• Natural Gas News

    Cyprus Natural Gas Sector Sails on Fast



Cyprus' energy sector has seen a series of positive events including seperate talks with Total and Noble Energy while Kogas and Eni have already agreed to explore blocks 2, 3, and 9. Cyprus has also raised money in signing bonuses from countries interested in its offshore reserves as positive estimates put Cypriot reserves of around 20 trillion.

by: Ioannis Michaletos

Posted in:

Natural Gas & LNG News, News By Country, , Cyprus

Cyprus Natural Gas Sector Sails on Fast

Cyprus' nascent natural gas sector is sailing on fast after a recent series of agreements.

According to the Minister of Commerce & Energy of Cyprus, Neocles Sylikiotis, the country has already raised 150 million euros (around 0.9% of its GDP) in "signing bonuses” from companies interested in exploring and exploiting offshore reserves. Moreover, Eni and Kogas have recently agreed to research the Sea Blocks, numbered 2, 3 and 9 of the Cyprus Exclusive Economic Zone. Initial estimates indicate that there may be around 20 trillion cubic feet of gas. Concurrently,  Total is about to wrap up talks with the Cypriot government regarding its participation in Sea Blocks 10 and 11.

Another company which started first to explore the potential of offshore reserves of the Island, U.S. based Noble Energy, is also in talks regarding its discovery in late 2011 in the Sea Block 12, also known as "Aphrodite," which has around 250 billion cubic meters of gas. A high-ranking managerial delegation arrived in Nicosia from Houston in the last week of January and met with governmental officials.

The most important aspect of these negotiations that are ongoing is the option put on table regarding the exploration of the found gas in the international markets. Presently the favorite route is an underwater pipeline leading to an LNG terminal in the Island that will be used mostly for exports in the European markets by 2019-2020. What is needed though is the signing of an all-inclusive bilateral agreement between the Cyprus government and Noble, so as for both sides to be able to raise substantial amounts of capital from the international markets needed for such project.

Government of Cyprus spokesperson Stefanos Stefanou has commented that "there will be no transfer of gas through Turkey if there is no political solution found between the two countries," an option that was discussed by the Economist magazine. Another point of interest regarding the overall viability of the emerging natural gas sector in the country is the debt issue that is battering Cyprus. Conflicting views in Cyprus over the past few weeks suggested that IMF-ECB-EU which are involved into lending loans to the Cyprus state, would like to acquire rights regarding the offshore gas reserves, a move that would complicate negotiations thus far with interested international energy companies, such as the one mentioned. Stefanou stated that such terms were not accepted by Nicosia and as such were not included in the drafts for the secure of loans by the Troika of lenders. In an interesting twist, a recent Royal Bank of Scotland (RBS) investor report stated that “the Island sits on potentially huge energy wealth in excess of 600 billion euros...Cyprus will become geopolitically important for gas pipeline routes." Presently, Cyprus may raise up to 17 billion euros loans, which according to the RBS, can be paid off rather easily in the mid and long-term by the cash flow from the explored gas reserves. 

Judging by various estimations both by Cypriot officials and international companies, the country could have an injection of more than 1 billion Euros annually after 2020, lasting for several decades, an amount around 6% of its current GDP, a substantial number in analogy to other gas producing states.