By Simon Trevezas
Based on Delek Group recently published annual report the company clarifies the importance of developing Tamar, Leviathan and Aphrodite reservoirs. The main objectives are to proceed in various projects which will expand the use of natural gas within the domestic market. In addition, develop natural gas trade plans by exporting via regional pipelines and to invest in resources and to promote sanctioning of the Group’s discoveries in Cyprus (“the Aphrodite reservoir”). These actions will require advance concurrent planning and development of the reservoirs obtained in Cyprus and in Israel which must be combined with the non-stopping intention of exploiting for new discoveries in the area.
Although the company is dealing with multiple risk factors which sets it in a vulnerable economic position, it seems confident that will hold the riot. Specifically, Midroog (a company responsible for Delek’s investment strategies) have studied multiple scenarios for the block 12, one of them was to divest because it is a huge investment and it includes a high business risk combined with today’s oil prices and the lack of signed agreements. It is important to remember that the company has signed a concession agreement and holds the 30% of the block. Hopefully the above mentioned scenario was rejected due to the fact that it would reduce the company’s ability for future investments in the energy sector.
Although, little progress has been achieved concerning the exploitation of Aphrodite’s proven gas reserves, the memorandum of understanding (MOU) signed between Cyprus and Egypt has given new hopes. The company is obligated to proceed until 23 of May 2016 on drilling exploration and within this year must present plans for a floating production facilities and an offshore pipeline which will deliver the natural gas directly to the markets. The estimated cost for the completion of the floating facilities is between 3.5 billion USD and 4.5 billion USD.
Source: http://medafricatimes.com/wp-content/uploads/2014/11/cypurs_egypt_gas.gif
It becomes clear that Delek Group is a company which evaluates every aspect on their investments seeking for cost effective solutions. The unpredictable oil price is the primary reason and political decisions are the secondary which explains the current delays. Moreover, it becomes clear that under these conditions it is almost impossible to calculate with accuracy the total cost of the investment which in fact increases the risk factor and the uncertainties. The company since today has proven that it believes on a profitable exploitation of their reservoirs and is willing to sell part of their holding in order to stay loyal to this purpose. Eventually, the Aphrodite’s reservoir is planned to start producing in the first half of 2020 driving it directly to the markets which will lead on immediate boost of the Cypriot economy.
Simon Trevezas,
Oil and Gas Analyst for CyprusGasNews
Email: [email protected]
References:
- Corporation I. Annual Report 2014. 2015:419. http://ir.delek-group.com/phoenix.zhtml?c=160695&p=irol-reportsannual.
