A DEAL has been struck between the consortium holding the marine services concession at the port of Limassol and EDT Offshore, allowing French oil major Total to drill its first exploratory well on schedule.
The development means that EDT, can via their port facilities, provide onshore logistical support to Total who plan to drill around April next year.
The breakthrough, which sources said came after ‘marathon negotiations’ between EDT and P&O Maritime – the co-concession holders at Limassol port along with G.A.P. Vassilopoulos – was achieved.
The same sources said the arrangement has immediate effect and will be in force for a period two years, until the end of 2018.
In early October, Total and EDT, 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
In the meantime, the marine services concession at the port of Limassol – after it was privatised – was granted to a partnership comprising P&O Maritime and G.A.P. Vassilopoulos for the next 15 years.
But the concession, granted by the Cyprus Ports Authority, included a monopoly clause in favour of the concessionaires.
EDT’s facilities, which will serve as an onshore support base for Total’s drilling operations, lie in the government-retained areas of the port, administered by the Cyprus Ports Authority (CPA).
Nevertheless, the concession agreement entered into by the government and the private concession holders held that any activity relating to oil and gas at the port would need the ‘blessing’ of the concessionaires – including if those activities did not take place in areas operated by them.
Apparently this complication came to the transport ministry’s attention belatedly, threatening to derail Total’s drilling schedule.
“The snag was about who insures what in the event of an accident [at the port],” another source told the Cyprus Mail.
It’s understood that, to resolve the issue, EDT has agreed to adjust its insurance policy by adding to it the port’s concessionaires.
EDT will continue to pay the same fee as before to the CPA.
The pact is but a quick fix, as far as Total’s programme is concerned. While the arrangement does allow the energy company to use the Limassol port facilities until the end of 2018, beyond that a question mark looms.
That will be especially true should Total, which has also bid in the third offshore licensing round, were to be awarded an additional exploration concession.
The French behemoth had been previously persuaded to shift their onshore support base to Limassol, despite being keen on operating out of the port of Larnaca – which is no longer an option.
The same issue goes for ENI, who currently have exploration licenses on three offshore blocks. Amid reports that the Italian company were considering relocating their Cyprus onshore base to Haifa, the government weighed in to prevent that.
There are a variety of technical reasons why oil companies prefer Larnaca. The water depth – around 12 metres – is more than sufficient for support vessels to wade into the harbour. Also, the port at Larnaca is nowhere near as congested as Limassol’s.
The Cyprus Mail understands that, like Total, ENI will probably be using Limassol in the future for drilling activities.
Government sources, speaking on condition of anonymity, said ENI would be using the future facilities of DP World at Limassol port.
DP World are co-concession holders with G.A.P. Vassilopoulos Group in operating the multi-purpose terminal of Limassol port for the next 25 years.
The sources said they expected DP World’s facilities – an onshore logistics base – to be completed within the second half 2017.
To date, the ENI-Kogas consortium has drilled two wells – both duds – and is contractually obligated to drill two more.
Asked whether the port in Limassol is capable of accommodating two hydrocarbons drilling operations at the same time – should that necessity arise – the sources insisted it could.
And in a related development, the Commission for the Protection of Competition (CPC) on Thursday ruled that the operation of marine services at Limassol port (Lot 2) by P&O Maritime does not contravene competition laws.
The CPC also found no breach of competition rules regarding DP World’s operation of the multi-purpose terminal (Lot 3).
However, the ruling is conditional on the companies in question adhering to certain practices, such as engaging in arm’s length transactions.
An arm’s length transaction is one in which the buyer/tenant and seller/owner act independently and have no relationship (by blood, marriage or unrelated business dealings) to each other.