In late 2011, Noble Energy International Ltd ("Noble")
announced the discovery of an average of 7 trillion cubic feet of
natural gas in Block 12 of the Republic of Cyprus'
("Cyprus") Exclusive Economic Zone ("EEZ"),
which opened the way to a second hydrocarbons licencing round with
the involvement of some major international companies and consortia
enthusiastic about exploring and exploiting in the future these
potentially vast reserves.
Pursuant to Article 3(2)(a) of the Directive 94/22/EC of the
European Parliament and of the Council dated 30th May 1994, Cyprus,
represented by the Ministry of Commerce, Industry and Tourism (the
"Ministry"), published a notice in the Official Journal
of the European Union on 11th February 2012 (Notice No. 2012/C
38/10) inviting interested contractors to apply for hydrocarbon
exploration licences and subsequent hydrocarbon exploitation
licences. By the expiration of the three month bidding period on 11
May 2012 five companies and ten consortia submitted 15 bids for
nine of the 12 remaining blocks. Bids were not restricted to any
one block and in total 33 applications for licences were made. The
interested contractors bidding in the second hydrocarbons'
licencing round are outlined in the list below:
- Company: Petra Petroleum Inc (Canada);
- Consortium: ATP East Med Number 2 B.V. (US), Naphtha Israel Petroleum Corp. Ltd (Israel), DOR Chemicals Ltd (Israel), Modi 'in Energy Limited Partnership (Israel);
- Company: Total E&P Activities Petrolieres (France);
- Consortium: Total E&P Activities Petrolieres (operator) (France), NOVATEC Overseas Exploration & Production GMbH (Russia), GPB Global Resources BV (Russia);
- Consortium: Premier Oil (operator) (UK), VITOL (UK);
- Consortium: Premier Oil (operator) (UK), VITOL (UK), Petronas (Malaysia);
- Consortium: Edison International S.p.A. (operator) (Italy), Delek Drilling Ltd Partnership (Israel), Avner Oil Exploration Ltd Partnership (Israel), Enel Trade S.p.A. (Italy); Woodside Energy Holdings PTY Ltd (Australia);
- Consortium: ENI (Italy), KOGAS (South Korea);
- Consortium: C.O. Cyprus Opportunity Energy Public Company Ltd (Cyprus), AGR Energy AS (operator) (Norway);
- Consortium: Oak Delta NG Exploration Joint Venture (US/Israel);
- Consortium: Capricorn Oil (UK), Marathon Oil (US); Orange NASSAU Energie (Netherlands), CC Energie S.A.L (Lebanon);
- Company: Winevia Holdings Ltd (Cyprus);
- Company: RX-DRILL ENERGY CYPRUS LTD (Cyprus);
- Consortium: PT Energi Mega Persada Tdk & Frastico Holdings Ltd (Canada/Indonesia/Cyprus); and
- Company: Emannuelle Geoglobal Rosario (Israel).
After the application deadline, the Minister from the Ministry
(the "Minister") convened a meeting of the Advisory
Committee established under Article 6 of the Hydrocarbons Law No.
4(I) of 2007, as amended from time to time (the "Law"),
in order to examine each application and to see whether it was
submitted in accordance with the provisions of the Law and the
Hydrocarbons (Prospection, Exploration and Exploitation)
Regulations of 2007 and 2009, as amended from time to time. The
Advisory Committee also examined the applications to insure that
the information submitted complied with the requirements of the
relevant Guidance Note and in order to insure that there was
adequate information to make an evaluation of each of the
applications. The Advisory Committee was then required to submit a
reasoned opinion to the Minister as to whether or not a licence
should be granted.
The final decision, however, rests with the Council of Ministers
who may within six months from the start of the negotiations on the
terms of the Exploration and Production Sharing Contract
("EPSC") grant a licence to a preferred bidder. After
successful negotiations with the Council of Ministers, Consortium 8
signed three EPSCs in relation to blocks 2, 3 and 9 and Company 3
signed two EPSCs in relation to blocks 10 and 11. The concession
periods will be valid for 3 years with an option to renew for
another 2 year period, although 25 per cent of the licenced area
will have to be relinquished on each renewal. The evaluation of the
remaining bids and applications will continue and it is possible
that other licences may be awarded in the near future.
The recent discoveries of hydrocarbons in the Cyprus EEZ and the
status of Cyprus as a full Member State of the European Union
("EU") enables the country to contribute to the
strengthening of the EU's energy security at a time of high
demand for natural gas and at a time where energy diversity is very
much on the agenda. The proximity of Block 12 to Israel's
Leviathan and Tamar gas fields as a neighbouring lucrative natural
gas reserve, and the location of blocks 2, 3 and 9 in the Levantine
basin with large gas potential, make liquefaction and export of
natural gas by both Cyprus and Israel, through the proposed Cyprus
LNG plant, a possibility in the future. It is estimated that
construction of the infrastructure to host the LNG plant will not
be completed before 2018. Cyprus has also recently taken further
steps to strengthen its cooperation with Israel through an
agreement that has been reached on around the 11th February 2013
whereby Noble will transfer 30 per cent of its rights held in Block
12 to Israel's Delek Drilling and Anver Oil and Gas
Exploration. Furthermore, irrespective of the abovementioned time
frame constraints Cyprus may be in a position to exploit its
hydrocarbon reserves sooner, as Company 3 will also be looking to
drill for potential oil deposits, which if successful, may not
require the above infrastructure to be in place in order to deliver
oil to its customer as these can be delivered onboard oil
tankers.
The latest licencing round is a welcome development for the Cyprus
economy as under the EPSC the participating companies and consortia
will be required, within three months following the effective date
of the EPSC, to establish an office in Cyprus for the whole
duration of the licence (in respect of the consortia, the
consortium as such and not each consortium member will be required
to establish an office in Cyprus). The ability to use and maximize
the local workforce is a significant element for the success of the
contractors' operations.
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