ENERGY giant Total’s plans to explore for hydrocarbons offshore Cyprus are stuck in limbo, while ENI and Noble Energy are intimating they are considering moving their onshore logistics base to Egypt and Israel, respectively, unless they are able to continue operating out of the port of Larnaca.
In early October, Total and EDT offshore, an oil and gas services company, signed a contract where the latter would provide the former onshore logistics services out of the port of Limassol supporting Total’s drilling programme.
Amid much fanfare at the signing ceremony – attended by energy minister Giorgos Lakkotrypis and transport minister Marios Demetriades – Total announced they were poised to drill their first exploratory well in Block 11 of Cyprus’ Exclusive Economic Zone, in April 2017.
But the Total-EDT deal may now be in shambles.
The services concession at the port of Limassol – after it was privatised – was granted to a consortium comprising the G.A.P. Vassilopoulos Group and DP World.
But the concession, granted by the Cyprus Ports Authority, includes a monopoly clause for those areas of the port given over to the consortium.
Citing the concession agreement, the consortium now says that any oilfield services at the port must therefore either be handled by them, or at least go through them – through subcontracting.
G.A.P. Vassilopoulos Group and DP World contend that the arrangement between Total and EDT is in violation of their own agreement with the government to operate the port.
In short, if the consortium is right, Total cannot make use of the logistics base at the port of Limassol.
In what appears to be a monumental foul-up, the monopoly clause in favour of the port’s new operators came to the transport ministry’s attention only after Total and EDT had put ink to paper in their deal.
It has also been reported that the monopoly clause was inserted during the final-stage negotiations between the government and the G.A.P. Vassilopoulos Group- DP World consortium; it seems the clause was not part of the original tender documents to privatise some of the port’s services.
Transport minister Marios Demetriades could not be immediately reached for comment.
Given these complications, Total have handed the government an ultimatum until October 26 – this Wednesday – to resolve the issue.
The energy behemoth has let it be known that, unless the government comes up with solid assurances by that deadline, it may have to suspend its drilling programme indefinitely.
Among other things, Total need to lease a drilling platform – involving considerable lead-time – but cannot do so unless they are first assured that they can go ahead with drilling.
In a bid to untangle the mess, it’s understood that the transport ministry has proposed that the new port operators be compensated either by the Cyprus Ports Authority, or paid a licensing fee by EDT.
And all this after Total were coaxed by the government into transferring their onshore support base to Limassol; the company had wanted to operate out of Larnaca port.
Back in February, Larnaca’s municipal council voted against extending the stay of MedServ, the company providing support services to offshore exploratory activities.
Whereas Total reluctantly agreed to shift their support base to the port of Limassol, ENI and Noble insist on operating out of Larnaca.
Should the government fail to come to an accommodation with ENI and Noble, and the two companies do transfer their support base elsewhere, that would mean loss of business for several Cyprus-based outfits other than Medserv.
ENI are bound by contract to carry out two additional drills by January 2018 in their concessions, blocks 2, 3 and 9. But the company insists on using Medserv’s facilities at Larnaca port, as it had done when it drilled twice in Block 9 in the past. Otherwise, they are considering relocating their logistics base to Port Said in Egypt.
ENI are already using Port Said as their logistics base for their Egyptian operations.
Noble Energy are likewise said to be keen on Larnaca, refusing to move their support base to Limassol. The Texas-based company have indicated that if this is not possible, they would relocate their logistics base to Haifa, Israel.
Medserv’s permit at Larnaca port was set to expire in August of this year, with the government requesting a six-month extension beyond that date- essentially a quick fix, as neither ENI nor Noble were at any rate expected to drill in 2016 or early 2017.
But back in February, Larnaca’s municipal council voted against extending the permit for Medserv’s facilities. The town’s residents feared the port would be turned into an industrial hub with all the attendant health and environmental risks.
The government decided at the time not to override the municipality’s decision, amid speculation it did not wish to antagonize Larnaca’s residents, what with parliamentary elections looming in May.