12° Nicosia,
13 June, 2024

Two-week lifeline as ''Aphrodite'' negotiations extend amid deadlock

Chevron and Cyprus seek common ground with an extra 14 days on the clock

Yiannis Ioannou

Yiannis Ioannou

With the deadline for Chevron's proposal on the "Aphrodite" reservoir set to expire on Sunday, November 5, negotiations between the Republic of Cyprus and the consortium of "12" (Chevron, Shell, NewMed) led by the American giant for the development of the reservoir seem to remain in a deadlock. The negotiations, which started last August after Nicosia rejected the development plan for the reservoir, have gone through several phases. However, the main differences persist regarding the Floating Production Unit (FPU) and various other economic aspects compared to the initial development plan submitted by the consortium in 2019, prior to Noble Energy's departure. Unless an unforeseen event occurs, a two-week extension to Chevron is expected to be granted, as the visit of Clay Neff, a high-ranking executive of the American company, to Nicosia, aimed to break the deadlock. Nevertheless, the negotiations and the firm stances of both sides do not bode well for any significant progress, leading to further delays in the Aphrodite project.

Historical Background:

Cyprus and Chevron have been at odds over the "Aphrodite" reservoir (5 VS 3) and the development structures. Nicosia insists on creating a Floating Production Unit (FPU), while Chevron prefers utilizing the existing infrastructure of Shell in the region, particularly in the West Delta Deep Marine (WWDM) area before the Egyptian terminal of Idku. Beyond economic implications, the core of the disagreement lies in differing philosophies. Energy Minister George Papasavvas supports a Cyprus-centered approach, while Chevron aims to reduce development costs for a smaller reservoir like "12," given its involvement in larger projects in the area.

Clay Neff's Visit:

The visit of Clay Neff, President of Exploration and Production for the Middle East, Africa, and South America at Chevron, to Nicosia last Friday is closely linked to the new two-week extension for negotiations. Neff had previously met with President Christodoulides in New York during the United Nations General Assembly. However, no significant progress was made during that meeting. On Friday, Neff also met with Energy Minister George Papasavvas, further highlighting the depth of the deadlock in the Chevron-Cyprus negotiations.

Uncharted Waters:

The ongoing deadlock in the development of "Aphrodite" extends the prospect of gas production in a reservoir discovered in 2011, over a decade ago, and commercially viable since 2014-2015 in uncharted waters. There are four potential outcomes:

1. An extension of negotiations for two more weeks, which may not resolve the persistent differences between the two parties.
2. The resolution of the entire issue through arbitration, potentially leading to the revocation of the license for the "12" block held by Chevron, potentially causing a legal battle and Chevron's withdrawal from the Aphrodite consortium.
3. Political reshuffles resulting from the negotiation deadlock, including the potential resignation of Energy Minister George Papasavvas.
4. The best-case scenario is an agreement that bridges the differences but does not affect the fundamental disagreement regarding the FPU's construction versus the use of existing facilities near Idku (West Delta Deep Marine). In any case, the current deadlock further postpones the development of "Aphrodite," and initial estimates of full development by 2026-2027 remain unconfirmed.

ENI and "Kronos-2":

The floating drilling rig Transocean Barrents sailed from Limassol last Thursday to the "Kronos" reservoir on the "6" block of the Cypriot Exclusive Economic Zone (EEZ), where Italy's ENI will conduct drilling in the "Kronos-2" target. The drilling is expected to continue until late this year or early 2024, with results to be announced several months later, possibly in March 2024. It's the third exploratory drilling in the "6" block, where the "Kronos" target was discovered in August 2022, with a small quantity of natural gas, approximately 2.2 to 2.5 tcf. In 2018, exploratory drilling took place on the "Kalypso" target, but despite initial estimates of substantial natural gas reserves, the existence of a Zohr-type reservoir was not confirmed. The mapping of the "6" block by the French-Italian consortium Total-ENI is part of the contractual obligations for drilling in the area. Developments in 2024 are expected, possibly involving drilling in the "7" block, also managed by the French-Italian consortium.

[This article was translated from its Greek original]

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