Aphrodite gas project faces renewed uncertainty after Cyprus plan rejection

The much-delayed Aphrodite gas development offshore Cyprus is facing renewed uncertainty after the Cypriot energy ministry rejected the latest optimized development plan presented for the field.

Aphrodite -- the first of a number of large gas finds made offshore Cyprus -- was discovered in late 2011 in Block 12 but has faced numerous delays that have hampered its development.

The most recent negotiations over Aphrodite have been ongoing since August last year when the government rejected Chevron's revised development plan for the field, which it inherited in 2020 when it purchased operator Noble Energy.

The Cypriot energy ministry in December last year pointed to a new "understanding" over the development of Aphrodite but it now faces a new standoff after the ministry rejected Chevron's latest development plan.

In a statement on May 2, the energy ministry said Chevron had submitted a proposal for the optimization of the approved development plan on March 29 having been given an end-March deadline for submission in December.

"After careful evaluation in cooperation with the advisers of the Republic of Cyprus, [the plan] is considered to be in need of improvements," the ministry said.

"Therefore, the minister of energy proposes in his letter to Chevron, dated April 30, to take specific targeted actions within the next six months," it said.

Speedy development

Chevron said it was still happy to be a partner with Cyprus in offshore Block 12.

"We value our relationships with the government of the Republic of Cyprus and other stakeholders, and we continue working to progress the Aphrodite project," a Chevron spokesperson told S&P Global Commodity Insights.

"We believe it is important that Aphrodite is expeditiously developed for the benefit of the Republic of Cyprus, the Eastern Mediterranean region, and European and other international markets," the spokesperson said.

"Beyond this, it is not Chevron's policy to comment on commercial matters."

The most recent dispute originally centered on Chevron's proposal to have less infrastructure at the field than had been envisaged in the original development plan.

Noble in 2019 proposed five wells and a floating production unit (FPU) for the field.

Chevron's initially revised plan proposed three production wells that would tie into Shell's West Delta Deep Marine processing facilities offshore Egypt from where gas could be piped into Egypt's domestic market or Shell's LNG facility at Idku for re-export.

Cyprus rejected that revised proposal, arguing that an FPU and five wells were needed for future exploitation of the field's reserves for Cyprus' benefit.

It is unclear what was proposed in Chevron's latest optimized development plan, but project partner NewMed Energy said it had not been deemed acceptable by the Cypriot government.

Israel's NewMed holds a 30% stake in the project alongside Chevron with 35% and Shell, also with 35%.

'Courses of action'

NewMed said that the Aphrodite partners intended to examine the implications of the letter received from the Cypriot government and "the possible courses of action available to them".

It also said the partners were required in the ministry letter to "promptly confirm in writing their unconditional consent to commence performance of the front-end engineering design within six months from the date of the letter."

The partners would then also be granted certain extensions for compliance with the milestone for performance of the FEED and the milestone for the adoption of a final investment decision.

In December, energy minister George Papanastasiou said it would only be a matter of time until final decisions were made to start development work and that the goal remained to have gas from Aphrodite by the end of 2027.

The standoff over Aphrodite comes as the EU continues to engage with alternative gas suppliers in order to offset the loss of Russian gas.

Curtailed Russian pipeline flows helped drive prices to record levels in summer 2022.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26, 2022.

Prices are now back closer to pre-crisis levels thanks to healthy storage levels and demand curtailments, though remain relatively high, with Platts assessing the TTF month-ahead price on May 9 at Eur30.93/MWh.

Aphrodite was the first gas discovery made offshore Cyprus, but other discoveries have been made by an Eni/TotalEnergies venture and ExxonMobil in partnership with QatarEnergy.