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ENI-KOGAS talks ended for ‘purely commercial reasons’

Energy Minister Giorgos Lakkotrypis speaking at the Energy Charter Conference

By Poly Pantelides

Just a few months after the government suggested to an Italian-South Korean consortium to start talks on exploration concessions for offshore blocks 5 and 6, negotiations have ended “purely for commercial reasons,” Energy minister Giorgos Lakkotrypis has said.

Lakkotrypis said they gave the ENI-KOGAS consortium the opportunity to extend a licensing round for blocks 5 and 6 a few months ago. The licensing round was due to close in May, but Lakkotrypis said at the time a six-month extension for those two blocks would be granted.

ENI-KOGAS already hold concessions on three other blocks in the Cyprus exclusive economic zone and were the sole bidders for block 5 and one of a number of companies and consortia that bid for block 6 during the second round in 2012. The first licensing round was in 2007.

The two offshore blocks lie southwest of Cyprus, in an area which Turkey claims fall within its own continental shelf and which Turkey has also expressed an interest in exploring.

“Purely for commercial reasons, the consortium answered with a letter they are not ready to start a negotiation process, because they cannot improve on the terms of their financial offer,” Lakkotrypis said. He said because of Turkey’s claims on the blocks, the southwest offshore blocks lacked adequate data on natural gas prospects, making investment more “high risk” for the consortium.

Lakkotrypis was briefing reporters before a press conference concluding the 24th Meeting of the Energy Charter Conference in Nicosia. The conference was organised by the energy ministry in cooperation with the Energy Charter Secretariat.

Participants from over 80 countries discussed the South Eastern Mediterranean which originated in 1994. The treaty is a legally binding multilateral instrument to ensure a level playing field among world energy players. The treaty’s provisions focus on investment, trade, dispute resolution mechanisms, and the promotion of energy efficiency. It concerns the entire energy chain, from exploration to end-use and energy products and equipment. Cyprus ratified the treaty in 1998.

“For Cyprus, which still remains an isolated energy market at the heart of the South Eastern Mediterranean, energy investments are becoming increasingly important,” Lakkotrypis said.

He said participants during the Cyprus-based conference decided to lay down new rules on future Conference chairmanships, which will now be decided by the participating countries. Kazakhstan is up next in 2014.

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