As the biggest Offshore Technology Conference (OTC) to take place in Houston, Texas, was coming to a close on Thursday, Cyprus was presented as the aspiring oil and energy market.
Officials from Cyprus and the US presented the prospects which the island has, following the attention received in the Eastern Mediterranean with the oil and gas discoveries in the Tamar region, during an industrial breakfast organised by the US Department of Commerce and the OTC.
Head of the Energy Department of the Cypriot Ministry of Commerce, Industry and Tourism Solon Kassinis explained, during the industrial breakfast dedicated to Cyprus, what the island is doing as regards exploration, future plans and recent developments.
Noting that Cyprus is the third largest island in the Mediterranean, located at the crossroads if big energy routes, he said it is a member of the European Union and maintains a transparent legal framework. ''We have an open services oriented market economy'', he said, adding that it can also serve for oil and gas exploration.
Based on the US Geological Department, Kassinis said there are 1.68 million barrels of oil and 122 trillion cubic feet of natural gas in the region.
All this could make Cyprus a door to Europe in that respect since it is an emerging area which is very promising for exploration.
Already, he added, the area for exploration is 51 thousand square kilometers, divided into 13 blocks. He also said there is a great potential to trade the gas in the region.
Kassinis reminded that the first license round was arranged in 2007 and the concession was given to the US company Noble Energy to explore for hydrocarbons in an offshore field south-east of Cyprus.
At the same time there are plans for a geophysical survey with multi-client seismic surveys. Kassinis said that Noble is planning to make additional seismic 3D surveys in the area while the government will make additional 2D red lines.
Regarding the legal and regulatory framework, he said it was completed in 2007 and is the same as the norms and guidelines of the EU. The first exploration license is granted for three years with the ability for two biannual renewals.
Kassinis said that the government has undertaken a strategic environmental assessment to identify, describe and evaluate the likely significant effects on the environmental effects of implementing hydrocarbon exploration and exploration activities.
He reminded that Cyprus has signed delimitation agreements with Egypt, Israel and Lebanon, the two first having ratified the agreements while Lebanon has not yet ratified it but ''we are expecting very soon when the political situation improves''.
Kassinis said he expected that Noble would start drilling in the 4th quarter of 2011, while the second license round will be announced by the end of the year to cover all other blocks.
Once the gas is discovered, he added, Cyprus could serve as a liquefied natural gas (LNG) hub, serving local needs and making gas much cheaper.
The initial evaluation is production in middle 2014 and onshore production by 2019.
Dr Stelios Stylianou, General Manager of the Electricity Authority of Cyprus (EAC), in his speech, said that in order to facilitate the introduction of natural gas to Cyprus and the improvement of the competitiveness and efficiency of the Cyprus oil products market, the Government, through its Council of Ministers, decided to develop and establish an onshore LNG import, storage and regasification terminal (the ''LNG Terminal'').
Dr. Stylianou said that once developed, the LNG Terminal will assist Cyprus in diversifying the country's energy sources thereby ensuring enhanced security of energy supply and reducing CO2 emissions, in compliance with European Union Directives, adding that the LNG Terminal ''is therefore regarded as highly significant and important by both the EAC and the Government of Cyprus''.
The ''LNG Terminal Company'' will be registered in Cyprus with the significant participation of the EAC, he said, adding that it will enter into an agreement with the Natural Gas Public Company (DEFA) for the provision of LNG import, storage and re-gasification / send out services pursuant to a Terminal Use Agreement (the ''TUA'') which is to be negotiated and agreed between DEFA and the LNG Terminal Company.
He said the EAC plans to invest in the LNG Terminal Company through an investment vehicle, a private limited company already registered in Cyprus. The Project will allow EAC to diversify from its core business but will also offer the opportunity to its Strategic Partner to invest in a new activity and possibly a new geographical area. It will create employment opportunities and will allow redeployment of highly skilled EAC personnel.
The biggest challenge for the LNG Terminal Company however will be financing the Project, he said, taking into consideration the current economic climate. The total project cost is estimated at 500m-600m euros and it is intended that the Project will be designed and structured to enable the LNG Terminal Company to obtain project financing, with the objective of achieving a target ratio of debt to equity of 80/20, with limited financial guarantees or other form of credit support from EAC and the Strategic Partner or their Affiliates.
In December 2010, Dr. Stylianou remarked, the EAC completed the Request for Proposal for Strategic Partner Selection procedure and ranked the prospective Strategic Partners from most preferred to least preferred. The report was submitted to the EAC Board and on the 30th of December the ranking was approved. The decision for final selection of a Strategic Partner is however subject to DEFA reaching a decision on the preferred LNG Supplier.
Since December 2010, Dr. Stylianou said, new developments have taken place relating to the possibility of Cyprus having its own indigenous gas and the possibility of bringing that gas to Cyprus in the next 5-10 years. Recent gas discoveries in nearby Israel, he added, also constitute developments which cannot be ignored. These developments have affected both DEFA's LNG Supplier Selection process and EAC's SP selection process and development of the LNG regasification terminal.
''However, even with the potential of discoveries of Cyprus gas, it is considered that the development of the LNG regasification terminal should not be postponed or called off. Most of the work to be carried out during the development stage of the project and most of the regasification installations will be capable of being utilised even in the case where the LNG regasification terminal will have to be converted or expanded to an LNG liquefaction plant. The design of the LNG regasification terminal could in fact be carried out taking into account the possibility of conversion/expansion to a liquefaction plant thus not having to go through more difficult, dangerous and costly modification in the future'', he added.
Concluding, Dr. Stylianou said that it is considered that this project will contribute towards the implementation of European priorities for enhanced security of energy supply and reduction of CO2 emissions and will meet the long term objectives for the energy infrastructure.
Vice President of international operations at US company Noble Energy, Terry Gerhart described Cyprus as a ''fantastic country'' that could be on the verge of natural gas revolution, noting his company is confident it has the skills to make it happen.
He presented the example of Noble in Equator and most recently in Israel, noting that Israel is in the middle of a revolution since now natural gas supplies 40% of the country's electricity.
Gerhart said that Noble is really ''excited over the prospects in Cyprus'' and this confidence comes after the discoveries in the Levithian basin.
''We are working with Mr. Kassinis and the government to meet the EU requirements and expedite drilling in this block'', he added.
He further said that regarding Vassilikos Energy Centre, Noble shares a common vision with Kassinis to turn it into a Mediterranean energy hub, noting that this site has mass potential and Cyprus should be wise in how it will be used.
The venture in Cyprus, he added, would be the largest investment in history worth over 10 billion dollars with tremendous rewards, securing lower cost of energy for the domestic market, clean energy for domestic power generation, a significant stable tax and foreign exchange revenue for government over a long time attracting long term employment.
''We have a sense of what is to come'', he concluded.
The industry breakfast was attended by companies represented at the OTC and Cypriot businesses that came to Houston to explore the possibilities for cooperation and make contacts.
According to the Commercial Specialist of the US Embassy in Nicosia, Ephie-Yvonnie Charalambidou, attending the OTC, the Embassy strongly appreciates the participation of Cypriot business people in the OTC delegation and hopes that there will be bigger participation in more events to follow in the US.
The Commercial Specialist said the presence of Cypriot businesspeople is very important to American businesses and provides the former the advantage of forming joint ventures and cooperation in the near future.
