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Energy shift after Total shock

The government is set to shift its attention onto regional gas sales and a possible deal with Egypt as its first priority.

The focus-shift comes in the wake of Energy Minister George Lakkotrypis’ announcement yesterday that French oil conglomerate Total may abandon its current search for oil and gas in Cyprus.

His comments came after the news that Total had failed to find evidence of reserves which could justify costly drillingin Blocks 10 and 11 of the EEZ.

Yesterday, President Nicos Anastasiades met with his Egyptian counterpart, Abdel Fatah al Sissi, on the side-lines of the World Economic Forum in Davos. According to government sources, the prospect of a possible deal was at the top of their agenda.

For such a deal to materialise, it is vital that an agreement be reached between the companies involved in buying and selling gas from the Aphrodite field. Noble Energy and Delek group have the rights to the sale of Aphrodite’s resources. They will have to make a deal to sell to British Gas Egypt, which owns the gas liquefaction plant in north Egypt. British Gas Egypt will have to agree to construct a pipeline connecting its LNG plant to Aphrodite, as Noble and Delek have made it clear that they want to sell at source.

The government is also in talks with Jordan,which has expressed an interest in buying gas from the Aphrodite field. King Abdullah of Jordan has invited Anastasiades to visit Amman to further discuss the possibility of a deal.

The spectre of Total’s withdrawal was announced by Lakkotrypis, dealing a blow to the island’s hopes of an energy bonanza, after a painful bailout in 2013. Total’s disappointing find follows a similar failure by Italian-Korean venture ENI-Kogas to pin-point gas reserves in Block 9 of the Onassagoras field.
Lakkotrypis said that there is a “very remote” possibility of Total keeping any kind of operations in Cyprus’ EEZ.

Speaking to the Cyprus Weekly, government sources pointed out that it would be “very difficult” to allow Total to do research in other blocks of the EEZ, without violating International and European laws on licensing.

In a statement on Wednesday, Total confirmed its interest in remaining active in Cyprus, despite the recent disappointment. A spokeswoman for the group said the company was “currently discussing with local authorities a potential programme of additional exploration works in the area”.

The government confirmed that Total had expressed interest in exploring for reserves in other blocks of the EEZ. According to energy sources, the French company was interested in Blocks 7 and 8 which are adjacent to those of 10 and 11.

Block 8 has been included in the new navigational notice (NAVTEX) that Turkey has issued for seismic research in areas of Cypriot EEZ. The notice began in early January and will last until the end of March.
According to the same government source, the Attorney General has given the government a slim hope of legally allowing Total to stay beyond its licensing specification, citing a “strong national interest”.

However, after further legal advice, the government has reached an initial decision not to give Total an extension for research in Blocks 10 and 11, or a discrete licence for work in other blocks of the EEZ.

Such a move would run the risk of other energy companies taking legal action against Cyprus for not abiding by the international regulations on licensing for exploration in a country’s EEZ.

The disappointing development coincides with Total’s decision to cut 30% of its exploration activities in the North Sea and the US. Plummeting oil prices have influenced the company’sdecision and may also be indirectly linked to the termination of activities in Cyprus.

The government rejected as “absurd” an attempt by opposition parties to link Total’s decision to pressure from Turkey’s renewal of its NAVTEX in Cyprus’ EEZ.

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