Russian, Italian, French companies among 15 bidding for oil and gas drilling rights off Cyprus

On May 11, 2012 by stratagem

NICOSIA, Cyprus — Major oil and gas companies such as Russia’s Novatec, Italy’s ENI, France’s Total, and Malaysia’s Petronas are among 15 firms and consortiums that are seeking to carry out exploratory drilling for gas deposits off southern Cyprus, the island’s commerce minister said Friday, despite Turkey’s strong objections.

The minister, Neoklis Sylikiotis, said the companies that applied for a license to drill by Friday’s deadline also include ones from Canada, the UK, Norway, Israel, South Korea and the U.S., surpassing the government’s hopes.

The bids come as the small east Mediterranean island nation is reeling from Europe’s financial crisis. It economy is projected to shrink by half a percentage point of GDP this year, and unemployment is hitting record highs.

“We’ve all had great expectations from this licensing round and I can tell you not only have the results not belied those expectations, they’ve exceeded them by far,” Sylikiotis told a news conference.

He said the companies want to drill in areas close to a natural gas field that the U.S. firm Noble Energy discovered last year and which is estimated at 5-8 trillion cubic feet (140-230 billion cubic meters). That’s enough to meet this crude-oil dependent island’s energy needs for decades while leaving plenty for possible export, officials said. The Cypriot field lies close to an Israeli gas deposit that’s more than double in size.

Noble Energy was the only company that sought a license to drill inside the island’s 19,700 square mile (51,000 square kilometer) exclusive economic zone during in an initial licensing round in 2007. The zone is carved into 13 sections, or blocks, and Sylikiotis said most companies are looking to drill in blocks 9 and 2, which lie above Noble Energy’s gas find.

The minister said the government will appraise all the bids by the end of the year. Licenses will be granted to winning bidders following negotiations that will likely wrap up by mid-2013, he said.

Cyprus and Israel are jointly considering how to best exploit their newfound gas reserves. One option is to pipe the gas to Cyprus where it could be processed for export to Europe and beyond. The processing facility liquefying the gas for easier transport would take a decade to complete and cost billions.

But the gas search has rankled neighboring Turkey, which doesn’t recognize Cyprus as a sovereign country. Cyprus was split in 1974 when Turkey invaded after a coup by supporters of uniting the island with Greece.

Turkey says the offshore gas search by the internationally recognized Greek Cypriot government in the island’s south flouts the rights of breakaway Turkish Cypriots in the north, and last month began exploratory drilling of its own there. In 2011, Turkey sent a warship-escorted research vessel south of Cyprus, while Turkish Prime Minister Recep Tayyip Erdogan warned that his government would “retaliate even more strongly” to any further search for mineral deposits around the island.

Turkey also considers an agreement between Israel and Cyprus demarcating their maritime borders as invalid and claims part of Cyprus’ economic zone as its own.

Source: AP

Image: Reuters

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