrocarbons Co. has told "Bloomberg." In his estimate the potential for gas discoveries in the licenses already allocated could amount to 40 trillion cubic feet (TCF).
Cyprus intends expanding the liquid natural gas (LNG) installation for export beyond its original plan even if Israel does not allow gas exports via the Cypriot facility. With the ongoing uncertainty regarding Israel's policy on gas exports, sources in Cyprus told "Globes" that "We are very interested in cooperation with Israel but we are not talking about a necessary condition for realizing our development program in the energy sector."
Cyprus is promoting a plan to build an LNG facility near Limassol at an investment of $12 billion. The facility will contain three production lines and the government recently signed a memorandum of understanding on the matter with Noble Energy, Avner and Delek Drilling Noble owns 70% of Block 12 (Aphrodite) and the Delek units hold 15% each. Under the terms of the agreement the first production line will be built at a cost of $6 billion with annual output of 5 million tons, or 8 billion cubic meters (BCM) of natural gas.
Subsequently a second two other production lines will be built each with a similar capacity at a cost of $3 billion each. The facility should be operating by 2019 with construction involving 10,000 workers beginning in 2016. Block 12 (Aphrodite) with up to 200 BCM and a further field that Noble expects to discover will supply gas to the facility. Noble is currently conducting a test drilling to try and estimate the size of the field. Development of the field could be affected by a spillover into Israeli economic waters.
With this in mind, Israel and Cyprus have been conducting talks for the past three years to reach a unitization agreement for arrangements in cooperation over the energy reserves of the two countries. Sources in Cyprus recently told "Globes" that if the agreement is not signed then Cyprus will have no choice but to develop is fields without an agreement. However, sources in Israel currently believe that such an agreement will be signed by the end of 2013 at the latest after the findings from the Block 12 drilling are received.
At the same time Cyprus is pushing ahead in developing other licenses that were distributed last year to leading global energy companies. Total already holds licenses for Blocks 10 and 11 and Italy's ENI holds the 2,3, and 9 licenses together with South Korea's Kogas. These groups have said that they would be interested in taking part in the development of the future LNG installation.
Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2013
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