Tuesday June 30, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Cypriot gas no fix for country's funding gap

By Henning Gloystein & Kevin Allison

Cyprus' gas is worth less than $2 billion based on reserves found so far and there may be too little to develop anyway, leaving plans to mortgage them against a $13 billion bailout unlikely to fly, Reuters research has found.

So far, an estimated 200 billion cubic meters (bcm) of natural gas worth $80 billion at current prices have been discovered in the Aphrodite gas field in Cypriot waters.

The Cypriot government says that it hopes to begin exports of liquefied natural gas (LNG) from 2018, although most analysts say production is unlikely to begin before 2020 and some doubt whether the fields will be developed at all.

“If Cyprus has found only 7 trillion cubic feet (200 bcm) right now, that's not yet enough to think about doing LNG given the number of projects ahead in the queue, such as the over 100 tcf of gas already found in East Africa,” said Kim Fustier, oil and gas analyst at Credit Suisse.

Cyprus' financial system has collapsed because banks bloated with Russian cash lent heavily to Greece and were then caught out when Greek borrowings lost much of their value. Proposals submitted to the Cypriot parliament to recover from the resulting crisis include a “solidarity fund” to bundle state assets, including future gas revenues and nationalized semi-state pension funds, as the basis for an emergency bond issue.

The European Union is demanding 5.8 billion euros ($7.5 billion) of security in return for a 10 billion euro ($13 billion) bailout.

A gas price of $13 per million British thermal units (mmBtu) would justify an investment in a 5 bcm per year export facility to operate over 25 years, delivering $1.55 billion of value, only about a fifth of what Cyprus needs to plug its funding gap.

The Reuters analysis, vetted by several analysts, assumes the gas facility is built in seven years at a cost of $2 billion per billion cubic meters of annual capacity. It assumes the project makes margins of 75-80 percent on gas sales from 2020, and applies a 10 percent discount rate to future cash flows to arrive at a net present value for the project.

But analysts say gas prices could fall after 2015 when a wave of new supplies become available in the US, Australia and Africa.

And French bank Societe Generale expects European spot gas prices to be around $10-11 per mmBtu in 2020 as US exports also begin to pull down global prices.

“US LNG exports are a game changer and expensive LNG projects will no longer receive any Final Investment Decision,” the bank said in a report published this week.

In order to fill its $7.5 billion funding hole, Cyprus would have to export around 18 bcm of gas per year, but at 450 bcm spread over 25 years, it would also require more than twice the gas discovered to date. Use the calculator to adjust the values involved.

A project that big would also require at least $36 billion of upfront spending, Reuters analysis suggests, about 1.6 times Cyprus's current GDP, before gas started flowing around 2020.

“With rampant cost inflation and an increasingly price-sensitive customer base, these large-scale, expensive projects simply look cumbersome and outdated in the context of intensifying global competition,” Societe Generale said.

One way to scale its gas reserves would be for Cyprus to coordinate its production and sales with Israel, which has found bigger reserves in its waters.

Cyprus' Aphrodite gas field lies close to Israel's 480 bcm Leviathan field, and the two governments have signed cooperation agreements.

Together, these two fields could meet Europe's entire gas needs for almost two years.

Some uncertainty remains though, because Israel has yet to say whether it will allow significant gas exports. Further complicating the issue for any potential developer, Turkey, a key player in the region's energy politics, has made clear it will oppose any attempt to pre-sell Cypriot gas.

Industry sources also say that high development costs in the seismically active and deep waters of the eastern Mediterranean will mean that the project's profitability is in doubt.

“Expensive projects will be indefinitely postponed,” Societe Generale said. [Reuters]

ekathimerini.com , Saturday March 23, 2013 (10:20)  
Greeks check goods online, buy at stores
Closure of country’s banks leads commerce to grind to a halt
Public coffers run dry as taxes go unpaid
ATHEX: No trade until next Tuesday at the earliest
Tsipras says ´no´ vote will help talks but ´yes´ will prompt political developments
Prime Minister Alexis Tsipras indicated on Monday that Greece was still open to an agreement with creditors, “even at the 11th hour,” made it all but clear that a payment due on Tuesday to t...
EU officials say referendum is on euro or drachma
A number of European leaders warned Greece on Monday that Greeks face a choice between the euro and the drachma when they go to vote on Sunday, regardless of the government insisting that a ...
Inside News
SOCCER
English keeper Steele stays with Panathinaikos
English goalkeeper Luke Steele has extended his contract with Panathinaikos until the summer of 2018, the Greek Super League club announced on Monday. Former England youth international Stee...
VOLLEYBALL
Great wall of China insurmountable for Greece
The Greek men’s national volleyball came mighty close to snatching a spot in the Final-Four of the World League’s third division, but eventually succumbed to China in front of some 4,000 fan...
Inside Sports
Switching the rules for the referendum
The legislative decree that the government just issued changes in its favor the rules that apply for the carrying out referendums. It states that «if it is not possible to put together one s...
COMMENTARY
Playing the last chips
Prime Minister Alexis Tsipras played his last chips and the country is already experiencing the results. If he has come to terms with the idea of Greece returning to the drachma then you can...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Tsipras says ´no´ vote will help talks but ´yes´ will prompt political developments
2. Greeks check goods online, buy at stores
3. Closure of country’s banks leads commerce to grind to a halt
4. Public coffers run dry as taxes go unpaid
5. ATHEX: No trade until next Tuesday at the earliest
6. Double default day for Greece?
more news
Today
This Week
1. Greek government says no limit on bank withdrawals for foreign tourists
2. Playing the last chips
3. Poll shows chances of Greece euro exit balancing on knife's edge
4. Referendum asks Greeks simply to accept or reject creditors' plan
5. Cautious Merkel on verge of biggest risk with 'Grexit'
6. ECB rejected Greek funding line request for extra 6 bln euros, say sources
Today
This Week
1. Greek government says no limit on bank withdrawals for foreign tourists
2. Greek referendum offer is more con than democracy
3. Greek negotiators learned of referendum proposal from Twitter
4. Greeks want to stay in eurozone, two polls show
5. Ship of fools
6. A decision with no preparation
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.