Italian energy company Eni finalized a farm-in agreement with French Total to acquire 50 percent participating interest in block 11 offshore Cyprus, the company announced on Tuesday.
Through the transaction, Eni reinforced its own position in the field in the south of the Mediterranean island. The company acquired the right to explore the 2,215 square kilometer area, adjacent to the major Zohr discovery in the Egyptian offshore, according to Eni's press release.
According to the farm-in agreement, which has been approved by the Greek Cypriot administration, Total will remain the operator of the block.
There are four main characteristics to the farm-in agreement, according to international business law and litigation firm, Fasken Martineau.
"In a farm-in agreement, the seller has a license interest, the buyer agrees to pay the seller’s costs for a particular activity, and in return the seller transfers part of the seller’s interest to the buyer while the seller retains part of its interest."
The Greek Cypriot administration assigned the rights of block 11 to Total in 2013 after it unilaterally held a bid round for the block.
- Cyprus issue and unilateral bids
The Cyprus Island was divided into a Turkish Cypriot state in the north and a Greek Cypriot administration in the south after an Enosis-inspired 1974 military coup was followed by violence against the island’s Turkish population, and the subsequent intervention of Turkey as a guarantor power.
The status of the island remains unresolved in spite of a series of discussions that resumed in May 2015.
Despite the disputed status, the Greek Cypriot administration continued to unilaterally open new tenders for hydrocarbon explorations without any cooperation with the Turkish Cypriots.
As a result, Turkey and Turkish Republic of Northern Cyprus have repeatedly declared that the Greek Cypriot administration’s unilateral decisions to open tenders not only disregarded the Turkish Cypriot's equal rights and interests over the island’s natural resources, but also violated Turkey's continental shelf rights in the region.
By Muhsin Baris Tiryakioglu