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Government allows Chevron until end of March for gas deal

Υπουργείο Ενέργειας – Τελετή παρά
Energy Minister George Papanastasiou

The government has granted energy giants Chevron, operators of the Aphrodite gas field offshore Cyprus, an extension until the end of March 2024 to submit an ‘optimal development plan’, it emerged on Monday.

Over the weekend, and in a filing to the Tel Aviv stock exchange, Israeli firm NewMed Energy – a partner in the Aphrodite joint venture with Chevron – said that on December 8 Cyprus’ energy minister “authorised the operator to submit for his approval, by March31, 2024, a proposal for an optimal development plan, such that if the minister approves it, the date for compliance with the milestone will be postponed at the minister’s discretion”.

The “milestone” refers to the cutoff date by which the joint venture is supposed to commence a Front-End Engineering Design (Feed) study for Aphrodite, as agreed under the original development plan of 2019.

Under the 2019 production sharing contract, the companies were supposed to commence the Feed study by November 7, 2023.

As understood by NewMed’s latest filing, Energy Minister George Papanastasiou has now agreed to push back that deliverable – to a date as yet not disclosed.

A Feed study is basic engineering, which comes after the conceptual design or feasibility study. It focuses on the technical requirements, and generates a rough investment cost for the project. It is a key step prior to a final investment decision.

A week ago, Papanastasiou confirmed to the Cyprus Mail (https://cyprus-mail.com/2023/12/04/chevron-asks-for-extension-to-key-aphrodite-gas-study/) that he had received Chevron’s request for a postponement.

Chevron had formally made that request on Friday, December 1.

That Friday was the same day the government announced some understanding had been reached with Chevron regarding the development plan for the gas field.

“A win-win situation has been achieved,” Papanastasiou said at the time.

But details of what exactly was agreed were sketchy. The energy minister did add that final decisions on how to exploit the Aphrodite gas could take days or weeks more.

Back in May of this year, the joint venture had submitted a revised development plan for the gas field. The Cypriot government rejected the amendments at the end of August, with the contract providing for 30 days of negotiations to resolve the dispute. The negotiation period was extended for another 30 days with a deadline on November 5, which was then pushed back again.

The main points of disagreement included the construction or not of a Floating Production Unit (FPU) at Aphrodite, the construction of three instead of originally five production wells, and the timeline for delivery of the Feed.

Discovered in 2011, the Aphrodite reservoir holds an estimated 4.5 trillion cubic feet of recoverable gas. Chevron is the operator and a 35 per cent partner in the field, along with Shell (35 per cent) and NewMed Energy (30 per cent).

 

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