Cyprus Natural Gas Opportunities

Cyprus, a full EU member since 2004, is located at the Eastern Mediterranean and stands at the crossroads of big international energy routes. Assessments by US Geological Surveys put the level of undiscovered oil and gas resources in the Eastern Mediterranean to significant amounts of natural oil in gas that lie in the island’s Exclusive Economic Zone (EEZ). Cyprus may have up to 40 trillion cubic feet (tcf) of natural gas reserves in some of its blocks within its EEZ, and could start exporting 2.0 tcf of LNG a year by 2020. The attraction of energy companies is estimated to result in the increase of financial investments in the island. These financial investments will require infrastructure, maintenance, support services, financing and banking, and such demands will result in job creation and eventually in the stabilization of the economic environment of the Republic of Cyprus.

Thirteen offshore exploration blocks have been defined to date in the Republic of Cyprus Exclusive Economic Zone. In 2008 Cyprus signed its first hydrocarbon exploration contract with US Noble Energy for offshore block 12. Exploratory drilling conducted by Noble in late 2011 revealed a natural gas reservoir with an estimated gross mean of 7 trillion cubic feet, which is close to a major gas discovery by neighbouring Israel. In February 2013 French energy giant Total was granted hydrocarbon exploration licenses in Cyprus’ EEZ to search for oil and gas in offshore blocks 10 and 11.

In October 2012 the government announced its decision to launch negotiations to award licences for blocks 2 and 3 with the consortia ENI-KOGAS (Italy and South Korea).

The building of liquefied natural gas (LNG) terminal is the best option for Cyprus to export its hydrocarbons. The pipeline to Turkey, despite the fact that it could be most cost-effective solution, is not attractive due to political implications. Obviously, a pipeline transferring natural gas from Cyprus to Greece is commercially not viable, as the cost of constructing such a pipeline is prohibitive. The LNG terminal is expected to be ready by 2019. The plan envisages the construction of three LNG trains (liquefaction and purification facilities), making the terminal one of the largest in the world. Gas for local consumption might flow in 2015, and export and sell might start in 2017 the earliest.

In a medium term future, with the gas converted into energy Cyprus will become an energy hub serving Europe and considering the European Union energy dependency this cooperation is expected to be extremely important for all parties involved.

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