Eni inks contract for deepwater exploration blocks off Cyprus
London (Platts)--24Jan2013/820 am EST/1320 GMT
Italy's Eni and South Korea's Kogas on Thursday signed contracts to
explore three natural gas-rich blocks in deepwater off Cyprus, where
political tensions have arisen over exploration in the Mediterranean island's
exclusive economic zone.
An exploration and production sharing contract for Blocks 2, 3 and
9 covering an area of around 12,530 sq km in the offshore Levantine basin was
signed with the Cypriot government Thursday, Eni said in a statement.
The contract, which marks Eni's first upstream foothold in the country,
follows months of talks to hammer out the final terms of an initial block
award granted last year.
Eni was first awarded the three blocks as 80% operator alongside Korean
partner Kogas (20%) under Cyprus' second offshore licensing round) in October
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The block 9 license was initially granted to a consortium comprising
France's Total and Russian companies Novatek and Global Resources, but
contracts talks with the preferred bidders fell through.
"This result is of significant importance for the consolidation of Eni's
position in the Mediterranean region, which is a strategic area in the
company's exploration and production portfolio," Eni said, referring to the
final award for three blocks.
The government of Cyprus was keen to finalize the blocks before the
first round of presidential elections are held on February 17.
The Eni/Kogas blocks lie closer to the island's southern shore than
block 12, where the US' Noble Energy discovered an estimated gross mean
resources of 7 Tcf of natural gas in December 2011.
Total is still awaiting final approval for a PSC on Blocks 10 and 11
which lie in waters adjacent to Egypt's deepwater area.
ENI'S TURKISH PROJECT UNDER THREAT
Oil and gas companies have recently been attracted to the little-drilled
Levantine basin which has fast become one of Europe's hottest exploration
frontiers with a "giant gas potential", Eni said.
But Turkey, which has been at diplomatic loggerheads with the divided
island for years, has accused the Greek Cypriot government of undermining
peace efforts on the island by proceeding with its exploration plans.
Cyprus also has yet to reach firm agreements with neighboring Lebanon
and Syria over exploration in its claimed exclusive economic zone.
Turkish energy minister Taner Yildiz in November warned Eni that Turkey
might reconsider its participation in the planned Samsun-Ceyhan oil pipeline
if the company went ahead with plans to explore for natural gas in Cyprus.
The pipeline would provide an overland bypass for oil shipments to and
from the Mediterranean Sea through the congested Turkish straits.
Eni and Turkey's Calik Enerji signed a cooperation agreement in 2005 for
a planned 1.5 million b/d pipeline from Samsun on Turkey's Black Sea coast to
its Mediterranean oil hub at Ceyhan.
In 2009, the two companies signed a memorandum of understanding with
Russian companies Rosneft and Transneft, which were both expected to commit
crude to the project.
But as of yet no company with crude arriving in the Black Sea from
Caspian fields has committed oil to the project and with the volume of tanker
traffic through the straits having fallen in recent years as new pipelines
have carried crude from the Black Sea to European refineries, it has been
unclear for some time whether the project will proceed.
The Turkish government maintains that the Republic of Cyprus had no
right to conclude international treaties with its east Mediterranean
neighbors delineating their respective Exclusive Economic Zones, or to hold
licensing rounds before a settlement had been reached between the two halves
of the divided island.
Turkey has won some international support for its position that any
mineral reserves found in Cyprus EEZ are the property of the people of the
whole of Cyprus, and not just the Republic of Cyprus, which occupies the
southern two thirds of the island.
--Robert Perkins, email@example.com
--Edited by Jeff Barber, firstname.lastname@example.org