Europe has hopes Eastern Mediterranean gas reserves can help to diversify its supply sources, as well as easing Cyprus’s economic pain and potentially playing a role in healing the rift between the northern and southern parts of the island.

Charles Ellinas, executive chairman of the Cyprus National Hydrocarbons Company, said authorities would also push ahead with plans to develop a liquefaction plant to handle exports expected from 2020.

But gas from the region also comes with Middle East complications since the fields are split with Israel and Lebanon, two countries technically at war, and Turkey objects to ethnically split Cyprus tapping offshore reserves.

“I am very confident that Cyprus can provide Europe with 30 to 40% of its additional gas needs by 2025,” Ellinas told Reuters as part of a series of interviews on the gas market.

Europe’s gas demand is slightly below 500mn cubic metres a year, and Ellinas estimated the increase in demand by then to be around 100bn cubic metres (bcm) a year, although many analysts say demand will grow much more slowly.

The US Geological Survey estimates a mean 122tn cubic feet (3.5tn cubic metres) of recoverable gas lie in the eastern Mediterranean basin, as well as 1.7bn barrels of recoverable oil.

Much of it lies trapped beneath the sea bed between Cyprus, Israel and Lebanon, including two vast gas fields off Israel which are some the largest discovered in the past decade.

So far an estimated 200bcm of natural gas worth $80bn at current prices have been discovered in the Aphrodite gas field in Cypriot waters, but research suggests that developing the field would require large amounts of upfront investment into a project that may not deliver high returns.

Analysts say gas prices could fall after 2015 when a wave of new supplies become available in the US, Australia and Africa.

Consultants estimate the first phase of the LNG facility including infrastructure and one delivery chain will cost $6bn. One option under consideration for funding the project was to use the LNG sales agreements as collateral.

“Given that the ownership of gas is, roughly speaking, two-thirds Cyprus’s and one third to oil companies, these LNG sales agreements are worth a large amount of money which can provide security for loans,” Ellinas said.

Ellinas said there was a chance developing the gas could lead Turkey and Cyprus to bridge their 40-year differences.

“One of the reasons Turkey has been putting so much pressure on everybody is because of their own needs (for gas),” he said.

The gas windfall is one economic positive for Cyprus, where the terms of an EU and International Monetary Fund bailout will see the island’s €17.5bn ($22.51bn) economy shrink by more than 8% this year.

Despite its close business ties with Cyprus in other sectors, Russia does not have any involvement in the island’s attempts to develop its offshore energy sources.

“The Eastern Mediterranean is a secure, independent supply corridor. It’s probably best if Russia is not involved,” Ellinas said when asked about Russian involvement.

Cyprus has signed production sharing contracts with US based Noble Energy, France’s Total, Italy’s ENI and South Korea’s KoGas.

Ellinas said Noble was scheduled to start appraisal drilling in June to verify initial findings of between 5 and 8tn cubic feet (tcf) of gas. Total was scheduled to start an exploratory drill in 2014, and ENI by 2015 or possibly earlier.

“I have seen the estimates of ENI and Total about how much gas there is in their blocks and it is quite significant,” he said. Asked if the estimates were on a par with those of Noble, he said: “The short answer is yes.”

Ellinas, who previously held senior positions at energy firm Mott MacDonald, said the construction of a pipeline to channel the gas to markets was impractical because of sea depths, but said that could not be ruled out in the future.

For now, the island will move ahead with plans to construct an LNG terminal, which will liquefy gas and ship it.

The terminal, which is expected to be built at Vassilikos, on the island’s south, could handle gas fom Israel and Lebanon as well as Cyprus, he said.

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Livieratos briefed the Cypriot Minister as regards the procedures to be followed for the exploitation of Greece’s reserves. The Cypriot Minister from his part briefed his interlocutor on the initiatives taken by the Government regarding the exploitation of natural gas reserves in Cyprus’ Exclusive Economic Zone.

He also informed him about the meetings he recently had in the region, which focused on energy issues. Lakkotrypis also met with the Deputy Minister for Energy Makis Papageorghiou with whom he discussed the cooperation between Cyprus, Greece and Israel regarding energy infrastructure matters.

The Greek Deputy Minister, according to a press release, referred to the excellent cooperation between Greece and Cyprus, noting that the bilateral contacts can assist in promoting the two countries and their role in the Eastern Mediterranean region.

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Under the 10 billon euro international aid package agreed in March, Cyprus must close one bank, Popular CPBC.CY, and impose painful losses on deposits of more than 100,000 euros held at the euro zonestate’s biggest lender, Bank of Cyprus BOC.CY.

Both institutions were wrecked by lending to Greece.

Michael Kammas, general director of Cyprus’s Association of Commercial Banks, said the government should quickly clarify exactly how much savers must contribute to recapitalizing the banks, as the uncertainty was strangling economic activity.

“The more decisions are delayed, it won’t solve the confidence and stability issue which exists in Cyprus now,” Kammas said in a interview with Reuters on Tuesday.

A final figure is due to be given in June, until when up to 90 percent of large bank deposits will remain frozen.

Cyprus had relied on its outsized financial system, which attracted deposits from abroad, especially Russia, to fuel growth but needs to diversify its economy following the bailout.

Kammas said untapped hydrocarbon deposits in the eastern Mediterranean could help the island and its banks recover from the “calamitous” impact of conditions attached to the rescue program by the International Monetary Fund and the European Union.

“It’s a new course for Cyprus and there are lots of ways to get involved … There are infrastructure projects with regards to the energy sector which need financing, and these are opportunities (for the banks),” he added.

“We are still open for business, and we will take advantage of the natural gas opportunities. We need to focus on what increases productivity.”

Noble Energy (NBL.N) in 2011 reported an estimated 5 to 8 trillion cubic feet of gas in one field – more than Cyprus could use in a century. Texas-based Noble plans to launch an appraisal drilling to verify the find this year.

