Energy Reserves No Quick Fix for Cyprus
From Wall Street Journal
By Sarah Kent
The discovery of significant energy reserves in the eastern Mediterranean over the past two years has been held up as a beacon of hope for debt-crippled Cyprus.
Top officials have repeatedly highlighted the prospect of future income from the gas reserves as a way out of the country’s current economic mess. Most recently, President Nicos Anastasiades said Cyprus would compensate bank depositors who have lost out under the terms of a European Union bailout with future natural gas proceeds.
But this will provide little comfort in the near term for Cypriots who are looking at a tax of between 3% and 15% on their savings, because revenues from natural gas are still a long way off.
In late 2011 Houston-based Noble Energy Inc. NBL -0.33% discovered gas reserves of up to 8 trillion cubic feet in the waters near Cyprus. Several major oil companies participated in an auction for exploration licenses in Cyprus last year, including France’s Total SA FP.FR -1.37%, Italy’s Eni SpA ENI.MI -1.10%and South Korea’s Korea Gas Corp. 036460.SE -0.14%
Israel, Lebanon and Syria have also seen companies make gas discoveries in their waters in recent years. But the full extent of the eastern Mediterranean’s energy riches are still unproven.
Even if the complex developments proceed smoothly, Cyprus won’t pipe the gas onshore until 2018. Export revenues could take even longer, requiring the construction of costly facilities to liquefy the gas so it can be carried in ocean-going tankers. Moreover, analysts say politics and border disputes could complicate and slow the exploitation of Cyprus’ gas reserves.
Cyprus has signed delineation agreements with Egypt, Israel and Lebanon to pave the way for exploiting hydrocarbon deposits that crisscross their boundaries. But Turkey, which occupies the northern part of Cyprus, has protested strongly against the Cypriot government’s offshore energy bid, branding it illegal and retaliating by starting its own exploratory drilling in the north.
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