Cyprus and Israel agree to let gas companies thrash out protracted dispute (Updated)

After a nine-year impasse, Israel and Cyprus on Tuesday reached an understanding over gas reserves straddling their maritime border in a development hailed as a “breakthrough” by Israel’s energy minister Yuval Steinitz.

Cypriot Energy Minister Natasa Pilidou said she and Steinitz, during his brief visit to Cyprus, had agreed upon a framework to resolve the issue, and guidelines would be passed on to the companies involved in the project.

The Aphrodite-Yishai field is a cross-border natural gas reservoir but the two governments have been unable to reach an agreement on the fine print of its commercial exploitation.

Cyprus had in 2019 signed a 25-year concession with Noble Energy, Shell and Delek Drilling for exploitation of Aphrodite. Israel had maintained an agreement was required before work started because part of Aphrodite overlapped on to the Israeli side.

The Aphrodite field holds an estimated 4.1 trillion cubic feet of gas. At stake was about 10 per cent of the deposit, which is a fraction of the gas already discovered in Israel.

Development of the Aphrodite field has been held up because of the protracted dispute.

One of the options raised some time ago to break the impasse, was the possibility of initiating direct negotiations between the licensees in both countries, subject to final approval by the two states.

Cyprus’ Energy Minister Natasa Pilidou said on Tuesday after her meeting with Steinitz that a key step had been taken towards resolving the nine-year impasse over offshore spoils.

Pilides said she and Steinitz had agreed upon a framework to resolve the issue, and guidelines would be passed on to the companies involved in the project.

“The framework will be set out in a joint letter which is being prepared. We are both very satisfied we are now at this point after nine years of discussion,” Pilides told reporters as Steinitz, who was in Cyprus to sign a memorandum of understanding on another project, prepared to depart the island.

Pilides thanked her Israeli counterpart and his team for the “very constructive discussions” they had over the past 24 hours, saying that in a very short period of time they had managed to make significant progress on all bilateral issues but especially the discussions on Yishai and the issue of the Aphrodite gas field.

She added that they had agreed on a framework according to which the companies involved in the project would have specific guidelines regarding discussions they will have to resolve the issues within a specific period of time.
After the proposed settlement is agreed, the two states would, after studying the matter, give final approval, Pilides said.

Both countries, she said, were satisfied that they had reached this point after nine years of discussions.
Steinitz who said he could even call the development “a breakthrough” said there was a ‘fair chance’ of an eventual resolution. “Nothing is certain, but there is a good chance that this might lead us to a solution of this little but significant obstacle in the wonderful relations and cooperation between Cyprus and Israel on energy and on many other issues,” he said.

Steinitz described his visit as “very successful”.

“Finally, after years of endless and fruitless talks and negotiations we think we made a significant progress maybe even a breakthrough”.

He explained that the general idea is that the two governments will enable the companies involved on both sides of the demarcation line between the Exclusive Economic Zones of Cyprus and Israel to sit together for the next half a year and to try to reach commercial arrangements between them that will be later submitted to the two governments to approve.

“We think that there is a fair chance that commercial companies might find some regiment among themselves and then it will be easier for the governments to consider and to approve,” he added.

Noting that they still have to finalise some details in the documents he expressed hope that in a very short time they would be able to invite the companies from both sides to sit together with the permission and approval of the Israeli and Cypriot governments.

“Suddenly we see the light at the end of the tunnel, and there is a fair chance, nothing is certain, but there is a good chance that this might lead us to a solution of this little but significant obstacle in the wonderful relations and cooperation between Cyprus and Israel on energy and on many other issues,” said Steinitz.

He also said that together with his Cypriot counterpart they would be leaving for Egypt to participate in the first meeting of the East Mediterranean Gas Forum as a regional organisation, where “many interesting and important things will be on the agenda.”