In January, Cypriot authorities signed production-sharing contracts for another five offshore blocks with Italy’s ENI (ENI.MI), South Korea’s KOGAS and France’s Total (TOTF.PA).

The government also plans to construct a liquefaction terminal on the island’s southern coast [ID:nL6N0C6AG5].

Kammas said the banks were not wholly responsible for Cyprus’s difficulties and that the financial system had been fundamentally sound until European leaders agreed to restructure Greece’s debts in October 2011. The losses imposed on Greek bondholders cost the island’s banks some 4.5 billion euros.

(Reporting by Michele Kambas; Editing by Catherine Evans)

Published by: www.reuters.com

from possible gas reserves within offshore Block 3 is being “considered” by the

government, the Sunday Mail has been told.
The venture had bid for Block 3 but was not picked, the exploration licence ultimately

awarded to the Italian-Korean consortium of ENI-KOGAS.
But Dr Eli Barnea, CEO of Sigma Explorations Holdings Limited – which has a 75 per

cent stake and was the designated operator in the Israeli joint venture – said this

week that their offer still stands.
The Israeli-led group’s proposal on Block 3 incorporated the construction of a power

plant on the island for exporting electricity to Israel and for generating electricity

for Cyprus’ local consumption, by linking the two countries’ grids via a subsea cable.
Due to their geography, both nations are currently isolated in energy terms and

vulnerable to failures at their main power plants, argues Barnea, citing the Mari

disaster of 2011.
In that respect, a 1500MW capacity plant in Cyprus would be a win-win for everyone.
Barnea says the Cyprus government and the ENI-KOGAS consortium could be persuaded to

‘farm-in’ the Israeli-led joint venture.
One option might be for the Israelis to purchase part of the Block 3 gas from the

Italian-Korean consortium. They would then finance a natural gas-powered plant on the

island and sell the bulk of the generated electricity to Israel.
In addition to the jobs created in building a facility, Cyprus would benefit from

charging a fee for the export of electricity to the neighbouring country.
Barnea sees Block 3 as being ideal for the project, because of the prospect’s close

proximity to Cyprus shores – some 65km from Cape Greco.
Moreover, drilling there would cost far less – about US$40 million compared to US$100

million in other prospects – because of the lower sea depths.
Lower development costs in turn would yield lower electricity prices, making them

attractive to the Israeli market.
“With electricity, you need only be competitive on a regional basis. With natural gas,

on the other hand, you’re competing on a global level,” Barnea argues.
And electricity exports from Cyprus to Israel could begin from late 2015 or early

2016; by contrast, the option of exporting gas via a liquefied natural gas (LNG) plant

cannot be achieved sooner than 2020 or 2021.
Barnea holds that exporting natural gas is not the best option for Cyprus because the

added value is not that high. According to his own estimates, Cyprus would stand to

make $10 per million BTU from exporting electricity, compared to just $3 per million

BTU from exporting gas via an LNG terminal.
The proposal is not a new one. It was brought to the attention of the Cyprus National

Hydrocarbons Company (CNHC) back in January through a detailed presentation.
And a month ago, Barnea expounded on the plan’s merits during a meeting with President

Anastasiades in Nicosia; the response from the president was “generally positive”,

says Barnea.
It’s also likely the idea was discussed between Anastasiades and Israeli premier

Benjamin Netanyahu during the former’s visit to Israel this week.
What’s changed since January is the financial crisis here, which has taken a sharp

turn for the worse.
“Before 2020 – and that’s being optimistic – LNG won’t be making a penny for Cyprus.

But if Cyprus can cash in on hundreds of millions of euros from electricity exports as

of 2016, for a period of 20 years, that’s a hell of an incentive,” Barnea says.
In the meantime, the CEO continues to lobby Tel Aviv.
Barnea aims to persuade the Israeli state to issue a conditional statement of intent

to purchase around €1bn of electricity a year from Cyprus.
And in an unmistakeable display of can-do attitude, the entrepreneur thinks he can get

that “in a month”.
To finance the approximately €5bn project, Barnea will be seeking an offtake agreement

backed by the state of Israel. An offtake agreement is a deal between a producer of a

resource and a buyer of a resource to purchase/sell portions of the producer’s future

production. It is normally negotiated prior to the construction of a facility (such as

a mine) in order to secure a market for the future output of the facility. If lenders

can see the company will have a purchaser of its production, it makes it easier to

obtain financing to construct a facility.
Offtake agreements are frequently used in natural resource development, where the

capital costs to extract the resource are significant and the company wants a

guarantee that some of its product will be sold.
Barnea also suggests the Electricity Authority of Cyprus and the Israel Electric

Corporation could be invited to co-finance and be stakeholders in the project.
Speaking on condition of anonymity, an energy official here called Barnea’s pitch

“both serious and worthy of consideration.”
What makes the proposal interesting, the source said, is that it does not rule out the

LNG project – the stated cornerstone of Cyprus’ energy plans.
“Rather, the two can be complementary,” the source said.

Published by: www.cyprus-mail.com

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This was the message conveyed by a workshop held yesterday in Nicosia on developing the oil and gas sector with a focus on education. The workshop was jointly organised by the British High Commission, the School of Engineering of the University of Cyprus (UCY) and the British Council.

UCY Rector Constantinos Christofides said that he would use  the results of the workshop “to shape its agenda for exploiting the new opportunities in the hydrocarbon sector through educational, research and services programmes.

“A decade ago we started the engineering school, which now has four departments, four research centres and two inter-departmental graduate programmes on energy, one of those is a Masters programme in Petroleum Engineering starting in September with 25 students,” he said.

‘We formed an international committee to advise us in creating a new department, with focus in chemical and petroleum engineering. The research activity in the Engineering School is remarkable, supported by external funding in excess of €19 million. In appreciation of its good results we work hard on securing finding for its new building at the campus to start the construction early next year”.

British High Commissioner Matthew Kidd said that skills and knowledge were very important for a country like Cyprus, which wants to have a successful energy sector and become a regional energy hub.

