US Department of State

Report
Prospects, issues, and implications of gas exploration in the Eastern Mediterranean
Focus on energy developments and commercial dynamics in Cyprus
Prepared by Anastasios Giamouridis, Senior Consultant, Pöyry Management Consulting ( UK) Limited for the
“Security of Gas Supply: The Role of Developments in the Mediterranean Region”
Malta Energy Conference 2014
10-11 July 2014
from 20% to 100%
Project Owners
FINANCING STRUCTURES FOR ENERGY SUPPLY PROJECTS - FOCUS ON LNG
Shareholder 1
Shareholder 2
Shareholder 3
Shareholder 4
Equity
Equity
Equity
Equity
Loans
Loans
Loans
Loans
Completion guarantees
Completion guarantees
Completion guarantees
Completion guarantees
Etc...
from 0% to 80%
Project Finance - Lenders
LNG Project
Export Credit Ag. 1
Export Credit Ag. 2
Export Credit Ag. 3
Export Credit Ag. 4
Loan guarantees
Loan guarantees
Loan guarantees
Loan guarantees
Loans
Loans
Loans
Loans
Commercial bank 1
Commercial bank 2
Commercial bank 3
Commercial bank 4
Loans
Loans
Loans
Loans
Multilateral bank 1
Multilateral bank 2
Multilateral bank 3
Multilateral bank 4
Loans
Loans
Loans
Loans
Etc...
Etc...
Etc...
2
FINANCING CRITERIA FOR ENERGY SUPPLY PROJECTS - FOCUS ON LNG
3
EXPLORATION AND GAS COMMERCIALISATION PROGRESS SO FAR IN CYPRUS
Blocks 2,3,9,10,11 ( 2nd Round )
Appraisal
Drilling
Declaration of
Commerciality
Exploratory
Drilling
Seismic
Surveys
Block 12 – Aphrodite field ( 1st Round )
License
Block 12 – other prospectivity ( 1st Round )
Blocks 1,4,5,6,7,8,13
( potential 3rd round )
Source: Pöyry Management Consulting
4
STEPS TOWARDS GAS MONETISATION AFTER DECLARATION OF COMMERCIALITY *
Estimated Aphrodite resources insufficient to proceed on this basis alone - potential solutions
1.
Gas discoveries by Noble Energy over and above Aphrodite in its Block 12 license
2.
Gas discoveries in the new licenses awarded to Total and/or ENI-KOGAS
3.
Joint monetisation of offshore natural gas resources with Israel
4.
Oil discoveries ( liquids credits supporting gas economics)
Reach positive
Final Investment
Decision (FID)
Negotiate and
sign LongTerm Contracts
(LTCs) with
gas buyers
Front End
Engineering
and Design
(FEED)
Construction of
gas upstream
and export
infrastructure
commences
Screen and
select Contractor
for Engineering,
Procurement,
and Construction
(EPC)
* Reaching a positive FID presupposes
1) Projected revenues outweigh estimated CAPEX and
OPEX by a margin superior to other investment options
2) The project in question can successfully compete for
capital and can secure financing on attractive terms
Source: Pöyry Management Consulting
5
POTENTIAL CYPRUS GAS RESOURCES SET IN REGIONAL AND EU CONTEXT
Aphrodite field *
( discovered but not proved )
Cyprus EEZ Blocks
( speculated )
* Actual exports from Cyprus on this basis could amount
to as much as 70% of Phase 1 of the Southern Corridor
Source: BP Statistical Review 2013 and Pöyry Management Consulting
6
MORE OFFSHORE EXPLORATION NEEDED – POLITICAL RISK REAL BUT EXAGGERATED
Source: Oxford Institute for Energy studies and Pöyry Management Consulting
7
EXPORTS TO BE DECIDED ON COMMERCIAL MERIT OR RISK CANCELLATION
Source: Oxford Institute for Energy studies and Pöyry Management Consulting
8
RELEVANCE OF CYPRUS GAS TO THE EU AND HOW TO SUPPORT DEVELOPMENTS
Cyprus economy
• Hydrocarbons
Cyprus dispute
• Making exploration
EU companies
• Total and ENI
Supply Security
• No proved reserves
production and
and/or export routes
currently faced with
at the moment in
exports out of
conditional on
normal technical
offshore Cyprus but
Cyprus are possible
politics may delay
and commercial
oil/gas prospectivity
but should not be
project or lead to
risks associated
needs to be
taken for granted
outright cancellation
with E&P process
assessed in full
• Potentially
• Pipeline to TR is not
• Politics could
• Cannot replace
significant impact
necessarily the best
undermine project if
RUS but Aphrodite
but challenging to
commercial option,
allowed to delay
exports alone could
achieve gas exports
it requires normal
and/or interfere with
reach 70% of Phase
before mid-2020s
pre-FID scrutiny
commercial logic
1 of South Corridor
Support uninhibited exploration in internationally-recognised Cyprus EEZ
Facilitate decision-making on potential exports on the basis of commercial merit
Consider reasonable engagement of European multilateral banks and ECAs as appropriate
9
Anastasios Giamouridis
Email: [email protected]
Tel.: +44 1865 812 247 (office) / +44 7875 886 152 (mobile)
10

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