Back in February this year I asked if the gas window had closed for Cyprus, following a number of developments that had clouded the outlook for offshore natural gas production.
The energy minister, George Lakkotrypis had been forced to announce in late December that the first well drilled by the ENI-Kogas consortium in the Block 9 Onasagoras field was dry. Then he announced that France’s Total would not be drilling in Blocks 10 and 11.
There were even rumours that Noble Energy was going to give up on the Aphrodite field in Block 12.
Recent developments suggest that it is time to ask if the gas window has in fact inched open again.
Leviathan could be back on
The latest reason to believe that opportunities have opened again comes from developments in Israel.
Gas production from the Leviathan field has been held up by a big regulatory row, driven by concerns that Delek and Noble, partners in both the Tamar and Leviathan fields, would control too much of the market.
The blow came in December 2014, when the Israeli antitrust commissioner, David Gilo, refused to endorse a deal that would have allowed Delek and Noble, partners in Leviathan, to start production. Gilo decided that the partnership in Leviathan constituted a monopoly.
The decision meant that Noble and Delek would not be able to finalise any deals on gas exports and would probably have to sell their interest in Leviathan.
This had an impact on Cyprus. The Cyprus Aphrodite field, with just 4.5 trillion cubic feet (tcf), is not big enough to export by itself. It needs Leviathan gas, at around 20 tcf to make the economies of scale work.
Gilo eventually resigned and has, to date, not been replaced. The prime minister, Benjamin Netanyahu, hoped to use that interregnum to get the antirust decision overruled.
However, that, too, has proven difficult.
While Netanyahu made some progress in trying to get round the antitrust decision, the economy minister, Aryeh Dery, was not prepared to overrule it himself.
Dery resigned last week, saying that he was doing so to pave the way for gas, which suggests that Netanyahu will be able to get round the decision.
It is not easy. Judging from the Israeli press, it involves quite a lot of trading of favours to get everyone’s support, but it is probably the first bit of good news Noble and Delek have had in a long time.
Zohr is also good long term
If Leviathan is back on, it shifts the recent massive Zohr discovery in Egypt from a threat to an opportunity, albeit a long-term one.
The Zohr find, at an estimated 30 tcf, was so large that many feared it meant Egypt would not need any gas from Israel at all and definitely not from Cyprus.
However, Gene Kornegay, the new Noble Country Manager in Cyprus, said at The Economist conference on Tuesday that, based on his conversations with industry users, he was confident there would be plenty of demand in Egypt for all of the gas.
It is certainly true that Egyptian growth has been held back by lack of electricity resources, which in turn relates to a paucity of gas for electricity generation.
So one can imagine a situation in which the Zohr gas gives a kickstart to industry, which in turn creates more and more demand for gas. If that is the case, then there might still be scope for exports from Leviathan and Aphrodite.
However, it is not likely to happen tomorrow.
Gas prices remain very low, oil and gas companies are cutting back on capital spending, so we would have to see a sustained increase in gas prices before any production can get under way.
This is why some say that the first production from Aphrodite is still ten years away.