He said that the UK had experience in developing knowledge on the oil and gas industry and expressed the readiness of Britain to offer its knowledge and help to Cyprus in addressing the challenges as a sign of solidarity especially now as the country was going through a difficult period.

Advisor to the Foreign and Commonwealth office and Energy Specialist Angus Miller, in his address, said that Cyprus had the opportunity to develop as a hub both for hydrocarbon recovery and processing and for providing the training and education that would sustain the industry. “In short, to become the local provider of skills with worldwide application”, he concluded.

Permanent Secretary of the commerce ministry Stelios Chimonas speaking on behalf of Minister Giorgos Lakkotrypis, said that according to a study by the Human Resources Development Authority, it was anticipated that more than 5,000 jobs would be created in the hydrocarbons sector by 2019. “Obviously, all of these jobs will have to be filled by the right professionals, with the right skills and education,” he said.

Published by: www.cyprus-mail.com

During an interview, on the sidelines of the 2013 Offshore Technology Conference, in Houston, Texas, Elliot said he was satisfied with the working relationship established with the Cyprus government, adding that he did not believe things were progressing too slowly. Elliott has recently (last April) assumed his new duties, following an overhaul in Noble’s organisational structure, that added three major operating regions, including the Eastern Mediterranean.

Elliott said that as soon as the exploration well in Israel’s “Karish” field is finished, Noble will move the rig directly to Cyprus’ block 12 for the appraisal well. He added that the well in Israel is expected to finish in the first half of June, while drilling in block 12 will take up to three months. He noted that a lot depends on that operation, since “the purpose of the appraisal well is to try to narrow that bandwidth of uncertainty” with regards to the reservoir models and interpretations.

Elliott did not exclude another appraisal drilling in block 12, saying that “for a resource of this size and scale, two would be a very optimistic number”. He cited the example of Israel’s “Tamar” field, where Noble drilled two appraisal wells. “I wouldn’t want to leave anyone with the impression that this would be the last well”, he said, adding that if the company is able to build confidence in the resource base and size, this will result in fewer wells. Noble’s Vice President for the Eastern Mediterranean compared the company’s job to evaluate the resource through seismic data and drills, almost as “looking through an opaque screen”. “Our objective is to understand the resource,” he said, noting that this may take more wells. Cooperation with the government “fantastic”.

Published by: www.cna.org.cy

“We feel that through a close collaboration with Israel we will be able to be a major player in the world energy market, something that for each country individually might be too hard to achieve,” said Energy, Commerce, Industry and Tourism Minister Yiorgos Lakkotrypis.

Lakkotrypis was addressing a group of Israeli and Cypriot business leaders and government officials at a seminar entitled “Cyprus: An International and Professional Center,” held in Tel Aviv on Tuesday afternoon and hosted by the Cyprus Chamber of Commerce and Industry, the Cyprus Energy, Commerce, Industry and Tourism Ministry, in association with the Federation of Israeli Chambers of Commerce.

While the participants from approximately 100 Israeli companies and 30 Cypriot firms ranged in fields “from milk to gas,” the focus of leaders from both countries remained largely on the Mediterranean natural resource that each of the nations has come to enjoy.

The amounts of gas discovered in each country respectively might be considered small individually, but, by working together, Israel and Cyprus have the capability to “create the third pillar of energy routes” in the world, according to Lakkotrypis.

“What an unbelievable opportunity we have as two countries to play a role in the energy market that is shaping as we speak, worldwide,” he said.

Lakkotrypis and the Cypriot businessmen and women had arrived in Israel as part of a larger delegation that includes Cypriot President Nicos Anastasiades and officials from the country’s Foreign Affairs Ministry.

Echoing Lakkotrypis’s comments, Anastasiades likewise stressed during the seminar that natural gas “can become the driving force” for partnership between Israel and Cyprus.

Natural gas finds from the Tamar reservoir’s 250 billion cubic-meters are already flowing into Israel, to be used for domestic purposes only. The neighboring, more than double-sized Leviathan reservoir should be providing gas within the next few years, and will likely be doing so in both an export and domestic capacity – pending government approval of an export policy.

Cyprus’s first explored basin, the Aphrodite reservoir in Block 12 adjacent to Leviathan, is estimated to contain about 198 billion cu. m. of gas and is being drilled by some of the same partners working on the Israeli reservoirs – Houston-based Noble Energy and Israel-based Delek Drilling and Avner Oil Exploration.

There are two other clumps also slated for exploration in the Cypriot zone, under a combination of Italian, Korean and French firms.

Israel and Cyprus signed a delimitation agreement on their Exclusive Economic Zones in 2010, and a framework agreement is now underway concerning the development of cross-border hydrocarbon management, Lakkotrypis explained.

Anastasiades likewise confirmed that his administration would “remain dedicated to proceeding expeditiously with the conclusion of a framework agreement.”

At Aphrodite, the American and Israeli cohort should conclude drilling an appraisal well by October 2013, after which the team can determine for sure that its contents are proven reserves with commercial capacity, the minister said.

Gas flow from Aphrodite should start between 2020 and 2021, Lakkotrypis added.

Simultaneous to the exploration of Cypriot reservoirs, plans are unfolding to construct an onshore liquefied natural gas (LNG) generation plant, in order to facilitate the export of the country’s gas.

While “the decision to go for an LNG terminal was not taken lightly” and is considered very expensive, the plant will allow for the most flexibility in Cyprus’s export options, Lakkotrypis explained.

Unlike Israel, Cyprus is not facing much resistance among its citizens toward the idea of exporting gas, as the quantities likely found in the reservoirs are “very small compared to the needs of the country,” Lakkotrypis explained.

The Cypriot government is therefore working with Noble Energy on developing its future LNG plant, which will likely be completed by 2019 or 2020. As competition around the world for natural gas surges – particularly due to the United States’ massive shale gas discoveries – moving quickly with the plant’s construction “is super critical,” Lakkotrypis said.

Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, emphasized that cooperation on natural gas and on other business ventures between the two countries would be beneficial “for our region as a whole.”

To further this growing partnership, an Israeli business delegation would be officially visiting Cyprus in June, Lynn said.

Christakis Papavasilious, president of the Israel-Cyprus Business Association, emphasized “the new historic era” that Cyprus and Israel are entering together, and that the two countries should rely on each other in order to push forward.

“The discovery of energy resources in our region has created a very strong impetus in our relations,” Papavasilious said. “There is no turning back.”

Gad Yardeni, president of the Israel- Cyprus Chamber of Commerce, called the gas discoveries a “gift from mother nature” and stressed the need for middlesized energy firms in both countries to pursue connections with one and other.

At a luncheon that the Cypriot president attended earlier that day in Jerusalem with President Shimon Peres, Anastasiades spoke of “inaugurating a new era” for the two countries due to the natural gas discoveries.

“We are both committed to working together and we have a common blessing in our seas,” he said. “God has blessed us with energy and it is our duty to see how we can secure each other.”

Anastasiades expressed his feeling that Cyprus truly “needs” Israel and that he did not expect Israel to need Cyprus to the same extent in return. That being said, he declared his country to be a “reliable and credible friend and brother,” and voiced the hope that both countries should enjoy stability, peace and prosperity.

Describing both countries as islands – Cyprus in the geographic sense and Israel in the political sense – Peres noted that the two nations share many similarities and reciprocal benefits.

“Without Cyprus, we would be far from Europe,” Peres said. “We see in Cyprus a friend – politically and geographically.”

In order to secure that European mainland connection, the two countries will need to work together by combining their resources to achieve a new route of energy, Lakkotrypis stressed back at the business seminar.

“None of our two countries individually can make a big difference,” Lakkotrypis said. “The quantities that we have are negligible compared to the total needs that Europe has and will have.”

“We are living in very important times, very exciting times for both countries,” he continued. “We have our fair share of challenges, but the prospects do remain excellent.”

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Published by: www.financialmirror.com

Oil and natural gas, despite naturally occurring together usually in the same geological formations, serve two distinct energy markets. Natural gas is predominantly destined for electricity generation whereas oil is the prime transportation fuel. Worldwide, oil makes up about 30 per cent of the primary energy supply. Transportation fuels including diesel, gasoline and aviation fuel (kerosene) are 96 per cent derived from oil. Oil by virtue of its ease of being hauled, chemical stability, high energy density, and safe nature dominates the transportation energy mix. This hegemony is unlikely to be challenged any time soon, unless alternative and cost-effective transportation fuels emerge or hybrid/electric vehicles become more economically competitive circumventing technical limitations. Natural gas is more environmentally friendly than oil. Mainly due to its gaseous nature and relatively low volumetric energy density, natural gas is less fungible than oil meaning that it is cumbersome to transport from source to end-users.

Deepwater offshore oil production is expected to undergo phenomenal growth accounting for 11 per cent of the global oil production in 2015, up from 1 per cent in 2000. In relation to natural gas, oil does not only fetch a higher price, it is usually exploited within shorter time frames. On an energy equivalent basis, meaning that a barrel of oil contains 5.8 times the energy of natural gas, and at a natural gas selling price of $10 per million BTU, oil is worth three times as much as the price of natural gas.

Prospecting for oil

Expedited by the presidential elections, the second licensing round culminated in the awarding of five offshore licences, namely, blocks 2, 3 and 9 to Eni and Kogas, and blocks 10 and 11 to Total. Sources revealed that Total will prioritise the quest for oil in blocks 10 and 11. For this purpose, the French supermajor is believed to be making the necessary preparations for oil exploration. These steps comprise gathering all the pertinent geological information and analysing it in the context of the already two-dimensional seismic data, conducted by PGS, and the interpretation reports issued by Beicip Franlab. Subsequently, a seismic survey vessel will acquire three-dimensional (3D) seismic measurements in the promising acreage.

Next in line will be to source the semi-submersible drilling rig or drill ship which will attempt the exploration well(s). Each well is expected to cost about €80m. As of February 2013, the average chartering rates for drill-ships amounted to $450,000/day while semi-sub rigs cost about $370,000/day. Oil is usually found in reservoirs occurring at greater depths than natural gas. Only in-situ drilling can unravel the mystery of the existence of oil in the Cypriot EEZ. Interestingly, no well—in the eastern Med— has yet to reach the desirable depth at which oil is believed to reside. If successful, such an oil borehole is anticipated to extend to a total depth, including the water column, of about 7,500m. Indeed this will be an engineering feat. Developing such a deep offshore oil field will represent another engineering marvel. Such ultra deepwater developments were literally unheard of a decade ago.

Prior to embarking on such an ambitious endeavour, oil companies piece together all the geological evidence within reach. Considering the southern area of the Cypriot EEZ, we have strong indications to be optimistic that oil lies below the sea floor. Suffice to mention that Beicip Franlab, in its interpretation reports of the seismic data, acquired by PGS, identifies 14 oil plays, six of which are located in the vicinity of the Eratosthenes sea mount close to blocks number 10 and 11. Proved working hydrocarbon systems offer another line of evidence. Last but not least the natural gas discovered in the Aphrodite field is thermogenic in nature pointing to the presence of oil.

Timeframe for exports: natural gas versus oil

Given the state of the Cypriot economy, time is of the essence. Put simply, the faster Cyprus exploits a portion of its fossil fuels the better—provided that benefits spill into the economy. However, this pace is governed by a host of factors, chief among which are technical and economic considerations. The Tamar gas consortium prides itself of developing the gas field within a record time schedule spanning just four years from discovery to commercialisation. Essentially, the time it takes to extract natural gas or oil from a subsea reservoir of cognate geological complexity requiring similar equipment does not fundamentally differ, at least as regards the first phases of the field life cycle (see figure). That is, for oil companies to gain access and complete the exploratory drilling it usually takes three to four years. Once hydrocarbons have been encountered the next phase is to appraise them. The appraisal phase, which accurately assesses the potential of the oil or gas field and hedges against risk, takes about two years.

