Cyprus and Israel have made progress in talks regarding the distribution of future proceeds from the sale of natural gas produced at the Aphrodite reservoir, a part of which extends into Israel’s maritime waters, Energy Minister Natasa Pilides said on Tuesday.

“On the issue of Yishai [the Israeli gas licence] we held particularly constructive talks, where essentially we have arrived – at least verbally – at the basic principles that will govern an agreement between the two states, so that Israel will be compensated due to the fact that Cyprus will undertake the development of the entire reservoir,” Pilides said.

Pilides explained the process going forward. Teams of technocrats appointed by the two governments would hold meetings to agree a formula on the divvying up of proceeds. Once the two sides have something in writing, an independent expert would be appointed.

“And of course it will take some years until we reach the stage of compensation [to Israel], which will run parallel to Chevron’s and the consortium’s development plan,” she said.

Chevron Corp, along with partners Shell Plc and Israel’s Newmed Energy LP, owns drilling rights in the Aphrodite offshore field.

“Certainly no compensation will be given before we have the development plan, before the reservoir enters into the development process, and before there are definite prospects for revenue for both sides, because we don’t want either side to be treated unfairly,” Pilides added.

The minister also addressed media reports claiming an informal agreement had been reached assigning 10 per cent of the Aphrodite play to Israel, or that Cyprus would make an advance payment to Israel in exchange for the latter waiving its rights.

These reports are inaccurate, she noted.

The dispute derives from the claim of the owners of the Yishai gas licence, on the Israeli side of the Israel/Cyprus EEZ boundary, that the Aphrodite gas deposit extends into Yishai.

In 2010 Israel and Cyprus signed an agreement delimiting the border between their respective maritime areas.

But a unitisation deal, specifying development of gas reservoirs straddling both countries’ territories, was never signed.

Years of talks between the companies on either side regarding the mode of sharing went nowhere, at which point the governments stepped in.

Chevron are to present their final development plan for Aphrodite, located in Block 12 of Cyprus’s EEZ, by the end of this year with plans to drill a new well in early 2023.

First discovered in 2011, the Aphrodite play is estimated to hold 4.4 trillion cubic feet of still untapped gas.

Meanwhile over the weekend, the partners in the Aphrodite field in Cypriot waters announced they approved a $192 million investment to begin drilling and to cover other development costs for the offshore project.

Most of the investment is for drilling a well that will first confirm the size of the gas deposit, NewMed said.

The partners are examining development options, NewMed said, including connecting the field to existing facilities in the area or linking it to development plans for nearby assets in Egypt.

Asked to comment on this, Pilides said these planned investments are a separate matter to the Yishai dispute.

On Monday the two ministers also discussed an electrical connection between the two countries, the ‘green transition’, and Cyprus’ participation in COP27.