Cyprus aims to start talks as soon as possible on a final deal to build an onshore liquefied natural gas terminal, Energy Minister George Lakkotrypis said.
The government yesterday approved a framework for negotiating an accord with Houston-based Noble Energy Inc. (NBL:US) and Israeli companies Delek Drilling LP and Avner Oil Exploration LLP (AVNRL) to build the terminal. The project will entail the largest investment in the country’s history, Lakkotrypis said during a presentation last month.
The memorandum of understanding marks “a very important milestone, as it completes another step in our efforts to monetize natural gas reserves,” Lakkotrypis said in an interview in Nicosia yesterday.
The terminal is part of a plan to export gas to Europe and Asia by 2020 to help revive the Cypriot economy after the country agreed March 25 to a 10 billion-euro ($13.2 billion) bailout from European partners and the International Monetary Fund that forced it to shut its second-largest bank. The economy is set to shrink about 13 percent over the next two years, the IMF said last month.
Cyprus’s natural gas reserves in its territorial waters could be as much as 60 trillion cubic feet, Charalambos Ellinas, chairman of the Cyprus Hydrocarbons State Co., said March 15.
Noble has a 70 percent stake in Block 12 of Cyprus’s offshore exclusive economic zone (EEZ) and in late 2011 announced the discovery of 7 trillion cubic feet of natural gas. The company earlier this month began a second appraisal drilling to determine total reserves. Delek and Avner have 15 percent stakes in Block 12.
France’s Total SA (FP) and Italy’s Eni SpA (ENI), “who have shown interest to participate in the terminal, will be more than welcome,” Lakkotrypis said. “We will make sure that whatever the final agreement we have in place, we will be able to accommodate further expansion.”
Total has the right to explore for natural gas in Blocks 10 and 11 of Cyprus’s EEZ, while a venture of Eni and Korea Gas Corp (036460) have stakes of 80 percent and 20 percent respectively in Blocks 2, 3 and 9. Cyprus has yet to award exploration licenses for the remaining seven blocks.
“As we get closer to the final investment decision, we will be looking for assistance from large financial institutions,” Lakkotrypis said. “A number have already shown big interest to finance construction,” he said, without providing details.
Pre-sales of gas could make up some of the financing for building the terminal, Lakkotrypis said.
Cyprus’s LNG terminal could also be used by Israel and Lebanon for exporting natural gas, Ellinas said April 8.
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