Total SA Licensed to Drill Cyprus’ Oil and Gas Deposits
According to the Cypriot government’s spokesman Stefanos Stefanou, Cyprus will sign a hydrocarbons exploration deal with Total SA on Wednesday 6 February 2013. The licensing contract covers the drilling of oil and gas deposits in two of thirteen blocks on the southern Cypriot coast (an area that spans 51,000 square kilometres of Cyprus’ exclusive economic zone).
The two blocks are located west of a gas field - now being developed by the Texas-based Noble Energy group and its Israeli partner Delek - estimated to hold between 5 and 8 trillion cubic feet (an equivalent of 140 to 230 billion cubic meters). Charles Ellinas, who heads the newly established Cyprus National Hydrocarbons Company, estimates that Cypriot waters hold at least a total of 60 trillion cubic feet (or the equivalent of 1.7 trillion cubic meters), enough to satisfy domestic consumption for decades - and Cyprus' ambition to become an energy exporter - and EU’s growing demand.
The deal is promising given Cyprus’ current debt crisis. The timing could not have been more ideal given the current juncture: Cyprus is currently in rescue loan talks with the EU and IMF, the loans being discussed are equivalent to the country’s GDP of EUR 17 billion. Although the bail-out package has been delayed until March due to European finance ministers concerns over the size of the package, the recent development in the Energy sector could play a positive role in facilitating the release of the rescue funds. According to Ellinas, Cyprus could possibly start exporting its gas as of 2019.
One problem persists and is not likely to be resolved in the short term: Turkey’s strong opposition to the drilling. Cyprus is divided between its northern part inhabited by Turkish Cypriots since 1974 and the eastern part inhabited by Greek Cypriots. The division of Cyprus is as flagrant as ever since the discovery of hydrocarbon resources in its waters, creating tension between the Turks and the Greeks.
It would be extremely interesting to observe Cyprus offshore gas development in the short term in order to assess how necessary Turkey’s green light really is.
Karen Ayat is an analyst in Eastern Mediterranean energy geopolitics