In May 2023, Cyprus found itself at odds with Chevron after unexpectedly receiving a revised plan for the Aphrodite Field Development. This so-called "amendment" wasn't just a few changes; it was an entirely new plan. The unilateral manner in which Chevron, the operator of the Aphrodite gas find, presented this plan to Cyprus granted the Minister the authority to terminate the contract unless both parties could reconcile their differences and jointly agree on a new Field Development Plan (FDP).

From the outset, Cyprus had a clear vision for the utilization of its gas reserves. The concerns arising from Chevron's unsolicited plan for Aphrodite were evident early on. Cyprus took measured steps to comprehensively review the proposed changes. Between August 25-28th, after careful evaluation, Cyprus officially declined Chevron's plan. This decision initiated a 30-day grace period for renegotiations, which was set to conclude at the end of September. Demonstrating a commitment to finding middle ground, Cyprus extended this period to November 5th.

Despite the ongoing tensions, Chevron remains bound by its contractual obligations to achieve the next milestones. With the backdrop of the rejection, various analyses emerged, attempting to decipher the rationale behind Cyprus's decision. Today, we delve into how this rejection has shaped the ongoing negotiations between Cyprus and Chevron concerning the Aphrodite project.

Economic Concerns Drive Cyprus to Reject Chevron's Aphrodite Gas Field Proposal

NICOSIA - The Cypriot government has made a bold move, declining Chevron's revised plan for the Aphrodite gas field, marking a pivotal point in Eastern Mediterranean energy dynamics. While Chevron had set forth a proposal they felt was economically viable, it seems Cyprus viewed things differently, focusing primarily on the potential long-term economic implications and the quality of extracted resources.

Located near the Leviathan gas field, jointly managed by Chevron and NewMed, Aphrodite was discovered in 2011. Boasting an estimated 4.4 trillion cubic feet of natural gas, it represents a significant asset for the Cypriot government. However, leveraging such resources in the best interests of the nation requires judicious decision-making.

Chevron's proposal aimed to trim production costs, proposing to reduce drilling operations from five to just three. This would lead to a drop in gas production from 800 cfd to 650 cfd and result in about a 1 billion dollar cost saving from the previously agreed 3.6 billion dollar expenditure. On the surface, a $1 billion reduction seems lucrative; however, the government’s concerns lay elsewhere.

A primary concern was Chevron's decision to cancel the Floating Production Unit (FPU) for gas processing. Such a move raised alarms about the potential degradation in the quality of gas extracted from the Aphrodite field. Furthermore, the revised approach hinted at a risk that the gas sourced during the latter half of the Aphrodite field's lifespan might not uphold optimal quality standards. A more alarming note was the potential risk of water extraction.