Is Chevron going back to the drawing board for gas development off Cyprus?

After the government of Cyprus shot down an updated plan for the development of an offshore gas field reservoir in Block 12, Chevron Cyprus Limited, a subsidiary of the U.S.-headquartered oil major Chevron, and its partners will need to engage in further talks with the country’s authorities to come to an agreement regarding the development of this project.

Following the Aphrodite discovery 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.

When July 2022 rolled in, Chevron was finalising the optimisation of the Aphrodite field’s development concept, through possible synergies with other facilities in the region. The development concept was expected to be presented to Cyprus’ Minister of Energy for approval by the end of the year. A few months later, the U.S. oil major confirmed plans to move 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.

At the end of May 2023, Chevron handed over an updated plan for the development of the project to the country’s government. The plan included a change to the fundamental project concept of the approved development and production plan. According to the updated plan, the production of natural gas from the Aphrodite reservoir and processing thereof would be done through the construction of a subsea pipeline and connection to existing offshore and onshore infrastructure in Egypt, without the construction of a floating production and processing facility within the area of the reservoir, as was included in the approved plan.

A letter, received on 25 August 2023, from the government of Cyprus threw a wrench in Chevron’s plans, as the country decided not to approve the updated plan. However, the government did invite the operator and its partners in the Aphrodite reservoir to continue the discussions on the matter in early September 2023.

Furthermore, the letter of reply outlines several reasons for the government’s decision not to approve the updated plan, including the claim that this plan is expected to increase the technical and commercial complexity of the project, and is not expected to produce the advantages put forward in the request, as detailed in the immediate report on 31 May 2023.

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 metres. The reservoir is located in the Cypriot Exclusive Economic Zone (EEZ) in an area where the 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.

“The partners in the Aphrodite reservoir, with the assistance of their outside counsel, intend to consider the implications of the said decision of the government of Cyprus, and prepare for the continued discussions on the matter with the representatives of the government of Cyprus,” highlighted Chevron’s partner, NewMed.