Cyprus is interested in developing the Aphrodite gas field together with the Leviathan gas field but cannot wait for Israel, if the delays continue, Cypriot Minister of Energy, Commerce, and Tourism Georgios Lakkotrypis told "Globes" in an exclusive interview. Lakkotrypis revealed that next month there will be a decision on whether the Aphrodite field extends under Israel's economic waters and explains why it will still be possible to sell Cypriot and Israeli gas to Egypt despite the huge Zohr find and contrary to the accepted picture of the situation in Israel.
Last week, "Globes" reported that Israel was demanding being a party to the approval of the Aphrodite development plan, which it claims extends into its exclusive economic zone (EEZ). The Israeli claim is based on signs of gas discovered by Beny Steinmetz in the Yishai license drilling (on Aphrodite's southern border) in 2012.
Against this background, Israel and Cyprus continue to conduct talks on a diplomatic agreement to jointly develop the two fields (unitization in the professional jargon). But signing the agreement has so far been delayed by about five years.
Lakkotrypis does not deny that there is an Israeli demand for collaboration in the development of Aphrodite but completely rejects the suggestion that the disagreement is straining relations or delaying the signing of the unitization agreement and cooperation between the countries on other energy ventures.
Globes: The Israelis are convinced that Aphrodite extends into Israeli waters. Are you a party to this opinion?
Lakkotrypis: There has been an agreed process and a structured dialogue which has begun and it has been followed by an exchange of geological data in June 2014. We received the data from the Yishai drilling and the Israelis have the data from the Aphrodite drilling. It takes a long time to process this data."
He continued, "For example Eni (the Italian company that discovered the Egyptian gas field and also drilled in Cypriot waters A.B.) requested two years to analyze the data collected from its drilling. We've been looking for a date (for a meeting) for the two teams and next month there is technical discussion to determine whether it extends. Both countries are discussing in good faith and it's been outlined on many occasions that both countries will respect the other country's rights over its national resources."
Globes: Has the signing of the agreement been postponed until the end of the investigation process?
Lakkotrypis: When we visited Jerusalem in the summer we decided to wait with the unitization agreement until the end of the geological tests. I had a discussion on the phone with my Israeli counterpart Minister of Energy Dr. Yuval Steinitz two weeks ago and in our last conversation even though at the beginning we said 'let's see if we can have progress on the discussions for the unitization and then I can visit' in the last conversation we said 'let's not wait for that, let's find a date' - so it's just a matter of logistics, and it's completely not true that he delayed his visit for that reason. We don't like any shadows being cast on the fantastic relations between us. I know what Israeli intentions are and what our intentions are and we are only waiting for the technical results."
Globes: At what stage is the development of Aphrodite and has a date been set for the gas to start flowing?
Lakkotrypis: We have received the development plan from the developers and we have made our comments. At the moment we are discussing the detailed development plan. The plan in its present format talks about gas beginning to flow by 2020."
Globes: Taking investment decisions to begin developing the field requires finding buyers for the gas. Is anybody interested in buying your gas?
Lakkotrypis: "For this precise reason I was in Egypt last week because I wanted to make sure that the talks between our oil companies and the Egyptian side continues. Our huge desire is that the two fields - Leviathan and Aphrodite - will be developed together because there is an enormous advantage in size. The distance between the two fields totals just 7 kilometers and that allows us to rely on the same suppliers and same planner. These synergies will very much increase the competitiveness of the two fields. We of course have no say in the Israeli decision but we very much want the two reservoirs to be developed at the same time."
Globes: The question is whether you can wait for Leviathan in the event that its development will be delayed several years?
Lakkotrypis: No. Windows of opportunity open and close in a flash in the natural gas market. Look at the Zohar discovery in Egypt. At the moment we see the Egyptian market as an excellent opportunity for Aphrodite and Leviathan even after the Zohar discovery - the Egyptians confirmed this to me only last week and I have heard the same thing from private companies. The annual growth of natural gas demand in Egypt is 7%. But Egypt has announced the allocation of new exploration licenses and we need to seize the opportunity. I intend passing this message onto Steinitz."
We are only just beginning
Like Leviathan and Aphrodite, the Egyptian gas field was discovered in the same small area where the Egyptian, Israeli and Cyprus exclusive zones meet. Cyprus has not yet ruled out the possibility that part of Zohr extends into Bloc 11, the Cyprus area closest to it in the north where Total holds exploration rights.
The French energy giant had planned handing back the rights to Bloc 11 to the Cypriot government but Lakkotrypis revealed that it has now changed its mind following the huge gas find.
He said, "Total verbally announced in the past few days that they are interested in extending the agreement with us on the license for the area. From what I understand from the Egyptian authorities, the Zohr reservoir is the first discovery of its kind with carbon geological strata that we have not previously encountered. The fact that we are talking about a different kind of strata to those discovered at Tamar, Leviathan and Aphrodite means we are talking about a completely new play (in the exploration sector AB) that has been opened for exploration. Many companies will be interested in these new strata that also stretch into Israel and Cyprus. The lesson is that you have to drill because if you don't drill you won't know.
"In the region that Eni has found the field there was another company, larger (Lakkotrypis means Royal Dutch Shell AB) that drilled in 2009 and did not find gas reservoirs."
Globes: How do you see the role of Cyprus in the international arena on the assumption that you don't discover large reservoirs?
Lakkotrypis: "We have carried out just three drillings and a verification drilling so we are only just beginning. We will continue to try and create clear regulations for cooperating with neighboring countries - relations between us and Israel are fantastic and with Egypt too. We will continue to be very involved in the entire value chain of this industry."
Globes: There was recently an initiative to build an Israel-Cyprus-Greece pipeline to export gas to Europe. What do you think about this?
Lakkotrypis: There is an idea to build a pipeline from Israel's waters via Cyprus and from there to Crete, to Greece and the European continent. The EU allocated €2 million to assist private companies involved in this initiative (Edison which also operates in Israel and the Greek National Gas Co. A.B.) to begin initial feasibility studies on this idea what quantities are required and the most appropriate route. The difficult part in terms of engineering is between Cyprus and Crete - this we know from another initiative to link Israel and Cyprus to the European electricity grid with an electricity transmission cable."
Globes: What is happening with that initiative?
Lakkotrypis: "That also received funding from the EU for conducting feasibility tests - the findings will be presented to us in the coming weeks. It is a project that can significantly increase Israeli and Cypriot energy security and also allow us to increase to a substantial extent the proportion of electricity sourced from renewable energy without harming the grid's stability."
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2015
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