Tough talks with Chevron on Cyprus EEZ

Two days of negotiations regarding the field development plan (FDP) for Block 12 (“Aphrodite”) within the Cypriot exclusive economic zone (EEZ) have concluded in Nicosia this week.

These talks involved the Energy Ministry and senior officials from the consortium responsible for its management, which includes Chevron, Shell and NewMed Energy.

The negotiations were prompted by Chevron’s proposal for Aphrodite on August 25, originally rejected by Cypriot authorities. The rejection led to a 30-day window for Chevron to return with an improved proposal. As it stands, both parties are slated to reconvene on November 5-6, with various options under consideration.

These options encompass finding a mutually beneficial compromise to address key differences and exploring a potentially delayed approach for the consortium to initiate production at Block 12, which could reshape the negotiation terms concerning the overall exploitation plan.

Nevertheless, substantial disparities remain. Despite Cyprus’ commitment to exporting Aphrodite gas to Egypt’s Idku terminal, significant discrepancies exist in the technical and economic aspects of Chevron’s August plan. These discrepancies revolve around the number of wells designated for gas extraction from Aphrodite; the transportation mode, especially in terms of the scale of the required infrastructure for the Egyptian terminal; and the overall cost of the project, with Chevron’s proposal being more cost-effective but potentially impacting Cyprus’ state revenues. 

The primary point of contention centers around the transportation mode to Egypt. Chevron favors utilizing existing facilities off Idku, while Cyprus prefers a floating production unit (FPU), aligning with Noble’s 2019 proposal before its withdrawal from the consortium. Chevron’s position benefits from its vested interest in Aphrodite. Nonetheless, Chevron’s larger regional commitments in the Leviathan and Tamar fields, which exceed Aphrodite in terms of gas volumes, underline the complexity of the ongoing talks.

For Nicosia, the prevailing message, particularly following President Nikos Christodoulides’ meeting with Chevron’s senior executive, Clay Neff, underscores a readiness to seek common ground. The consortium’s presence in Cyprus’ EEZ is viewed as not only economically significant but also geopolitically crucial.