Israel and Cyprus will be applying for international arbitration to decide a dispute over the distribution of natural gas in a joint offshore reservoir, reports said. Israeli business news portal Globes said the two countries disagree on how to proceed with the development of the Aphrodite gas reservoir, lying on the border of their respective economic zones.
The Israelis estimate the quantity of gas in their side at 7-10 BCM, while the gas in the Cypriot section of the reservoir, owned by Yitzhak Tshuva-controlled Delek Group, is estimated at 100 BCM. Since the gas in the Yishai prospect on the Israeli side is part of a single geological reservoir, its production depends on agreements between the two countries.
Israel and Cyprus signed a delineation agreement in 2010 but haven’t agreed so far on how to develop gas reservoirs straddling both economic zones. “The state did not forego the Yishai prospect, and will not give up its share, even if this part is relatively small,” Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz told Globes. “The state will not waive its share of either the gas or the revenue from the Aphrodite reservoir, and is also unable to do this in the name of the companies that hold it.”
In the absence of a distribution agreement, Israel is refusing to allow Cyprus to develop Aphrodite, because pumping gas from it will also cause gas to be pumped from the Yishai prospect. “There are negotiations that have unfortunately been going on for years, but we recently reached an agreement with the Cypriots that seems reasonable to us. Based on the figures provided by the two sides, the international arbitrator will rule what percentages Israel and Cyprus will receive,” Steinitz said. “First of all, however, we will allow companies from both sides to hold discussions in an attempt to reach understandings. If this does not happen, there will be an arbitrator within a few months.”
When the issue emerged again last month, a Cypriot government source had rebuffed the demand. “The claim, which is old, is unreasonable since they have officially admitted that the quantity discovered at Yishai is negligible and cannot be recovered,” the source told the Cyprus News Agency. The owners of Yishai had asked Israel’s government to take steps to safeguard the country’s rights in Aphrodite.
The chairman of Israel Opportunity, one of the partners in Yishai, suggested that allowing the deal to go ahead without taking their interests into account would be a dangerous precedent that could affect other reservoirs in the region. The matter has come to the fore following official statements that Cyprus and Egypt were close to an agreement for exporting Cypriot gas to the neighbouring country.
Energy Minister Giorgos Lakkotrypis confirmed the report on Wednesday. “We have recently agreed that we will ask the companies first to try and come to an arrangement between them … and if this is not possible … then we’ll look at the option of going to arbitration,” he said.
The minister said efforts to come to an agreement on joint exploitation of reserves have been going on for quite some time on a political level and that this was one of the most serious differences between the two sides.