Subsequently, the development phase could extend from two to four years depending on the complexity of the hydrocarbons field, extraction rates, availability of equipment etc. Field production of oil or gas usually lasts about 20 to 30 years. Finally, offshore field decommissioning and abandonment could take two to three years. When it comes to exporting oil or natural gas what matters most is the time it takes to construct the export terminal. Stranded gas resources with no immediate access to markets can be exported in liquefied form usually requiring a liquefied natural gas (LNG) facility and a subsea pipeline to siphon the gas to shore.

Offshore oil on the other hand has the advantage that it can be processed in-situ onboard a Floating, Production, Storage and Offloading (FPSO) vessel. As its name implies, an FPSO partially processes the oil, stores it onboard and offloads it onto a shuttle tanker. Hence, the FPSO solution obviates the need to construct expensive submarine pipelines. Compared to the construction of an LNG plant of about 5 million tonnes of export capacity per year (5 mtpa), which could take about eight years to complete and cost some €7 billion, an FPSO costs around €1bn and can be ready in, say, two and-a-half years. Overall, natural gas exports can commence the earliest after 2022 while oil exports as early as 2021.

Prior to any exploitation, however, the prerequisite is the discovery of oil. Despite significant advances in 3D seismic techniques, encountering extractable volumes of hydrocarbons remains a risky business. The chances of striking oil in the Cypriot EEZ are probably on the order of 40 per cent,  i.e. four out of 10 wells. However, as of 2010, the world average success rate for commercial discoveries dropped to 18 per cent.

Indisputably oil can be a game changer if discovered in sufficiently large quantities for commercial exploitation. If additional gas quantities are discovered, Europe stands to benefit from Cypriot exports as well. Hypothetically if oil is found, it will mark a new era for Cyprus and the region. Until then maintaining sovereignty over our resources is of paramount importance.

Constantinos Hadjistassou PhD is a researcher at the University of Cyprus specialising in hydrocarbons and low-carbon energy technologies www.energysequel.com 

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The government had warned that without approval the economy was in imminent danger of default. Cyprus is expected to get the first disbursement of a total of 10 billion euros in aid from the European Union and the International Monetary Fund in May.

PARLIAMENT was meeting on Tuesday on whether to back a bailout imposed by its EU partners, with approval likely from a thin majority against mounting calls for the island to exit the euro.
Lawmakers were meeting in an extraordinary session to ratify the terms of the aid, which is conditional on Cyprus winding down its second-largest bank and imposing heavy losses on uninsured depositors in another. Voting was expected on Tuesday afternoon.
No single party has a majority in the 56-member parliament, and the government is counting on support from members of its three-party centre-right coalition which has 30 seats in total. It needs 29 votes for the bill to pass.
“We have had enough of delusions. We don’t have another choice. Whoever has one should tell us what it is,” Cypriot government spokesman Christos Stylianides told state radio earlier in the day.
Communist AKEL, in government until it lost presidential elections in February, said it planned to vote against the bill. It has 19 seats in parliament. The socialist EDEK party, with 5 seats, also said it would reject it.
AKEL, which had made the initial application for financial aid in June 2012, said onerous terms offered by Cyprus’s EU partners were compelling enough for the island to seek alternative sources of funding.
“Cyprus’s only option is a solution outside the loan agreement and the Memorandum of Understanding. Seeking such a solution is possibly tantamount to a decision to exit the euro,” it said in a statement.

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Andreas Frank is an independent adviser to the German Bundestag and Council of Europe, who has already initiated two infringement proceedings against Germany for violations of the EU’s anti-money laundering (AML) directive.

A German national living in Switzerland, he argues that mostly German allegations of money laundering in Cyprus were used to justify the unprecedented Eurogroup decision to force a ‘bail-in’ of depositors in Cypriot banks, the argument being that German taxpayers’ money should not be used to save ‘dirty’ Russian money deposited on the island.

However, this premise could fall flat on its face if the recently submitted reports by the Council of Europe’s Moneyval and private auditor Deloitte Financial Advisory show Cyprus to be no more or less guilty of AML violations than other EU member states.

In fact, according to Frank, all 27 member states are failing to comply with the EU’s third AML directive from 2005. The European Commission, meanwhile, is currently working on a fourth.

Each new directive repeals and replaces the older one, meaning that when the fourth anti-money laundering directive is passed, the previous three will no longer be applicable.

Speaking to the Sunday Mail, Frank said the reason was that none of the member states were complying with the directives.

He highlighted the difference between adopting the directive’s measures “on paper” and actually ensuring “effective implementation”.

Rather than accusing member states of AML violations and taking all 27 to the European Court of Justice, as the Commission is obliged to do, it simply wipes the slate clean every few years and starts fresh with a new directive, giving member states more time to comply, he argued.

The EU’s AML directives are based on the 40+9  recommendations made by the Financial Action Task Force (FATF), an inter-governmental body established in1989 to set standards and promote effective implementation of AML and counter-terrorism financing (CTF) measures.

According to the previous Moneyval review of Cyprus in September 2011, the country was found to be compliant to some degree with all 40+9 recommendations.

It concluded that Cyprus adopted measures that comply with international standards and has a comprehensive legal framework in place which compares favourably with other EU and developed countries. In fact, the ratings assigned to Cyprus in relation to its compliance with the 40+9 FATF recommendations outranked most eurozone countries.

Cyprus has been evaluated by Moneyval four times before last month’s evaluation, imposed by the Eurogroup, along with a private audit, as a precondition to signing a bailout agreement. In all previous four reports, Cyprus received an overall positive evaluation.

The Basel AML Index, developed by the Basel Institute on Governance, uses a composite methodology, aggregating 15 variables from third party sources that deal with AML/ CTF regulations, financial standards, transparency and disclosure and political risks.

