Cyprus Potential Vast Natural Gas Reserves on the Table

Cyprus is making headlines these days due to its centrality in the EU banking and debt crisis, but it’s also one of the few areas in Europe where potentially vast unexplored natural gas reserves are to be found offshore.

In a recent international energy seminar organized by the Greek Institute of Energy of South East Europe (ΙΕΝΕ), interesting facts and data were presented by scientists and market experts that shed light to a series of fascinating developments that will shape to an extent the energy game in Europe.

Presently six sea blocks of Cyprus have been awarded for research to international companies (Blocks: 2, 3, 9, 10, and 12). The President of the Cyprus agency for hydrocarbons (KRETYK), Charalambos Ellinas, stated that his organization estimates around 40 trillion cubic feet could be found only in these 6 blocks and that by 2020 the country could export around 2 trillion cf per annum to world markets, an impressive amount, enough to cover the needs of a country like France. Already French Total, Italian Eni and Korean KOGAS have bought research and exploration rights and Noble Energy in Block 12 has made the first discovery of an estimated 3.5 TCF. The total capital expenditure for the six blocks over the coming years is estimated at $2 billion and Ellinas also commented that his agency assumes that block 9 (to be researched by Total) most probably contains twice as much gas as the 12 one.

The total amount of the Levantine basin that encompasses also Israeli and Lebanese exclusive economic zones may have 122 TCF according to KRYTEK, which presented relevant estimations by the United States Geological Survey (USGS). Definite data will only be validated once all researches are due.  Furthermore, Noble Energy's block 12 may contain further another 7 TCF, according to company's initial estimations and a final investment decision will be made by 2015, so as to start production in 2018, whilst the following year regular LNG shipments could be available for international markets supply. KRETYK believes that Cyprus despite its present day problems should move forward fast, since another large discovery in offshore Mozambique and the already found Israeli gas reserves may attract the attention of energy companies more and delay the Cypriot planning.

The director of  international projects of Greece's DEPA, Dimitrios Manolis, followed his company policy of pushing forward the so-called East Mediterranean Gas Pipeline that would transfer Cypriot and Israeli gas to Greece and thereafter to the Balkans and to the EU through Italy. The plan has been lobbied by DEPA since early 2012 in order to revive the ITGI pipeline project and in order to elevate Greece's role in the above culminations, as well as, for formatting the ongoing geopolitical consensus between Athens and Tel Aviv. Nevertheless it has little support in Brussels with the EU being in favor of the Southern Corridor long-awaited project and with significant amounts of capital needed that require the involvement of major companies that are for the moment engaged in other projects. According to a variety of energy analysts in Greece the East Mediterranean pipeline could be viable only if Greece succeeds in each own hydrocarbon researches, thus becoming a major producer that could attract considerable investments that will be lured by the sheer size of a combined mass transport of gas from the Mediterranean to the North. Greek hydrocarbon geologist Dinos Nikolaou believes that Greece has indeed considerable amounts of gas in the West and South offshore locations in the country which could be start to be explored by 2020-2025 in parallel with Cyprus plans.

The member of the scientific committee for natural gas of Cyprus, Panos Papanastasiou believes that Cyprus should follow the model of Norway by enchasing KRETYK in order to become in the future a new Statoil and engage actively in research and production, as well as, for Cyprus to develop a national wealth fund based on gas proceedings.

The amount of natural gas wealth in the eastern Mediterranean is a subject of various estimations but it is certain that considerable amounts are to be found in a region roughly from Adriatic Sea up to the Suez Channel. Since energy is not only a physical and business asset but most importantly a geopolitical prize, the turbulence in the exact same region since the first discoveries were made back in 2009-2010 is truly fascinating. That poses firstly the question on the political and country risk involved for any company wishing to get involved in such projects, and also what lies ahead in terms of political and consequently macro-economic stability.  Once more definite discoveries are made, it is certain decisions will be based in a mixture of both corporate and geopolitical factors that will in turn reveal the various influences involved and whether if all the plans could be facilitated or not. East Mediterranean is on the spotlight for the long-run making Cyprus's present day banking issues, perhaps another chapter in a long, and energy related, story ahead.


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