Cyprus & World News

CYPRUS: Liquefied natural gas plant by 2019

09 October, 2012

**Talks of monetisation “premature” **

Cyprus will have a liquefied natural gas (LNG) plant by 2019, according to the Minister of Commerce, Nicos Sylikiotis, speaking at the Economist Conference in Nicosia on Tuesday, and the state will have a strategic role in its operation.
The ambitious timeline for the LNG plant has been spurred by estimated large finds in Cyprus’ Exclusive Economic Zone (EEZ) after the first drilling in September 2011.
US-based Noble Energy estimated in December that it had found an estimated 5 to 8 trillion cubic feet (198 billion cubic metres) “with a gross mean of 7 tcf” of natural gas in Cyprus’ Block 12 after the first drilling last September.

This is enough to supply domestic consumption for around 200 years.
More gas may come on stream in the second licensing round, which is currently under way for the remaining 12 blocks in the EEZ.
In May 2012 15 consortia, including big names such as Total, Eni, Kogas and Petronas, expressed interest in the second round.
Sylikiotis said that they will start negotiations with one or two bidders for one or two blocks by the end of October.
In the first licensing only one block, Block 12, was licensed.

Reluctant to mortgage the future

In early October the government established a state hydrocarbons company, with 100% state ownership.
Sylikiotis said that the establishment of a national hydrocarbons fund was also under way.
The revenues from hydrocarbons would be spent on 1) resupply of the hydrocarbons market with infrastructure investments 2) the government budget and 3) saving and investment of a percentage for future generations of Cypriot citizens.
He did not elaborate on what percentage would be assigned to each category.
Asked whether the government had plans to “monetise” the gas, namely to sell it before it has come out of the ground, and whether or not these funds could be used to get Cyprus out of its current economic hole, Sylikiotis said that it was a “premature discussion”.
Referring to the recently established state hydrocarbons company, he said that the government’s first priority should be to be decisive about how to set up the processes and procedures.
While he noted that they might gain some income from signature rights, he said it “would be criminal to mortgage the future of the country”.
“Why do we have to mortgage this wealth today in order to cover holes in public finances?” he asked.

Fiona Mullen
Director, Sapienta Economics Ltd