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Final decision on third-round concessions expected early 2017

Energy Minister Giorgos Lakkotrypis at the House

Technocrats’ initial assessments of the bids submitted by energy companies in the third offshore licensing round should be ready within the next few weeks, Energy Minister Giorgos Lakkotrypis told MPs on Monday.

Once the ministry receives the reports and presents them to the cabinet, there will follow a period of negotiations with the preferred bidders.

A final decision awarding concessions should be made by early 2017, Lakkotrypis said.

In May 2016 Cyprus launched its third offshore licensing round. Three blocks (6, 8 and 10) have been put up for auction.

Responding to a question, the energy minister said that oil major Total’s timetable for drilling in its offshore concession – Block 11 – remains on target, despite complications relating to the use of facilities at the port of Limassol.

The matter of the port facilities in Limassol is on track for a positive resolution, he added.

Earlier, Total had said it planned to carry out its first exploratory drilling for hydrocarbons offshore Cyprus around April next year.

Lakkotrypis stressed the significance of the planned drilling in Block 11, given the proximity of the Cypriot acreage to a massive gas discovery in neighbouring Egyptian waters.

In late August 2015, Italy’s ENI announced it had discovered the Zohr field holding an estimated 30 trillion cubic feet of gas. ENI had taken a gamble, using a geological sequencing model tracking carbonate reservoirs rather than the classical sand-reservoir model.

Cyprus’ Block 11 lies about 6 kilometres from the Zohr discovery.

A geological map of the Cyprus-Egypt maritime border area shows a large ‘carbonate platform’ existing in the island’s southern offshore blocks of 10, 11 and 12, and in blocks 7 and 8, which lie in an uncontracted area known as the Eratosthenes mount.

In response to another question, Lakkotrypis said that the exploitation of hydrocarbons has at no stage been linked to the ongoing Cyprus reunification talks.

To date, he added, government has not carried out any techno-economic studies on a possible gas pipeline from Cyprus to Turkey.

The government’s top priority revolves around the potential discovery of additional hydrocarbons by already-licensed companies, Total and ENI.

Secondarily, discussions are ongoing on how to best use the proven gas reserves in Block 12 – Aphrodite – for which the top export option is a pipeline to the Egyptian shoreline.

But low oil prices at the moment are a challenge, the minister noted.

Regarding the planned construction of a liquefaction facility – to be used for storing natural gas for the purposes of export – Lakkotrypis said the master plan for an energy complex at Vasilikos has been completed.

The blueprint provides for a liquefaction facility with five trains – or production lines. However, additional gas discoveries would be necessary so that the facility may operate at capacity.

On the importation of natural gas until Cyprus can tap its own gas reserves, the minister said he has instructed the Natural Gas Public Company (Defa) to prepare a new study into the infrastructures required to import liquefied natural gas (LNG).

The study is looking into ways of importing LNG for power generation but also broadly for industrial purposes. DEFA, by law the sole importer and distributor of natural gas in Cyprus, has been given until around the end of the year to complete the study.

On the East Med Pipeline, directly connecting East Mediterranean resources to Greece via Cyprus and Crete, Lakkotrypis said that project promoter IGI Poseidon has presented techno-economic data to the governments of Cyprus, Greece and Israel.

The mooted pipeline, estimated to cost between €5 billion and €6 billion, would a viable project, provided however that buyers for the gas can be found.

Regarding the EuroAsia Interconnector – a proposed subsea electricity cable connecting Israel and Cyprus to the European mainland – the minister said that the project operator has submitted its investment proposal to Cyprus, Greece and Israel.

The proposal needs approval from the respective regulatory authorities of the three governments, who also have to agree among themselves how much each country will invest in the project according to their electricity consumption.

On the delays in opening up the electricity market to competition, Lakkotrypis informed MPs that by month’s end his ministry and the energy regulatory authority would come up with a concrete timetable.

Officials had earlier said that the liberalisation of the market would completed by June of 2016. Now, the date has been pushed back to 2019 or 2020.

The government is looking at a stopgap arrangement towards full liberalisation.

 

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