Bloomberg News

Cyprus Can Be Reunified Before Gas Exports to EU, Minister Says

January 06, 2012

Jan. 6 (Bloomberg) -- Cyprus, the divided Mediterranean island that announced its first offshore gas find last week, said revenues will benefit Greek and Turkish Cypriots because reunification will be achieved before the fuel is shipped.

“Revenues are not envisaged to start accruing before a number of years pass because we need a number of years to develop the necessary infrastructure,” Praxoula Antoniadou, minister for commerce, industry and tourism, said in an interview in Nicosia. “Our vision is that the Cyprus problem will be solved much sooner, within months.”

Cyprus’s Greek and Turkish-speaking communities have been divided since 1974, when Turkey invaded the north of the island. Exploration drilling last year by the U.S.’s Noble Energy Inc. prompted Turkey, which doesn’t recognize the Greek Cypriot government, to send warships to the area. It has urged Cyprus to freeze oil exploration until a settlement is reached so that the Turkish Cypriot community can benefit from revenues.

Noble’s gas field, containing as much as 8 trillion cubic feet of fuel, “enhances the probability” that other sites off Cyprus may also hold hydrocarbons, Antoniadou said Jan. 4. The government announced a second oil and gas licensing round on Nov. 23, covering 12 of 13 blocks, and will invite expressions of interest “in about a month’s time,” the minister said.

Export to Europe

The nation is seeking to export gas to western Europe as demand for the cleaner-burning fuel grows and the region strives to cut its reliance on Russian supply. Shipment options, complicated by the 38-year division of Cyprus’s two communities, include delivery as liquefied gas or by pipeline.

“What is currently under consideration is primarily the process of liquefaction,” Antoniadou said. “These types of decisions are being discussed and cannot be limited to just this first discovery. It would include the current discovery and other future discoveries.”

The tensions between Greek and Turkish Cypriots may hamper plans for a gas pipeline because any export link would have to connect to an existing network crossing Turkey, Pierre Godec, an oil-industry consultant, said last week. Gas liquefaction, a more costly alternative, would allow exporters to ship supplies by seaborne tanker instead.

Antoniadou, co-author of “The Day After” trilogy that set out the economic benefits of reunification for the island’s economy, for Turkey and for Greece, said there’s time for the two communities to agree on a “bizonal, bicommunal federation” before gas revenues accrue in a “number of years.”

Israeli Partners

Noble, based in Houston, is developing the Cyprus Block 12 field with Israeli partners Delek Drilling LP and Avner Oil Exploration LLP, which hold a combined 30 percent stake.

Israel, whose relations with Turkey were strained by the killing of activists on an aid ship in 2010, is boosting cooperation with Cyprus over energy resources, Antoniadou said. The two countries are negotiating a “unitization agreement” for hydrocarbon reserves that straddle the border between their respective “exclusive economic zones,” she said. Turkey was until recently Israel’s closest regional ally.

Cypriot President Demetris Christofias has repeatedly stated that the island’s “natural wealth” belongs to all Cypriots, said Antoniadou, who also chairs the United Democrats, a pro-reunification political party. Christofias “has indicated that through the reunification of our country, Turkish Cypriots can enjoy any benefits accruing from the exploitation of gas reserves,” she said.

New York Talks

United Nations Secretary-General Ban Ki-Moon summoned Christofias and Dervish Eroglu, the leader of the Turkish Cypriot community and president of the Turkish Republic of Northern Cyprus, recognized only by Turkey, to New York for talks this month to reunify the island.

Christofias, who said Sept. 22 that Turkish Cypriots will gain from oil and gas finds even if no political solution is reached, said Jan. 4 a joint meeting “would be meaningless” while the gulf between the two sides remains. The president, whose popularity slumped after a July 11 explosion knocked out half of the island’s power generation capacity, hasn’t clarified how Turkish Cypriots would benefit from the energy discoveries.

The leaders of the two communities haven’t found agreement on governance and power-sharing, property, territory and citizenship, Alexander Downer, special adviser to the UN secretary-general, said Jan. 4 in a statement published on Cyprus’s Press and Information Office website.

--With assistance from Emre Peker in Ankara. Editors: Amanda Jordan, Stephen Cunningham

To contact the reporter on this story: Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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