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Russian interest in Cyprus gas deals a bit far-fetched
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By Elias Hazou

PERIODIC reports about Russian companies’ interest in Cypriot offshore hydrocarbon plays should be taken with a grain of salt, the Cyprus Mail is told.

The latest iteration came out this week when energy minister Giorgos Lakkotrypis, speaking to the state broadcaster after meeting his Russian counterpart Aleksander Novak, said the two nations held “exploratory” talks on possible cooperation in developing energy finds in Cyprus’ exclusive economic zone and the eastern Mediterranean.

Daily Politis meanwhile reported that on the sidelines of the Moscow talks, Lakkotrypis and Novak discussed the prospect of engaging Russia’s Novatek in the exploitation of the Aphrodite prospect through the sale of a stake held by Houston-based Noble Energy.

As part of a consortium with France’s Total, Novatek had bid for block 9 during the second licensing round here. In December 2012 the government ended the negotiations, and turned to ENI-KOGAS, to whom the concession was eventually granted.

But the Mail understands that neither Novatek, nor any other Russian company, has so far made any official overtures to Noble about buying into block 12.

In any case, Noble would need the government’s permission to take on additional partners.

Asked to comment, gas expert Charles Ellinas said that in the past Russian companies have in fact expressed an interest in the Cypriot gas scene.

But, he added, an expression of interest is not the same as a concrete proposal.

Noble, it is understood, is in principle open to acquiring more partners in their block 12 concession.

The Texas-based company has a policy of keeping around 40 per cent in any given project. They currently hold a 70 per cent stake in their Cyprus concession.

Also, they’d want to bring in new partners to share the development costs for the Aphrodite field. In the event the prospect is developed with a pipeline to Egypt, the final tab might be north of $2bn.

A company buying into Aphrodite would need to pay the corresponding amount for the stake, plus take on its share of the development costs.

If Aphrodite – an as yet undeveloped prospect – is valued at roughly $1.5bn to $2bn, buying 30 per cent of that (70 per cent minus 40 per cent, the stake Noble would like to keep) works out to around $500m.

On top of that, the new partner would have to fork out a further $600m – a third of the development cost.

Whereas these costs are not beyond the reach of Novatek – Russia’s biggest independent gas producer – the company currently has cash-flow problems of its own.

Ellinas pointed out, for example, that recently the Russian government diverted some 150bn roubles from the country’s national wealth fund to help finance Novatek’s Yamal LNG project in Siberia.


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