Frank notes that the Basel AML Index assigns Cyprus a lower money laundering risk than the eurozone average and lower than EU countries like Germany, Luxembourg, Austria and the Netherlands.

He also highlights the difficulty in correctly assessing countries’ compliance using current evaluation procedures, hinting at much deeper problems in the worldwide approach to fighting money laundering and terrorism in general.

“To stop money laundering and transnational organised crime from further undermining the civil societies, the current AML/CFT regulations must be urgently adjusted and improved,” he said.

Taking Germany as an example, Frank noted that Germany’s 16 federated states (Lander) have requested the federal government take on the responsibilities of implementing the AML directive as they are not able to do so.

Germany’s largest Lander, North Rhine-Westphalia with a population of 18 million, has clearly acknowledged that its’ offices of public order will not be able to oversee AML measures in the non-financial sector of the federated state.

Frank also notes that on October 22, 2012, Italy’s anti-mafia prosecutor Dr Roberto Scarpinato was asked to speak at a public hearing of the Bundestag Finance Committee where he testified that “for international crime syndicates and Italy’s mafia, Germany is one of the most important countries for their money laundering operations”.

A staunch supporter of the EU project, Frank has over the years lobbied and pressured the German government to ensure full implementation of the EU’s AML directive, even getting a mention in German Finance Minister Wolfgang Schaueble’s official biography for his efforts.

Frank knew him when he was Interior Minister, and responsible for the AML framework, before it was passed on to the German Finance Ministry. Frank also shared correspondence with Schaueble’s underling Gerhard Schindler at the time, who incidentally, was later promoted to head of the German intelligence agency BND.

In the run-up to the Eurogroup’s fateful decision last month to impose massive losses on depositors of the island’s two biggest banks in exchange for a €10 billion loan, the German media and lawmakers embarked on a consistent campaign to point the finger at money laundering activities on the island.

In November, 2012, Germany’s Der Spiegel cited a BND report as saying “Russian oligarchs, business people and Mafiosi” would benefit most from any bailout and that Cyprus was a “gateway for money laundering in the EU”.

In January, 2013, the same publication wrote: “Several dozen oligarchs and financial sharks have set up offshore companies in Cyprus, where they can protect their assets, at very favourable tax rates, from the Kremlin-controlled Russian justice system,” and listed all Russian magnates with interests in Cyprus.

According to the BND report, attorneys and trustees in Cyprus have specialised in financial services, some of which “are used to conceal money earned illegally”, Spiegel said.

Schaueble and Bundestag MPs threatened at the time to veto a Cyprus bailout deal over money laundering concerns and applied heavy pressure on Cyprus to accept an independent audit on its AML framework.

“Can you imagine what Germany would say if Cyprus demanded the same?” asked Frank.

The AML consultant argued that Cyprus is obliged to abide by the “hard” law provisions of the EU’s AML directive. The Commission, as the “guardian of the treaty”, is responsible for ensuring that EU law is correctly applied.

When the Commission, as a troika member, supported the demand for an independent audit by a private company, it not only broke EU law but also destroyed its foundation, said Frank.

“Why should the member states comply with EU law when the Commission confirms that it is unable to fulfil its obligations in accordance with the treaties on European Union?”

For most Cypriots, the allegations were taken half-seriously, as most were under the impression Cyprus had improved its act after EU accession. To most members of the public, Cyprus was no longer tainted by the serious allegations levelled against it in the 1990s of UN sanctions’ violations connected to bagfuls of money being sent to Cyprus by former Serbian leader Slobodan Milosovic.

It’s not that Cyprus became squeaky clean, but that as a member of the EU, it had to act within a framework of certain rules and standards, meaning any possible AML violations could only go so far before the Commission would come along and take Cyprus to court for non-implementation.

However, failure to heed the warning signs proved most costly for the average Cypriot who operated their business accounts, deposited their savings or put away their pension/provident funds in seemingly safe places, like the island’s biggest and most systemic banks.

In 2012, the two banks, Laiki and Bank of Cyprus, had suffered massive losses from the EU-imposed haircut on Greek sovereign bonds, to which they were disproportionately exposed. They desperately needed bailing out, but the government was in no position to help, leading the country to request a eurozone bailout.

Various polls showed that the majority of Cypriots were in favour of signing a memorandum with the hydra-headed troika, and swallowing the austerity measures that this would entail, in exchange for a bailout of the systemic banks.

What they didn’t expect was for Cyprus to be used as an experiment, or as President Nicos Anastasiades put it a “guinea-pig” for the Eurogroup to send out a clear message that EU taxpayers will no longer foot the bill for the mistakes of eurozone banks, and even sovereigns.

Schaueble made it clear after March 25, 2013, that Cyprus was dealt with successfully. The German and IMF-inspired precondition that Cyprus does not inflate its public debt was met by using depositors’ money for most of the ‘rescue package’. This was morally justified, according to Schaueble, because those who were responsible for the crisis have been made to pay for it.

In the process, through its handling of the Cyprus debacle, the EU sent a host of other messages to the European public that, put simply, are almost Orwellian in nature:

If you are a prudent saver, as opposed to a reckless spender, you are liable to be punished and whatever money is not taken from you will be frozen indefinitely in your account.

If you fail to live within your means and have loans taken out with the bank, your savings will be spared from a haircut.

And equally controversial, if you choose to put your money in a bank which happens to offer high-interest rates on certain deposits, you are liable to be punished. Unless, of course, the offending party happens to be the University of Cyprus, a local authority or the UN Peacekeeping Force in Cyprus (which employed the services of Laiki to run its operations), in which case you are entitled to a ‘get out of jail’ card.

On April 18, the Bundestag overwhelmingly voted in favour of the Cyprus bailout, while the debate on money laundering was completely sidelined.

