Two announcements regarding Saturn that bring it one step closer to development, and two regarding Venus that could potentially disrupt the timelines
The two simultaneous announcements by energy giants ENI and Total Energies regarding their final investment decision on the commercial development of the Kronos field in Cyprus’s Exclusive Economic Zone, was the most welcome news to come out of the Ministry of Energy in years. The decision marks the most decisive step toward the commercial development of the field, as it gives the green light to begin construction projects that will enable the extraction of natural gas and its transport to the Damietta terminal in Egypt for liquefaction and sale on international markets.
Just three days later, the smiles gave way to cold sweat. In an announcement on Friday, July 31, Shell stated that it is proceeding with the sale of its subsidiary, BG Cyprus, the corporate vehicle through which it holds a 35% stake in the Aphrodite gas field joint venture. The sale, which is not yet final as it must also be approved by the Republic of Cyprus, was agreed upon with the Hungarian-owned MOL Group. This announcement changes the landscape for the Aphrodite field, as if the government grants final approval for the acquisition, MOL Group will take Shell’s place in the field’s joint venture. However, there is also the possibility of getting bogged down in legal wrangling that could set back the field’s already delayed progress toward production by years.
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
New Setbacks for Aphrodite
Last Friday, Shell announced an agreement to acquire BG Cyprus from the Hungarian MOL Group, its subsidiary that serves as the vehicle through which it holds a 35% stake in the joint venture with Chevron and NewMedEnergy, as a non-operating partner, with the American giant serving as the project operator. The announcement did not exactly come as a bolt from the blue, but it does set back the timeline for exploiting the field, since while the only obstacle on the path to commercialization was reaching an agreement with Israel regarding the 2% of the field that falls within Israel’s EEZ, another one has now been added, depending on how the government decides to handle it. While the government may have been aware of Shell’s intentions to sell its subsidiary in Cyprus, according to reliable information obtained by Alpha on Sunday, until shortly before the announcement of the agreement with the Hungarians, it had not communicated this through the official channels required by the relevant contracts between the state and the consortium.
In fact, not only was the government aware of this, but a major accounting firm announced in a post that the MOL Group is a priority client, which, according to the post, the firm supported in its efforts to finalize the agreement. The agreement is significant, as it signals Shell’s intention to withdraw from the Aphrodite field joint venture and MOL Group’s entry into the venture under the same terms. According to the Model Proportional Production Sharing Agreement published on the Ministry of Energy’s website as an example of the agreements the Republic enters into with consortia that acquire rights in its EEZ, contains provisions requiring companies to notify and obtain the approval of the Council of Ministers before completing an acquisition such as the one agreed upon by Shell and MOL, which transfers a percentage of theof a field to a new contractor. It should be noted that agreements entered into for the assignment of rights to joint ventures are confidential, as they may vary depending on the circumstances. This detail is important because the relevant provisions of the contract for the Aphrodite field will play a role in the government’s decision on how to handle the matter.
Reports indicate that the Ministry is considering ways to respond, which may even include taking legal action. The reason for the Ministry’s concern relates to the nature of the sensitive information regarding an issue of critical importance to the country, such as a natural gas field. In practice, in such corporate acquisition cases, what experts call “opening the data room” takes place— where all sensitive information regarding a company’s operations is stored; in the case of BG Cyprus, this includes critical data on the Aphrodite field. Sources at the Ministry of Energy pointed out to Alpha on Sunday that Shell did indeed grant MOL access to the so-called data room without first informing the Republic.
The Ministry believes that MOL’s background explains why Shell hesitated to use the government’s appropriate channels of communication. This is a company that is 30% owned, either directly or indirectly, by the Hungarian state, while a large portion of its commercial transactions is linked to Russia. It should be noted that these transactions involve funds subject to EU and U.S. sanctions; however, landlocked countries such as Hungary and Slovakia have been officially granted exemptions. More importantly, in 2024, MOL signed a Memorandum of Understanding with TRAO, upgrading its relationship with the Turkish state-owned company to a strategic partnership in the field of hydrocarbon exploration and production. The two companies are collaborating on oil and natural gas exploration in Hungary, as well as through a joint venture that operates a block in Libya’s Exclusive Economic Zone (EEZ), and have also been partners in projects in Russia.
The government is weighing its options, which include the possibility of blocking the completion of MOL’s acquisition of BG Cyprus not only on the grounds of a lack of prior official notification, but also as part of an assessment of the potential implications for national security. It should be noted, however, that if the government were to resort to this option, it would have to justify its decision, as MOL remains a company listed on stock exchanges in EU member states. Sources in the energy sector with experience in this type of acquisition pointed out to Alpha on Sunday that the Hungarian company’s partnership with TRAO and its ties to Russia do not automatically mean that acquiring rights to the Aphrodite field will also open the the door to access the field. They also highlighted the special relationship between Turkey and Qatar, given that Qatar Energy is a partner in the consortia for Blocks 5 and 10 of the Cypriot EEZ. These sources indicated that the government’s calculations will also include the time that will need to be spent in courtrooms to prevent the acquisition of BG Cyprus, a process that would set back efforts to commercially exploit the field by many years.
The Final Investment Decision on Kronos
The simultaneous announcements by ENI and Total Energies on July 28 are the most official sign yet that the clock is finally ticking on natural gas extraction from the Kronos field, with the companies announcing that the goal is to bring the first Cypriot natural gas to market in 2028. According to the established timelines, and based on estimates derived from the typical implementation cycle of such a project—from the final investment decision to first production— by the end of 2026, detailed planning for the field development project is expected to begin.
This includes the engineering design for the drilling of four subsea wells, a pipeline approximately 90 kilometers long from the Kronos field to the Egyptian Zor field, and the connection of the landfall point in Egypt to the liquefaction terminal in NTamietta via a pipeline approximately 60 kilometers long. Construction is expected to begin in 2027, as are the tests. Provided everything proceeds according to the companies’ plans, the start of production and the first exports of Cypriot liquefied natural gas from Egypt to Europe are expected in 2028, although the target set by the companies is not very likely to be met. In any case, the year in which the first natural gas extraction takes place will be the one that officially puts Cyprus on the energy map.
The short time span between the acquisition of rights to Block 6 of the Cypriot EEZ and the date of first production is of great significance. In 2018, ENI and TotalEnergies acquired the rights to the block, immediately began their exploration, and in 2022, the discovery of the Kronos field was officially announced. In February 2023, the confirmatory well was drilled, and over the next two years, the companies completed their additional technical and geological assessments. Since then, they have examined scenarios for the commercial development of the field, concluded that the best solution is to connect it to ENI’s existing infrastructure at the Zor field and the company’s terminal in Damietta, and the final investment decision has already been made.
As Energy Minister Michalis Damianos, all Cyprus has to do regarding the Kronos field is simply wait for the first revenues to flow into the Republic’s coffers, which will not be particularly large since, under the agreement, the companies have priority in recouping the expenses they incurred to make the commercialization of natural gas possible. What matters more to Cyprus than the revenue is the fact that it will send a message to the market that the country is a reliable player on whom energy giants can rely to carry out their plans. With one less “headache,” the government is now called upon to manage the Aphrodite field—whose development has already been delayed—and to immediately resolve the outstanding issues plaguing it.
