The second licensing round for
natural gas prospecting south of Cyprus has attracted unprecedented interest,
with 70 companies subscribing to the seismic data based on which they will
submit their bids to clinch one of the 12 remaining concessions in the
Exclusive Economic Zone.
Based on the six-month review period announced by former Commerce Minister
Praxoulla Antoniadou Kyriacou, the winning bidders should be announced by
September or October.
But being just six months away from the next presidential elections and halfway
through the Cyprus presidency of the European Council, the government will be
doubly keen to award the licenses to the highest bidders and use the money to
pay down its enormous public sector deficit.
Several companies have already come forward as interested parties to bid
or buy a license outright. Israel’s Delek, that already has an option to take a
30% stake in the first offshore block, currently being explored by Noble Energy,
is also reportedly interested to bid for a license. Delek and Noble are already
partners in a similar venture in Israel’s giant Leviathan basin that is
reported to have the biggest gas reserves in this part of the Mediterranean.
Texas-based Noble, that announced the discovery of an average 3-8 trln cubic
feet in the Block 12 “Aphrodite” concession last December, had previously shown
interest to bid for a second block as well.
Canada’s Triple Five retail-to-transport giant expressed interest to bid for
one of the blocks when Nadir Ghermezian, head of the Iranian-Jewish family,
visited Cyprus and was given a warm welcome by President Christofias.
Ghermezian said that Triple Five would also buy some 500 mln worth of
government bonds through a trade finance bank it wanted to set up in Cyprus.
New Trade and Energy Minister Neoclis Sylikiotis named China’s National
Offshore Oil Corporation (CNOOC) as one of several major foreign energy
companies which have expressed interest in acquiring a license.
“There is interest by many companies, among them CNOOC to acquire a license for
hydrocarbon exploration, as there is also an interest by many other companies
which came to Cyprus,” Sylikiotis said.
The minister even declared that production from Noble’s site, some 65 kms south
east of Limassol, should begin by 2016, and that Cyprus would only require 15%
of the gasfield’s output to satisfy its energy needs.
CYPRUS – ISRAEL
Cyprus and Israel are considering a plan for joint development of their
respective natural gas reserves that includes building a pipeline to the
southern coast of the island. Cyprus is also planning to seek partners for a
liquefaction terminal that will cost about 10 bln euros and Noble is keen to
build and operate the terminal in order to provide natural gas for the domestic
market and for exports.
The state-run Electricity Authority of Cyprus needs to convert its power plants
to natural gas within the next two years in order to reduce the cost of energy
generation and supply, as well as to cut down on carbon emissions for which it
will have to pay pollution fines.
EAC chairman Haris Thrasou said that the government should proceed with a
land-side natural gas terminal as soon as possible.
“Cyprus will need about 1 bln cubic metres a year of natural gas. The terminal
will have a design capacity of 20 bln,” Thrasou said. He added that the surplus
production capability could be exported west to Europe, through the EuroAsia
Interconnector subsea electricity cable project which will be ready in about
three years’ time.
“Our local energy sufficiency will be satisfied before the installation of the
cable project. General Electric and J&P-Avax are working hard to repair the
damages at Vassiliko power station, with three more units coming online next
year. By then, we will have a safe margin of 15 to 20% which we can export,”
the EAC chairman said.
“The cost of cheaper electricity will only become a reality after we start
using natural gas to fuel the power stations. We will also add a sixth unit with
an output of 220 MW in 2016, which will coincide with our plans to have an
electricity surplus,” Thrasou said.
NATIONAL COMPANY
The government, meanwhile, wants to set up a state-run oil company to handle
all aspects of natural gas, including import, liquefaction, transport and
export.
In order to deprive the Christofias administration of controlling lucrative gas
distribution contracts, parliament, with the exception of the ruling Akel
party, decided to divide the job between the Public Company for Natural Gas
(DEFA) and the Energy Regulatory Authority (CERA). DEFA will import, distribute
and supply natural gas locally, while CERA will be in charge of exporting
natural gas, in addition to its regulatory role.
The president could refuse to sign the law and send it back to parliament. If
the House refuses to withdraw it, the matter would be referred to the Supreme
Court, creating even furter delays in the import and use of natural gas.
Sylikiotis will be one of the keynote speakers at the Investment Energy Summit
organised by the Economist in Athens this week, where he will also have the
opportunity to discuss further cooperation with officials from Noble and Delek,
as well as Israel’s Energy Minister Uzi Landau.
GAZPROM
WANTS TRADE
Meanwhile, Russia's Gazprom announced that its Swiss subsidiary, Gazprom
Marketing and Trading, has signed a letter of intent with the consortium
exploiting the smaller Israeli natural gas fields of Tamar and Dalit to begin
talks for marketing their gas.
Part of the output has been committed to the Israel Electric Company and
replaces the natural gas that Israel used to buty from Egypt.
Gazprom has also shown an interest in the offshore Leviathan deposit to buy the
liquefied natural gas (LNG) from a company that the Israeli consortium would
create. Gazprom's interest is principally to keep Israeli natural gas out of
the European markets, where Russia is the principal foreign supplier.
Other buyers, such as from South Korea, are also keen to buy Israel’s natural
gas supplies, with plans underway to build regassification plants and export
the natural gas by ship.