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FACTDROP: Cyprus: Connnecting Gas and Cash?


Cyprus: Connnecting Gas and Cash?

Πηγή: Natural Gas Europe
July 7 2012

Energy industry observers are contemplating the possible implications of Cyprus’ approach to secure more financial support from Russia.

Nicosia has reportedly asked Moscow for a €5bn loan, which would allow it to take steps to recapitalise a banking sector impacted by the Greek financial crisis, as well to finance outstanding debts and to meet near-term obligations.

Russia has forged close ties with Cyprus, both in acting as an ally in regional geo-political matters and in providing financial assistance, having already handed over a €2.5 billion low interest loans to cover a large segment of Cyprus' financial needs for 2012.

An increased Cypriot dependence on Russia is worrisome to European officials, as recent discoveries in Cyprus and Israel hold promise for the Eastern Mediterranean to become a key non-Russian, exporter of gas to Europe.

In an interview with Platts news agency, Cypriot Foreign Minister Erato Kozakou-Marcoullis said that the potential for energy from the region was massive.

"There is a huge potential for natural gas and oil in the Eastern Mediterranean," she said. With up to 400 trillion cubic feet of gas and 8 billion barrels of oil in the Mediterranean Sea off Cyprus, Egypt,Israel and Lebanon, the Eastern Mediterranean Sea is comparable to some of the biggest producers in the world, including Australia and Canada, the minister said.

The discovery of significant natural gas reserves in Block 12 of Cyprus' exclusive economic zone byNoble Energy Inc. attracted numerous international energy companies to investigate bidding in the second Cyprus offshore natural gas licensing round held this May.

The Government of Cyprus is currently in the process of assessing the bids from companies included Russia’s Novatek, who applied for rights to explore nine offshore blocks.

Reports have circulated suggested that informal agreements are in place that promised Russian interests the opportunity to acquire at least one block to undertake exploratory drilling.

Although Gazprom was not a direct bidder in the second offshore round (it holds a minority interest in Novatek), Cyprus forms a key part in the Russian gas giant’s desire to build a greater footprint in the Eastern Mediterranean and it has been reported to be active in attempting to take a leading position in seeking to develop Cyprus’ natural gas resources.

The Cypriot government has expressed its preference for the creation of an liquid natural gas terminal to transport the fuel once it begins commercial exports of it offshore gas reserves in 2019.

Energy Minister Neokles Sylikiotis has said major energy companies, together with financial and infrastructure players, have already expressed their willingness to consider funding such investment and Russia is regarded as being at the forefront of being involved in the project, estimated to cost €8bn-€10bn

Gazprom also has a keen interest in developing partnerships to develop Israel's offshore gas fields, holding development and marketing discussions with consortium that includes Noble and Israel's Delek Group that has discovered the Leviathan (which lies approximately 50 kilometres from the Block 12) and Tamar gas fields that are reported to contain 16 trillion and 8 trillion cubic feet of gas, respectively.

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