Apostolos Tomaras
Fifteen years after the first discovery of substantial hydrocarbon reserves in Cyprus’ exclusive economic zone, the Republic of Cyprus and Italian energy company Eni have taken their most significant step toward bringing the island into the ranks of energy-producing countries.
The agreements signed between the two sides mark nothing less than the final stage of putting the Kronos field’s development into motion. Industry figures, however, see the project’s importance as primarily geopolitical, rather than a source of substantial revenue for state coffers.
Developing the field will bring Cyprus greater geopolitical than financial benefits, former Energy Minister George Papanastasiou believes. He considers the 2028 target achievable, but optimistic.
The year 2028 is regarded as a milestone for Cyprus’ energy sector. According to the field’s Italian operator, that is when the first Cypriot natural gas is expected to be produced. It will initially be sent to Eni’s liquefaction facilities at Damietta in Egypt before being shipped as liquefied natural gas, or LNG, to international markets, primarily in Europe.
Europe features prominently among the geopolitical benefits for Cyprus: the start of production at Kronos would mark a milestone in establishing the eastern Mediterranean as a new source of supply for the continent.
Another potential geopolitical and economic gain is that the development of the Block 6 field could accelerate preliminary work on neighboring discoveries, some of which were made long before Kronos.
What happens next
Exploration and appraisal drilling at Kronos has identified an estimated 3 trillion cubic feet of gas—a commercially attractive volume for the investors, Eni and France’s TotalEnergies, which each hold a 50% stake.
The agreement signed in Nicosia covers a package of contracts that builds on the final investment decision announced by operator Eni last summer. The contracts intended to bring Kronos into production include:
- An agreement between Eni and the project’s contractors.
- An engineering and procurement contract covering equipment for the extraction infrastructure.
- A contract for the construction and installation of subsea drilling and gas transportation infrastructure.
The development timetable would have been different had infrastructure serving other fields connected to Egypt not already existed in the region.
Kronos lies 110 kilometers from the nearest infrastructure serving Egypt’s Zohr field. Those facilities will be used for the initial processing of Kronos gas, which will then travel through Zohr’s pipeline network to Eni’s Damietta plant for liquefaction and subsequent export.
Essentially, Eni will build a new pipeline connecting Kronos to the Egyptian field. The same development model could potentially be used for other nearby discoveries containing commercially viable quantities of gas.
The decision to route Cyprus’ first gas through facilities on Egyptian soil also carries particular geopolitical significance for the strategic relationship between Nicosia and Cairo. In practical terms, the Block 6 field would allow the currently idle Damietta LNG plant to resume operations.
The benefits
While the geopolitical gains from the approaching development of the Cypriot field are clear, its financial contribution to the Republic has prompted considerable public debate.
The signing of contracts worth €1.8 billion was described as significant progress, but it also brought the question of state revenue into sharper focus.
Former Energy Minister George Papanastasiou, who oversaw much of the preliminary work leading to the investment decision and the signing of the contracts, offers a telling assessment.
He is less optimistic about the Republic’s financial gains, believing that commercial development will generate greater returns for the field’s Italian and French investors.
Without putting a figure on the expected revenue, Papanastasiou believes that, beyond the geopolitical benefits, Cyprus will have to wait for the investors to recover their costs before seeing the financial rewards.
Under the production-sharing contracts, the Republic is entitled to revenue from the sale of natural gas before it is liquefied. As he explained to Kathimerini, this model means Cyprus cannot benefit from the additional value generated by selling the gas as LNG on international markets.
The former minister was also cautiously optimistic about the production timetable, describing Eni’s 2028 target as “achievable, but optimistic.”
The gas route
1. Transport through a new subsea pipeline: Gas travels from Kronos in Cyprus’ exclusive economic zone toward Egypt.
2. Initial processing: The gas is treated at the existing offshore facilities serving the neighbouring Zohr field.
3. Transfer to the liquefaction terminal: The gas is carried ashore and through an onshore pipeline to the terminal.
4. Liquefaction at Damietta: Natural gas is converted into LNG.
5. Loading onto LNG carriers: The gas is shipped to international markets, primarily Europe.
Eni in Cyprus: The road to Kronos
Italy’s Eni was among the first companies awarded exploration blocks in Cyprus’ exclusive economic zone. Its involvement dates to the second licensing round, launched on Feb. 11, 2012. It has since become an important partner for the Republic in its offshore energy programme.
Second licensing round — 2012
- Launch date: Feb. 11, 2012.
- Blocks offered: Blocks 1 through 11, and Block 13.
- Licenses awarded: The Eni Cyprus Limited–KOGAS Cyprus Limited consortium was awarded Blocks 2, 3 and 9 on Jan. 24, 2013. These blocks were subsequently relinquished.
In Block 3, a confrontation threatened to develop after a Turkish warship obstructed the drilling vessel chartered by the consortium, forcing the cancellation of exploration work.
Third licensing round—2016
- Launch date: March 24, 2016.
- Blocks offered: Blocks 6, 8 and 10.
- Licenses awarded in April 2017: Block 6 went to the Eni Cyprus Limited–Total E&P Cyprus B.V. consortium, now involving TotalEnergies. Block 8 was awarded to Eni Cyprus Limited.
Block 7
In October 2018, the Cabinet decided to begin the process of granting a hydrocarbon exploration license for Block 7. The license was awarded to the Total E&P Cyprus B.V.–Eni Cyprus Limited consortium on Sept. 18, 2019.
The Kronos timeline
The field lies in Block 6, approximately 160 to 180 kilometers southwest of Cyprus, in waters 2,287 meters deep.
- August 2022: The Tungsten Explorer drillship carried out the Kronos-1 exploration well. Eni announced the discovery of a gas column in carbonate rock, with estimated reserves of 3 trillion cubic feet.
- February 2024: The Kronos-2 appraisal well reinforced the findings at Kronos-1 concerning gas volumes, paving the way for a commercial development study.
- July 2026: Eni and TotalEnergies took the formal final investment decision to develop the field.
- October 2026: Contracts worth €1.8 billion were signed for the engineering, procurement and construction of subsea infrastructure.