“The money laundering accusations were used to serve as justification for the Eurogroup’s extraordinary demand for a depositors’ haircut, disregarding that many of the expropriated depositors earned or received their deposits from legal sources,” said Frank.

To prevent the creation of conspiracy theories, the results of an “unsparing and transparent” AML/CFT probe has to be published without omissions, he said.

“To prove that Cyprus was not discriminated or misused to set an example, the inquiry’s results have to be evaluated in the context and comparison with the AML status in the other EU member states which have to comply with the EU Money Laundering Directive.”

The German consultant was quick to add that US investigations have shown that some Cypriot banks have been involved in money laundering operations for Russian organised crime. But they are not alone.

“Many large international banks, some of them operating from the EU, have recently been ensnared in money laundering/financing terrorism cases.”

According to the US authorities, HSBC and Standard Charter laundered billions of dollars for their customers ranging from drug syndicates to failed states while German banks like HSH Nordbank, Commerzbank and Deutsche Bank have also been sanctioned by US authorities for AML related failures, he said.

As for Cyprus, the Moneyval/Deloitte reports were submitted to the troika last Wednesday. It remains to be seen whether they will be published in full, what their conclusions are, and whether Moneyval will reverse the positive evaluations of its last four reports on Cyprus, the most recent being one and a half years ago.

If it finds serious violations of the EU’s AML directive in Cyprus, then Frank believes there are legal grounds to sue the Commission over its failure to ensure enforcement of EU law.

If not, how will the EU make amends after forcing Cyprus to swallow a gut-wrenching pill before even completing the diagnosis, he asks.

Published by: www.cyprus-mail.com

To remarks that the interim solution for importing natural gas seemed unprofitable and it would be better to bring natural gas directly from Cyprus` blocks, Lakkotrypis said decisions would be taken next week, after he briefs the President of the Republic on the situation.

Asked when a new Chairman of Cygas, Cyprus` natural gas public company, would be appointed, Lakkotrypis said this was a decision for the Council of Ministers, which would be convening again on May 8.

To questions when Cyprus would be able to exploit its own natural gas, the Minister noted that “for our own consumption we are waiting to see the results of the interim solution and at the same time we are looking at some other options we may have, but it is not time yet to announce anything.”

Asked when confirmatory drilling would take place in block 12, Lakkotrypis said “the rig will be moved to block 12 in June, mid or late June, confirmatory drilling will begin almost immediately, and we hope it will be concluded by October.”

He added that “when the confirmatory drilling is completed and we know the quantities, the quality and the recoverable quantities, the procedure must begin to declare the deposit marketable.”

Exploratory drilling conducted by Noble Energy in Block 12 of Cyprus’ exclusive economic zone has revealed a gross natural gas reserve from 3 to 9 trillion cubic feet with a 60% probability of geologic success.

Noble is expected to extract and transfer natural gas to Cyprus by late 2018.

Contracts have been signed with the ENI/KOGAS consortium in blocks 2, 3 and 9 within Cyprus’ exclusive economic zone and with Total for blocks 10 and 11 in the context of the second licensing round.

Published by: www.incyprus.com.cy

Whatever is under the seabed in Syrian waters remains undiscovered but in the wake of major strikes by Israel and Cyprus, and Lebanon supposedly sitting on similar prizes, it’s a pretty good bet Syria has significant gas holdings.

There seems little doubt that Syrian President Bashar Assad’s regime will eventually be displaced as rebel forces, disunited but backed by most of the Arab powers and, up to a point, the United States and Europe, make steady gains in a war now in its third year.

Rebels seized Syrian oil fields in northeastern Deir al-Zor province near the Iraqi border in late 2012.

This year they’ve pushed into resource-rich Hassaka and Raqqa, securing control of most of Syria’s oil reserves. These total 2.5 billion barrels, a modest tally, although Damascus was earning around $4 billion a year from exports before the anti-Assad uprising began.

Many of the fields are controlled by Jabhat al-Nusra, the most formidable of the Islamist factions with links to al-Qaida.

Gen. Selim Idriss, chief of staff of the Supreme Military Command which supposedly runs dozens of rebel factions, wants to form a 30,000-man secular force to secure the oil fields and other key economic sectors to keep them out of Islamist hands.

He wants the West to provide the $30 million-$40 million a month he says he’d need to do that.

There’s another more important element in this unfolding energy contest in the Middle East and the East Mediterranean.

Key players in this complex competition are Qatar, which is supplying arms and funds to the Syrian rebels, and Turkey, Syria’s northeastern neighbor, which acts as facilitator and also wants to see the Assad regime destroyed.

The tiny emirate is one of the world’s leading gas suppliers and it has long sought to wreck Iranians plans to pump gas westward to Europe via Iraq to Syria’s Mediterranean coast.

One of its primary objectives in backing the Syrian rebels has been to ensure that the $10 billion Iran-Iraq-Syria gas project signed in 2011 even as the uprising against Assad gathered momentum never gets off the ground.

Both Tehran and Baghdad support Assad’s regime.

Qatar, one of the smallest Arab monarchies in the Persian Gulf has for some time sought to establish itself as a regional power, equal if not superior to long-dominant Saudi Arabia.

The battle of the pipelines reflects the growing sectarian rift in the Middle East and the wider Muslim world.

On one side is Islam’s mainstream Sunni sect, with Saudi Arabia at its head. On the other, the Shiites, who broke away in Islam’s early days. This group is led by Iran.

The Americans, and no doubt the Europeans who’d be able to break their dependence on Russian gas if they got supplies via Syria, would be immensely happy with a pipeline that isolates Iran and its allies.

Turkey, which also wants to shed its dependence on Russian gas, would also be happy to be cut in on the Qatari gas flow because that would further Ankara’s ambition to become the region’s pre-eminent energy crossroads.

Energy-short Jordan, too, would partake of the Qatari gas, assuring it of a steady supply, although the Qataris would prefer a Muslim Brotherhood regime in Amman than the Hashemite dynasty, which is looking increasingly shaky amid the turmoil sweeping the Arab world.

