CYPRUS’ potential lenders turned their eye yesterday to what could be a future cash cow for the island – the natural gas reserves still lying untapped off the coast.

A troika team held successive meetings, first with Energy Service director Solon Kassinis, and then with officials from the Natural Gas Public Company (DEFA), the Electricity Authority (EAC) and the Cyprus Energy Regulatory Authority (CERA).

Kassinis told reporters later the foreign experts posed a series of probing questions on the island’s broader energy plans.

In particular, he said, they homed in on government plans to export natural gas to European and/or Asian markets, on the prospects for collaboration with neighbouring nations, the capacity of the LNG storage terminal to be built on the island, and on the short-term benefit to the economy from the signature bonuses for the four offshore licences awarded recently.

“They asked me for specific numbers,” said Kassinis. “I told them that from the signature bonuses we expect to receive around €200 million.”

The matter of whether this cash would go toward growth or to service the public debt was not discussed, he said in response to a question.

The troika wanted to know also how soon Cyprus would be able to make use of natural gas for domestic electricity generation, the EAC’s general manager Stelios Stylianou told reporters.

The experts asked about the current status of the Vasilikos power plant that was severely damaged by a blast last year.

At no point did the troika raise the issue of privatising the EAC, Stylianou said.

“They told us that they are staying here until all matters are resolved,” he added, alluding to the troika’s mission to Cyprus in general.

And DEFA chairman Costas Ioannou said the troika experts were interested in the ways in which natural gas would be distributed once it came ashore, as well as what pricing policies for electricity authorities have in mind.

“They are interested in everything, not just the hard numbers, but also the details, the procedures, the [commercial] models, pricing…” said Ioannou.

Late last month the government announced it had awarded four licences for gas exploration in offshore blocks as part of the second licensing round launched back in February.

The blocks for which the licences have been awarded are: 2, 3, 9 and 11. They are all contiguous blocks, lying north and north-east of Block 12, where US firm Noble Energy has a concession to drill and has reported significant gas finds.

For blocks 2 and 3, licences were awarded to a consortium consisting of ENI from Italy and KOGAS from South Korea; the licence for Block 9 went to a consortium consisting of Total E&P Activities Petrolieres (operator), NOVATEC Overseas Exploration & Production GMbH and GPB Global Resources BV (a Gazprombank subsidiary); and the Block 11 licence went to Total E&P Activities Petrolieres.

While the troika was busy probing the government’s energy plans, the commerce ministry yesterday began negotiations with the companies and consortia that were selected for the four offshore licences.

According to reports, the negotiations – which as far as the government is concerned, are aimed at improving the companies’ financial offers – began with the ENI-KOGAS consortium for offshore blocks 2 and 3.

Today talks will be held with the Total-NOVATEC consortium over the Block 9 licence, and with Total for the Block 11 licence.

The awarding of the Block 9 licence has come under a great deal of scrutiny after reports that the administration picked the French-Russian consortium despite the fact that its bid was rated lower than others.

Commerce Minister Neoclis Sylikiotis said recently he hoped exploration contracts could be signed with the companies by “early 2013”. However, back in February, when the second licensing round was launched, the minister had indicated the second half of 2013.

It’s speculated that the expediting of the process could be linked to the government’s wish to demonstrate to the troika that Cyprus has additional assets in the form of natural gas.

Published by: www.cyprus-mail.com