Cyprus signs offshore deal with Total, puts hope in hydrocarbons
Cyprus signed a deal with France’s Total to search for offshore oil and gas, hailing its anticipated energy bonanza as a way out of austerity it faces due to exposure to indebted Greece.
Signing a production sharing agreement on Wednesday with the third energy major this year, Cyprus hopes for a windfall from hydrocarbons beneath the seabed in a largely untapped area of the east Mediterranean.
Any finds are not expected to come ashore until 2018 at the very earliest for domestic consumption, and in 2019 for export.
But commerce, industry and tourism minister Neoclis Sylikiotis said they would bring relief to Cyprus, which is in line for an international bailout with the accompanying tough conditions placed on its economy.
“Cyprus will finally and irrevocably turn its back on sterile policies of austerity imposed on countries of the south by a neo-liberal international and European establishment,” Sylikiotis said during a signing ceremony.
One of the eurozone’s smallest economies, Cyprus has been severely affected by a spillover of Greece’s debt crisis and a recession expected to crimp output by 3.5 percent this year.
A financial bailout for Cyprus could reach up to 17.5 billion euros, equalling the size of the Cypriot economy which adopted the euro in 2008. A final agreement is held up by concerns among the island’s European partners and the International Monetary Fund over debt sustainability.
Cyprus first struck natural gas offshore in late 2011, when U.S. based Noble reported an estimated 7 trillion cubic feet (tcf) natural gas find, close to a major gas discovery by neighbouring Israel.
Turkey, which lies north of Cyrus, has in the past voiced objections to the island exploring for oil or gas. Cyprus was split in a 1974 Turkish invasion after a brief Greek inspired coup and the exploration project is directed by the island’s internationally recognised government.
Under the deal, approved by the Cyprus cabinet on Tuesday, Total was licenced to carry out exploration work in two offshore blocks lying directly south of the island.
On Jan. 24, the outgoing Cypriot government licensed a consortium of Eni and South Korea’s KoreaGas Corp for other areas offshore.
“We anticipate up to 10 appraisal drillings over the next three years,” Sylikiotis said.
The area within Cyprus’s exclusive economic zone, a maritime boundary, could contain up to 60 tcf, Charles Ellinas, head of the Cyprus Natural Hydrocarbons Company (CNHC) told Reuters in an interview last week.