All this would profoundly alter the geopolitical and energy landscape in the Middle East, much to the benefit of the United States and Europe.

But the real clincher was the discovery of large gas fields off northern Israel in 2009-10, and later nearby Cyprus. This has already shifted strategic perceptions in the region. The U.S. Geological Survey says there’s 123 trillion cubic feet of gas there.

Israel and Turkey, with U.S. encouragement, are moving toward mending a diplomatic rupture in their strategic partnership. Israel could export its gas to Europe via an undersea pipeline to Turkey.

But before that can happen, Assad has to go, with a secular Sunni-majority successor regime installed in his place.

Published by: www.upi.com

Nicosia, Apr 23 (CNA) — The Cypriot bailout undermines confidence in the financial system, Russian President Vladimir Putin has said.

On April l2 the Euro area Finance Ministers, collectively called the Eurogroup, gave the green light to a €10 billion bailout for Cyprus. The Cypriot package includes losses for uninsured deposits (above €100,000) in Bank of Cyprus, which will absorb the good part of Cyprus` second largest lender, Cyprus Popular Bank, which will be wound down which entails that uninsured depositors in the bank may take losses up to 80%.

Published by: www.cna.org.cy

“There are still unsolved issues about Cyprus’ offshore and Russiatakes notice of them,” said Novak during a press meeting after the 12th meeting of the Turkish-Russian Joint Economic Commission in Antalya on April 20.

Russia has close cooperation with Turkey, Novak said. “We would never think to harm business principles considering our friendly relations.” However, Novak said the Samsun-Ceyhan crude pipeline project was in an unclear state, noting that if the projects became fruitful, they could seek a new partner instead of former partner Italian Eni.

Turkey decided to suspend energy projects with Italian giant Eni in retaliation for the company’s involvement in oil and gas drilling off the coast of Greek Cyprus, Energy Minister Taner Yıldız said at the end of March.

Eni has a share in the Samsun-Ceyhan crude pipeline, which is slated to span Turkey from the Black Sea province of Samsun to the oil hub of Ceyhan in the south. Eni, Russia’s Rosneft and Transneft and Turkey’s Çalık are all partners in the project.

Yıldız said that Turkey could consider canceling the Samsun-Ceyhan deal, adding that they could find alternatives to the Samsun-Ceyhan deal if it was canceled. Yıldız said Russia’s Gazprom and Rosneft would not join in projects in Greek Cyprus due to the strategic cooperation agreement between Turkey and Russia.

Trade volume target not ambitious

The aim to reach a trade volume between Russia and Turkey worth of $100 billion is “not that ambitious,” Russian Energy Minister Alexander Novak said during a press conference after the 12th meeting of the Turkish-Russian Joint Economic Commission inAntalya April 20.

The current trade volume between both countries is approximately $34 billion. “It [$100 billion] means that we would have to triple our trade volume. If we look to the aspects of our trade the primary import materials are energy resources and metals, at around 87 percent,” he said.

Novak emphasized that priority should be given to diversifying the traded goods. “It is especially important to realize new project in sectors where mostly new technologies are used, such as automotives, the nautical industry, and the machinery sector. Logistical and transportation centers are of great importance in this matter,” Novak said.

For his part, Turkish Energy Minister Taner Yıldız stressed that the trade potential between the two countries was huge. “There are nearly 500 Russian companies operating in Turkey, while Turkish construction companies have $50 billion worth of transactions in Russia,” Yıldız said.

Akkuyu nuclear plant to be completed ‘on time’

At the end of the press conference, the ministers held a video conference with Turkish students studying at the National Research Nuclear University in Moscow, who are expected to operate Turkey’s first nuclear plant built by a Turkish-Russian consortium. The students will mark history when they start working in Turkey, the Russian minister said.

Meanwhile, the director of the Akkuyu nuclear plant, Alexander Superfim, assured that work on the plant would be finished on time. It is currently scheduled to be completed in 2019.

Published by:  www.hurriyetdailynews.com

 
Published by: CNA

Sources told the Mail the decision was taken at a cabinet meeting on Wednesday, but was not immediately made known as the President intended to announce it today along with a raft of planned measures designed to jumpstart the economy.

A decision for an LNG facility had been taken by the previous administration of Demetris Christofias; the current DISY-led administration was understood to also support the project, but an official announcement was pending.

A clear commitment from the government would now allow US energy firm Noble Energy to move forward with plans to extract the gas from its offshore licence and declare commerciality on the project.

If Noble deems the project commercially viable – following appraisal drilling slated for this summer – it will undertake the cost of the subsea infrastructures (including the pipeline) to bring the gas ashore. However it all hinges on the existence of an LNG plant, which will process and store the gas for export. The LNG plant itself is to be financed by the government and other partners.

Officials say natural gas could be brought ashore for domestic consumption in late 2018, and for exports in 2019.

Earlier this week, a senior executive with Noble Energy said one option being considered by the company was to channel through Cyprus the gas to be extracted from Israel’s massive Leviathan prospect.

Gerald Peereboom, Director of LNG development at Noble Energy, made the comments at the ‘LNG 17’ gas conference held in Houston, Texas.

Israel is yet to decide its gas export policy, and there is opposition by environmental groups there against an LNG facility. At the same time, the recent thaw in Turkish-Israeli relations has seen increased talk of a gas pipeline connecting the two countries.

Speaking at an energy conference in Limassol yesterday, Charles Ellinas, the chairman of the Cyprus National Hydrocarbons Company (CNHC), said that by 2025 the island could generate 25 million tonnes of LNG a year, covering nearly 50 per cent of the EU’s additional energy needs and making Cyprus an important player on the global energy market.

The two-day Annual Cypriot-Greek Oil & Gas 2013 Summit is organised by International Research Networks. The conference is discussing all aspects of hydrocarbon exploration of both Greece and Cyprus.

Published by: www.cyprus-mail.com

Video from Al Jazeera