* Cash-starved Cyprus considers advance gas sales

* Cyprus tries to bring natgas drilling forward

* Gas revenues could be $400 billion

By Peter Apps

NICOSIA, March 14 (Reuters) – Cyprus, urgently needing revenues from its newly found natural gas reserves, hopes to begin exports by 2018 and will target sales at fellow European Union members, its energy minister said.

George Lakkotrypis also said gas could be sold in advance or used to help the government, which is now negotiating a multibillion-dollar bailout, to issue new debt on international markets in future.

U.S. company Noble Energy and the Cypriot government announced in 2011 that they had discovered gas deposits of around 7-8 trillion cubic feet (200 billion cubic metres), 40 percent of the EU’s annual demand.

Aphrodite, as the gas field is known, has more gas than Cyprus could use in over a century, so the government hopes to boost its revenues through exports to the European Union.

“It is important to us not just economically but also geostrategically,” Lakkotrypis told Reuters in an interview, referring to potential exploration partners.

“So EU member countries are obviously appealing.”

Experts believe Cyprus, an energy sector novice, could be sitting on hydrocarbons worth up to $400 billion.

Such revenues would be welcome to a government that is now negotiating a bailout from the European Union, International Monetary Fund and the European Central Bank so it can recapitalise its banks, service debt and support government spending.

But as the gas reserves are still unproven pending an appraisal drilling this year, they have barely been taken into account by lenders discussing aid to the island.

A draft bailout deal calls for the establishment of a resource fund to manage revenue and place debt on a downward course, though the creation of such a fund could be years away.

Lakkotrypis, barely in office two weeks following last month’s election, said the financial crisis had made development of the gas fields for exports much more urgent. The new government wished survey work had progressed faster to give Cyprus a stronger economic position and less need for a bailout.

“If it had been a year ahead, it would have made a real difference,” he said.

To monetise its deposits as fast as possible, the government was pushing Noble Energy to bring forward appraisal drilling to confirm its gas findings, Lakkotrypis said.

“It’s a pity we are under so much pressure. Every week counts,” he said.

Lakkotrypis said Cyprus was in the final months of deliberation over deals to run an onshore liquefied natural gas (LNG) plant to process the gas for export by ship.

ADVANCE GAS SALES

Lakkotrypis said the government hoped production could begin as soon as 2018. Once an appraisal confirms initial findings there was a range of options on how to use the reserves to raise cash, including advance sales, he said.

That would probably further anger the de facto Turkish Cypriot state that has run northern Cyprus since a Turkish invasion following a brief Greek inspired coup and effective partition of the island in 1974.

The Turkish Cypriot side says Greek Cypriots did wrong by unilaterally striking deals with foreign firms and should at the very least share gas revenue with them. Greek Cypriots say that can only happen once the island is reunited.

Cyprus is not the only country in the region that is hoping to benefit from a gas bonanza.

Geologists believe the eastern Mediterranean could contain up to 122 trillion cubic feet (3.45 trillion cubic metres) of recoverable reserves, enough to cover EU gas demand for around seven years.

The biggest finds have so far been made in Israeli waters, where the Tamar and Leviathan gas fields will cover Israel’s gas demand for decades while generating huge export potential.

Because the Leviathan and Aphrodite gas fields lie in close proximity, the governments of Israel and Cyprus agreed on joint exploration of some of the gas, making development more attractive for potential investors.

Earlier this year, Cyprus announced the results of some of the second round of bidding for offshore exploration blocks, bringing France’s Total, Italy’s Eni and South Korea’s KoGas into Cypriot energy exploration.

Cyprus’s second licensing round, in which it received 15 expressions of interest by 29 companies either on their own or in consortia for 9 offshore blocks, will be wrapped up by the end of May.

So far five blocks have been awarded in the second round. (Additional reporting by Michele Kambas and Oleg Vukmanovic; Editing by Henning Gloystein and Anthony Barker)

Published by: www.uk.reuters.com