By Elias Hazou
CYPRUS and a US-Israeli partnership yesterday signed a statement of intent for the development of a liquefaction natural gas (LNG) plant on the island.
Signing the preliminary accord were energy and commerce minister Giorgos Lakkotrypis, on behalf of the Cypriot state, and US energy firm Noble Energy together with their Israeli partners in offshore Block 12, Delek Drilling and Avner Oil Exploration Limited Partnership.
Noble operates Block 12 with a 70 per cent working interest. Delek and Avner each own 15 per cent.
The deal is the first in a series of agreements required for the implementation of the LNG project. A target date of December 31, 2013 has been specified for the completion and signing of a project agreement, paving the way for a final investment decision by the Block 12 partners in 2015 or early 2016.
The memorandum of understanding is intended as a precursor to a final project agreement that would set up a joint venture between the parties – a special-purpose vehicle seeking investors for the estimated €7 to €8bn LNG plant.
“The signing of the memorandum between the Republic of Cyprus and the three companies represents the next milestone on the road map for the exploitation of indigenous gas reserves in Cyprus’ Exclusive Economic Zone,” Lakkotrypis said at the official ceremony which took place at the Filoxenia conference centre in Nicosia.
The mooted LNG plant – which if it comes to fruition would be the largest investment ever on the island -will be built at Vasilikos, Limassol.
Lakkotrypis said also the LNG plant will constitute “the fundamental and necessary infrastructure that will allow for the export of Cypriot natural gas to European and global markets”.
Addressing the event, John Tomich, Cyprus country manager for Noble, said the agreement constitutes an important milestone for cooperation between Cyprus and its partners adding that it will lead to the full development of natural gas reserves to be found in block 12.
Gideon Tadmor, CEO of Delek Drilling and chairman of Avner Oil and Gas LP, said the MoU demonstrates the government’s and the companies’ commitment to press ahead with the construction of the LNG facility.
Tadmor said of the agreement that only a few years ago it had seemed a “fantasy”, which has today become reality.
Construction of the LNG terminal would create thousands of jobs and help the island rebound from economic recession, he added.
Also attending the ceremony were US and Israeli Ambassadors in Nicosia John Koening and Michael Harari, and Charles Ellinas, head of the Cyprus National Hydrocarbons Company (CNHC).
Responding to reporters’ questions, Lakkotrypis said the MoU lays out a framework for cooperation in the project; talks would be held over the next six months to hammer out the technical and commercial details, such as the parties’ stake in the project, he said.
The minister reiterated that the LNG plant would be commercially viable with Cypriot gas reserves alone, but added that the facility could be expanded in the future to accommodate the processing and storage of gas from other neighbouring countries, alluding to Israel.
The CNHC would play a key role in the project, Lakkotrypis said, noting that the state-owned hydrocarbons company would act as the state’s commercial arm in future agreements.
On appraisal drilling currently underway at the ‘Aphrodite’ field in Block 12, the minister estimated that it would be completed in two to three months’ time.
Cyprus hopes to use current infrastructures to channel natural gas to domestic electricity production by 2018, and to begin exports via an LNG plant in late 2019 or early 2020.