12° Nicosia,
16 June, 2024

Crisis averted as Cyprus and Chevron reach compromise

Reciprocal concessions and updated terms prevent potential geopolitical and economic turmoil in the Cypriot EEZ

Apostolis Tomaras

Apostolis Tomaras

The resolution of the dispute between the Republic of Cyprus and Chevron Cyprus Limited, the manager of the Aphrodite field, can be seen as a compromise satisfying both parties. Faced with the potential risks of an incident in the vital Aphrodite field within the Cypriot Exclusive Economic Zone (EEZ), the two sides opted for a step back to allow the Aphrodite production project to proceed. The agreement, partially disclosed to "K," is deemed fair, curbing negative criticisms and avoiding clear winners or losers labels.

To avert unforeseen dimensions and psychological effects on the broader energy program within the EEZ, the government agreed to update some provisions of the 2019 agreement without altering its fundamental aspects. Chevron, in response, accepted Nicosia's set red lines, gaining a time extension for the techno-economic study's preparation, initially due by November 7, 2023. The turmoil resulting from this agreement is expected to cause a one-year delay in the field's development.

The new agreement is built on reciprocity, ensuring both parties make concessions. It upholds the 2019 agreement, with any deviations being targeted adjustments. Cyprus maintained the original commercial development model, featuring a floating unit over the Aphrodite field, while transport to Egyptian terminals will occur through pipelines or existing infrastructure. Chevron, granted an extension for the feasibility study (FEED), cited the health crisis and Middle East hostilities for the delay. Partial modifications to the 2019 agreement are allowed, except for the provision for a floating unit over the field.

Amendments may be requested based on variations in provisions, potentially due to regional war or new energy directions. Cooperation with other maturing deposits in the region for joint transport to Egypt or Cyprus is contemplated. The government, sympathetic to Chevron's economic concerns, is open to third-party investment to mitigate costs but excludes involvement in the production phase.

The new agreement avoids potential trouble for the first Aphrodite deposit in the Cypriot EEZ, preventing wider negative implications for Cyprus's relations with the US and the political and economic fallout from the withdrawal of the operator. The de-escalation preserves momentum in Cyprus's energy role in the Eastern Mediterranean. Meanwhile, Chevron benefits from the resolution, potentially reducing the financial cost of starting F.O.P. production, a contentious issue that strained relations between the two parties.

[This article was translated from its Greek original and summarized for conciseness]

Cyprus  |  energy  |  USA

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