French energy company Total is likely to abandon a search for oil and gas off Cyprus after failing to find tangible evidence of reserves, dealing a blow to the island’s hopes of a natural resource bonanza after a painful bailout in 2013.
Cypriot energy minister Yiorgos Lakkotrypis said on Wednesday that Total, granted a concession two years ago, had failed to pinpoint reserves that would justify costly drilling.
“The company informed us some months ago that it was having difficulty finding any structures, targets, in the blocks it had a licence for … and they informed us last September they had not found any target to drill,” Lakkotrypis told state radio.
Total is among a raft of international oil exploration and production companies, including BP and ConocoPhillips, that have slashed 2015 budgets in light of lower oil prices.
Drilling in the east Mediterranean is costly, because of its considerable depth. Asked if authorities had been told drilling will not commence, Lakkotrypis said: “Essentially yes.”
Total was not immediately available for comment.
Cyprus needed a 10 billion euro bailout in early 2013, and had partly pinned hopes on natural gas to aid recovery.
Total’s decision was unlikely to have a significant effect on Cyprus’s short-term outlook, but would be a dampener in the medium and longer term, said Sofronis Clerides, associate professor at the Department of Economics at the University of Cyprus.
“An important upside risk just became less likely. Expectations that natural resource revenues and related economic activity will fuel a faster economic recovery will have to be adjusted.
“The only silver lining is that Cyprus may now be able to have a discussion about its natural resource prospects that is grounded in reality rather than in wishful thinking,” he told Reuters.
Italy’s ENI failed to find gas in a drill last year and is now searching elsewhere off Cyprus. U.S. energy company Noble found gas reserves in 2011.
Cyprus’s neighbour Turkey has challenged Nicosia’s right to drill for gas, maintaining the island’s estranged Turkish Cypriots have an equal claim. The island was split in a Turkish invasion in 1974 following a brief Greece-inspired coup.
Lakkotrypis said any decision by Total was unrelated to the political controversy.