FOUR licences for gas exploration in offshore blocks were announced by the government last night as part of the second licensing round launched in February.

The blocks for which the licenses have been awarded are: 2, 3, 9 and 11. They are all contiguous blocks, lying north and north-east of Block 12, where US firm Noble Energy has a concession to drill.

For blocks 2 and 3, licenses were awarded to a consortium consisting of ENI from Italy and KOGAS from South Korea; the license for Block 9 went to a consortium consisting of Total E&P Activities Petrolieres (operator), NOVATEC Overseas Exploration & Production GMbH and GPB Global Resources BV from Russia; and the Block 11 license went to Total E&P Activities Petrolieres.

Commerce Minister Neoclis Sylikiotis said the reason why the government decided to give the green light to these four blocks was the potential for economies of scale due to the fact the blocks are contiguous and in close proximity to Block 12, where significant reserves of natural gas (between 5 and 8 trillion cubic feet) have been found.

Sylikiotis said evaluation of the bids submitted for the remaining blocks (except for blocks 1, 4 and 13, for which no bids were made) would continue – meaning another batch of licenses could be awarded in the future.

In total, 15 bids from five companies and 10 from joint ventures were submitted in the second licensing round.

The minister said negotiations with the companies and consortia leading to possible exploration contracts would begin soon and should be completed within a few months.

Among other things, the contract will determine when exploratory drilling would commence, said Sylikiotis.

In the first licensing round, where only one bid was received, initial negotiations with Noble Energy lasted eight months. The US company was then given two years in which to start exploratory drilling.

This time round, however, due to competition over the blocks but also Cyprus’ acquired know-how, it should not take that long, Sylikiotis said.

Assuming negotiations with the selected companies are successful, the companies would next sign signature bonuses sometime in early 2013.

In a signature bonus, a payment is made up front to the host country for the right to develop a block commercially before work begins. Paying a signature bonus for a licence does not necessarily imply future revenues for the company from oil production in the same licence.

Sylikiotis said the proceeds to the state under the model production-sharing contract would be about 70 per cent, after recoverable expenses.

Immediate income would come in the form of the signature bonuses. Asked whether the government stood to make some €200 million from the signature bonuses on the four blocks awarded yesterday, Sylikiotis said that was a conservative estimate.

He said the development “opens new considerable prospects for the economy of Cyprus and the role that Cyprus is set to play as a key energy player in Europe and the southeast Mediterranean.

“You can understand how important a message this sends regarding the economy of Cyprus,” he added.

The government has said it hopes Cyprus will be able to have the infrastructure in place (pipelines, liquefaction terminal) by 2018 so it can start exporting natural gas by 2019.

Published by :www.cyprus-mail.com