Cyprus ‘will have had a say’ in BG Group sale

The Cypriot government “will have had a say” in the sale of the BG Group’s Cyprus unit from British multinational corporation Royal Dutch Shell to Hungarian oil and gas company MOL, former energy minister George Papanastasiou said on Friday. “I would expect the Republic of Cyprus to have had a say. A change in ownership will have been subject to government approval,” he told the Cyprus Mail. He explained that as the licensor for the gas field in which the BG Group’s Cyprus unit was active, the Aphrodite deposit in Block 12 of Cyprus’ exclusive economic zone (EEZ), the Republic of Cyprus would have had the right to refuse to acquiesce to the sale. “Cyprus can say no, but it would have needed a documented reason to do so,” he said, giving the example that “if Royal Dutch Shell would have intended to sell to [the Turkish Petroleum Corporation] Tpao”, the Republic of Cyprus “would, of course, have given a negative answer”. Regarding what MOL may be able to offer Cyprus, he said that “a larger corporation like Royal Dutch Shell may not have been as interested in a relatively smaller deposit, such as Aphrodite”, as “a bigger corporation will have access to bigger deposits elsewhere in the world which will interest it more”. He said that MOL, however, could show more interest and “move to commercialisation quicker” as, given that it is a smaller company, it will likely be more focused on Cyprus than Royal Dutch Shell had been. On the other hand, he said that Royal Dutch Shell “was always a big player”, and that while MOL is “not a small player”, the Hungarian company “does not have the displacement of a company like Royal Dutch Shell”. This, he said, “may prove important in a turbulent region like the one in which Cyprus finds itself”. Royal Dutch Shell had announced earlier on Friday that it had reached an agreement to sell the BG Group’s Cyprus unit, trading as BG Cyprus Ltd, to MOL, for up to $720 million (€628m), with that fee contingent on customary adjustments and other milestone-linked payments further down the line. The BG Group’s Cyprus unit holds a 35-per-cent share in the rights to exploit natural gas in Block 12 of Cyprus’ EEZ, with another 35-per-cent share belonging to American multinational corporation Chevron, and the remaining 30 per cent belonging to Israeli energy company NewMed Energy. As such, when the transaction of the BG Group’s Cyprus unit is complete, MOL will assume all of Royal Dutch Shell’s rights and obligations in Block 12. The BG Group, Chevron, NewMed Energy, and the governments of Cyprus and Egypt had all last year signed a memorandum of understanding concerning the Aphrodite field. The Cypriot government had said at the time that this memorandum of understanding “establishes the framework for the effective commercialisation of the natural gaswhich will come from the field”. However, warnings have since been issued about the potential high cost of exploiting natural gas from the field, with energy expert Dr Charles Ellinas saying that Chevron had suggested that it would cost €4 billion to extract and export the gas in the field, even without the installation of a floating processing unit above the field in the sea. However, he said, “we forced them to install a platform and they did, but I believe they will come and start asking us for more concessions”. “I hope they do not, but I am worried about it,” he added. Royal Dutch Shell confirmed on Friday that the agreement “includes a floating production unit”, and said that a final investment decision “has not yet been taken” regarding the Aphrodite deposit. Nonetheless, the corporation’s integrated gas president Cederic Cremers stressed on Friday that “we believe Aphrodite remains an attractive development opportunity and will play an important role in supporting regional energy needs”. “Our decision to exit is driven by disciplined capital allocation and portfolio choices, as we focus on opportunities that strengthen our integrated [liquefied natural gas] value chain,” he said. Royal Dutch Shell added that “Egypt remains an important country for Shell, where we continue to have a significant presence”. It also stated that the transaction is expected to be complete in the early part of next year “subject to regulatory approval and closing conditions”.