Chevron and partners prepare investment for Aphrodite gas field as Cyprus and Israel push for swift resolution of reservoir dispute

Oil major Chevron and its partners in the Aphrodite gas discovery off Cyprus are moving forward with the development of the field reservoir with plans to invest about $192 million to drill a new well and to cover development costs for the project.

This comes as the governments of Cyprus and Israel are intensifying their negotiation efforts to end over a decade-long dispute related to the Aphrodite-Ishai issue.

The Aphrodite field is located in Block 12, 160 km south of Limassol, and 30 km northwest of the Leviathan field, in an area where sea depth is 1,700 meters. The block is operated by Chevron with a 35 per cent interest with Shell (35 per cent) and NewMed Energy (30 per cent) as partners.

Israel’s NewMed Energy, previously known as Delek Drilling, revealed on Monday that the partners had authorised a budget of approximately $130 million for the A-3 well and an additional sum of $62 million for planning the reservoir’s development (Pre-FEED).

NewMed also said that the drilling is scheduled to begin in the first half of 2023.

Yossi Abu, CEO of NewMed Energy, commented: “Alongside the intense activity to expand the production from the Leviathan reservoir, which provides for the needs of the domestic and regional markets, we are promoting the development of the Aphrodite reservoir, another large reservoir, to assist in supplying the increasing global demand for natural gas.”

Aphrodite was discovered by the A-1 well in September 2011. The A-2 appraisal well, drilled in 2013, confirmed approximately 98 BCM of contingent resources with a potential for an additional 26 BCM of prospective resources.

In November 2019, the Government of Cyprus granted the partners in Block 12 a production license for 25 years, with an option to extend the term by another 10 years, together with the approval of an outline for the development of the reservoir.

As reported in July 2022, Chevron is in the process of finalising the optimisation of the Aphrodite field’s development concept, through possible synergies with other facilities in the region. The development concept is expected to be presented to Cyprus’ Minister of Energy for approval by the end of the year.

The Ministry of Energy, Commerce and Industry of Cyprus said in July that the development works for the Aphrodite would include the on-site drilling of a new well in the overall framework of the field’s approved Development and Production Plan.

As explained by NewMed in its 2Q 2022 report in August, this update to the development and production plan for the reservoir would be such that the development of the reservoir would be combined with preexisting facilities and/or development plans of nearby assets.

Furthermore, NewMed said at the time that the partners had adopted a decision regarding an engagement with a drillship for the purposes of drilling the Aphrodite A-3 well, which would later on serve as a production well.

Offshore Energy has reached out to Chevron and NewMed Energy, seeking to find out further details about the upcoming well, its timing, and the rig of choice.

A spokesperson for Chevron confirmed the company and other stakeholders are working to progress the Aphrodite project. “We confirm that it is the Joint Venture’s intention to drill the A3 well in the coming months,” the spokesperson added.

While Chevron did not comment on the rig of choice for this well, it is worth mentioning that, a couple of years ago, the oil major secured Stena Drilling’s Stena Forth drillship for a decommissioning campaign in the Mediterranean Sea offshore Israel. The contract also included an option for a well offshore Cyprus.

Coincidentally, the same drillship earlier this year drilled an appraisal well in Cyprus’ waters for ExxonMobil and confirmed the presence of high-quality gas. The drillship left the well location on 20 March 2022. During the summer of 2022, the rig drilled the Hampden K-41 well for ExxonMobil in Canada after which it was expected to return to the Eastern Mediterranean.

According to the latest AIS data, the drillship was in Damietta on 6 September 2022 and is expected to arrive at Nargis Offshore in the Eastern Mediterranean later today, 20 September 2022. Stena Drilling’s fleet availability report shows that the drillship is booked into part of 2Q 2023, becoming available in May 2023.

A spokesperson for NewMed Energy told us that the A-3 is an appraisal well, that will serve as a producing well post development, confirming that it will be drilled using the Stena Forth drillship.

When asked about options considered for this development and whether an all-subsea solution is considered with a tie-back to existing infrastructure in Egypt, the spokesperson said: “This is more or less the leading development concept now, though there are still a few more options that are being evaluated prior to submitting a detailed development plan to the Cypriot government.”

Another significant development related to the Aphrodite project occurred on Monday with negotiations held in Nicosia between the governments of Cyprus and Israel, led by energy ministers of the two countries.

During an official visit to Cyprus, the Cypriot and Israeli Energy Ministers, Natasa Pilides and Karine Elharrar, agreed to continue the constructive process aiming to conclude a fair and swift resolution of the Aphrodite-Ishai issue.

Namely, Israel claims that part of Chevron’s Aphrodite field lies within its nearby Ishai field, along an offshore demarcation line that separates the two countries’ exclusive economic zones.

After years of unresolved issues, the participating companies were in March 2021 given a year to negotiate the issue in order to reach an understanding that would bring an end to the ten-year dispute. Otherwise, the issue would be decided by the two governments with a common interest in advancing the development of the natural gas reservoir as soon as possible.

That one-year deadline has passed but the dispute has not been resolved and now the two governments have developed a roadmap for future dialogue with both sides expressing optimism regarding the possibility of reaching a settlement and encouraging the commercial sides to continue their own dialogue.

Minister Pilides commented: “Cyprus and Israel share a common vision for fully unlocking the potential of Eastern Mediterranean gas resources, thereby diversifying energy sources and routes to Europe. In this context, our Energy Ministries have made significant progress in the discussions leading to a mutually beneficial resolution of the Aphrodite – Ishai issue, regarding both the relevant bilateral agreement and the terms of reference for the expert to be appointed by the two countries. These discussions will continue in a structured and consistent manner in the following weeks.”

Minister Elharrar stated: “In light of the global energy crisis and the growing need for natural gas in Europe, I believe it is in our best interest that both parties should expedite a swift, transparent and fair settlement.”