NICOSIA, June 5 (Xinhua) -- Cyprus has concluded a agreement with U.S.-based Noble Energy on the distribution of revenues from natural gas exploitation from an eastern Mediterranean gas field, opening the way to a license to start infrastructure work needed for selling gas, Energy Minister Giorgos Lakkotrypis told state radio on Wednesday.
The agreement revises the original production-sharing contract between the government of Cyprus and the shareholders of the Aphrodite gas field, U.S.-based Noble Energy, the Dalek Group of Israel and British Shell.
Lakkotrypis said the agreement was based on the understanding that when international oil prices are low, the shareholders of Aphrodite will have an increased share from the gas revenue to offset infrastructure investments, but when oil prices go up their revenue will drop back in favor of the government, which will have an increased share.
The original production-sharing contract provided that Cyprus would receive 62 percent of the revenue and the gas field shareholders, 38 percent. Noble raised a demand to reverse this arrangement so that the share would be 62 percent for the shareholders and 38 percent for the government of Cyprus.
The final agreement provides that when Brent prices are at a low level of between 60-75 U.S. dollars a barrel, the share of the companies will be considerably increased compared to that under the original production-sharing agreement.
When oil prices reach 75 U.S. dollars and over, the share of the government of Cyprus will increase relative to the original agreement, and when Brent prices go over 81 U.S. dollars a barrel, the government's share will be even higher in the 62-38 percent scenario.
Lakkotrypis said that, based on the assumption that Brent prices will be around 70 U.S. dollars a barrel during the 2020-2022 period and will increase slightly in the next 7 years, the total revenue for Cyprus will be around 9.5 billion U.S. dollars.
That would be about 850 million U.S. dollars less than the sum the government would receive under the original production-sharing agreement, or 45 million U.S. dollars less during each year of the gas field's life, which is estimated to be 18 years. The government's income would average between 500 million and 525 million U.S. dollars a year.
Lakkotrypis said he briefed the political parties on Tuesday on the provisions of the agreement and explained the reasons behind the final arrangements, before the document is submitted to the Council of Ministers for approval.
He said that production is set to start in 2024, with a grace period of one year as a pipe will have to be built between the gas field and a gas liquefaction plant at Idku in Egypt.
Under the agreement, the shareholders of the field have to perform a third drilling during the second quarter of 2020 to confirm the quantity of gas.
Cyprus has discovered two more gas fields in blocks of its Exclusive Economic Zone licensed to Italy's Eni and the ExxonMobil-Qatar Petroleum consortium, and several more drillings are scheduled for the next few years.