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14 June, 2024
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How Cyprus and Chevron found common ground

Understanding the original agreements of 'Aphrodite' field

Apostolis Tomaras

Apostolis Tomaras

The resolution of the dispute between the Republic of Cyprus and Chevron Cyprus Limited, the operator of the Aphrodite field, appears largely satisfactory to both parties.

Faced with the potential consequences of an "accident" in the initial confirmed deposit of the Cypriot EEZ, with significant geopolitical and economic ramifications, both sides stepped back to facilitate the project's progress, stemming from "Aphrodite." Recognized by "K," the agreement is deemed fair, curbing negative assessments for winners and losers.

Confronted with the prospect of the dispute escalating unpredictably, impacting the broader energy program within the EEZ, the government accepted updates to certain provisions of the 2019 agreement without altering its fundamental core, specifically the technical aspects of F.P. production, achieved by installing a floating unit above the lode.

Chevron, in a letter to the Ministry of Energy, acquiesced to Nicosia's red lines, securing a time extension for the techno-economic study, initially due by November 7, 2023, and retaining the option to request differentiation updates if actual data deviate. The unrest is anticipated to postpone field development by approximately a year.

The New Deal
Informed by reliable sources, the new agreement hinges on reciprocity, aiming to prevent potentially violent legal resolutions to existing disagreements. The underlying philosophy stresses mutual concessions, maintaining the acknowledgment that the 2019 agreement remains intact, forming the basis for the new deal. The Republic of Cyprus successfully preserved the original commercial development model, featuring a floating unit above the "Aphrodite" deposit.

Transporting F.P. quantities to Egypt's terminals will utilize existing infrastructure. The agreement entails five drillings, deviating from the company's request for one, techno-economic study (FEED) preparation, and the submission of the final investment proposal by the managing company. Chevron, citing health crises and Middle East hostilities, secured a time extension for the techno-economic study. The company is granted the option of a partial provision amendment to the 2019 agreement and the inclusion of a floating unit above the deposit.

According to "K," the Managing Company can request updates if provisions of the 2019 Agreement change. For example, due to the war in the region, there is potential for diversifying energy directions.

Other deposits in the area, in maturation, could synergize with "Aphrodite" commercially. Cooperation is suggested for joint transportation of produced quantities to Egypt or Cyprus, meeting internal market needs. Recognizing American company concerns about financial costs, the government does not oppose third-party investments to mitigate expenses, categorically excluding direct participation.

The Pros and Cons
The new deal averted potential crises akin to the first deposit in the Cypriot EEZ. Escalation would have broader implications for Nicosia, touching on economic relations with the US, negative political and economic impacts from the potential withdrawal of the first deposit manager, and a crisis spreading to the Republic of Cyprus' broader energy program.

Crisis de-escalation maintains momentum within the EEZ, influencing Cyprus' energy role in the Eastern Mediterranean. Conversely, Chevron extricated itself from the prior situation, with potential changes reducing the financial cost of starting F.P. production, pushing relations between the two parties to extremes.

[This article was translated from its Greek original]

Cyprus  |  Chevron  |  Aphrodite  |  gas  |  energy

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