08 February 2013 12:22

 NICOSIA - Cyprus must proceed rapidly with its plans for natural gas exploitation and export, Chairman of the newly established Cyprus National Hydrocarbons Company Charles Ellinas has said.
As the United States paved the way for a shale gas production with reportedly vast quantities, China recently approved shale gas exploration programme aiming at producing shale gas within next five years, while in Europe Ukraine, which reportedly has the fourth largest shale gas reserves in Europe, estimated at 42 trillion cubic feet (tcf), has recently signed a 10 billion dollar contract with energy giant Shell, according to Reuters.

In statements to CNA, Ellinas said these developments do not pose any danger to Cyprus’ aim to become an exporter of natural gas.
While the US and China are pressing on with shale gas production, Europe remains dormant as the controversial technique used for shale gas extraction, also known as "fracking" is believed to cause environmental problems. Fracking involves pumping vast quantities of water and chemicals under high pressure through drilling holes in depths of up to 3 km to open shale rocks. Environmental groups fear this technique could increase seismic risks and could pollute water. On these fears, France, which is believed to be "sitting" on the largest shale gas reserve in Europe estimated at 180 tcf banned this procedure in 2010. Other EU member-states, such as Germany, Sweden and Austria are awaiting more concrete environmental studies.

"What concerns me is the fact that in Cyprus we have a tendency to talk too much and to proceed slowly, as if we are on our own in the world. We are not. It is important that we should proceed with our own projects rapidly," he said.
Cyprus entered the hydrocarbon scene when it signed a contract with US Noble Energy, which discovered in late 2011 an estimated gross mean resources of 7 tcf in offshore block 12, also know as Aphrodite. Furthermore, Nicosia signed more contracts with the ENI/KOGAS consortium for hydrocarbons exploration in blocks 2, 3 and 9 in its EEZ, as well as with French energy giant, Total, for two more blocks. The government has decided to construct a Liquefied Natural (LNG) Gas terminal, a 10-billion-euro project on southern coast, which would enable LNG exports.

"The global market is changing. But on the other hand world gas needs are huge," Ellinas said, reiterating that Cyprus could not waste any time.
With regard to Ukraine, Ellinas noted that this big country has many gas needs and wondered how many quantities could be exported.

Furthermore, Ellinas estimates that considerable developments will emerge from the European Union, which by 2025 will need 100 to 150 billion cubic metres of additional natural gas.
"If we implement our planning, Cyprus could offer half of Europe’s needs. Europe will need to secure the other half, which could be covered by shale gas," he said.

With regard to China and its shale gas extraction plans, Ellinas said the gas needs in China, the second largest economy in the world, are by far bigger than the shale quantities it could produce.
Moreover, he said that China’s National Petroleum Company has commenced a mammoth project aiming at transporting natural gas from Turkmenistan via a 4,000 kilometer pipeline. "They make such a project because their own shale gas reserves are simply not enough," Ellinas went on to say.

"Therefore, if we proceed without delay, the European market, as well as the Far Eastern market, such as Japan and China, are open for us," he said, wondering why Korean heavyweight KOGAS came to Cyprus.
"KOGAS has only a 20% stake in its consortium with Italian ENI. They didn’t come here to make profit from their 20% participation. KOGAS is the larges LNG trader in the world," he said.

Block 12 could generate income of 70 billion dollars
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According to Ellinas, the threats on the Cypriot natural gas prospect do not stem by the inception of shale gas.
"For instance if we do not proceed with the LNG terminal, Israel will decide to go its own way. Where that does leave us," he wondered.

Israel’s Leviathan block, adjacent to Cyprus’ block 12, is considered as the largest exploration success in Noble Energy’s history, with gross mean resources of 17 Tcf of natural gas. Furthermore, Israel’s Tamar block with gross mean resources of 9 Tcf of natural gas, the largest deepwater natural gas discovery in the world in 2009, whereas exploration at gas field, Tanin, revealed a further 1,2 Tcf. That added with Cyprus’ block 12 7 tcf equals to 35 tcf of natural gas, which experts say outnumbers by far the two country’s energy needs.
Ellinas also referred to the Troika’s presence in Cyprus, which, according to the CNHC Chairman may not be limited to reviewing Cyprus’ natural gas project planning. He also referred to the idea of transferring Cypriot natural gas through pipelines in neighbouring Turkey, a country which invaded Cyprus in 1974 and has been occupying its northern territory ever since, an idea which he described as false.

"Any further delay will assist such ideas," Ellinas added.
Cyprus requested financial assistance from the European Stability Mechanism, after its two largest banks sought state aid following mammoth losses estimated at 4.5 billion euro, as a result of the Greek sovereign debt haircut. The Cypriot authorities have agreed in principle with the Troika of the European Commission, the European Central Bank and the IMF on a memorandum of understanding containing the terms for the loan contact estimated at 17.5 billion euro. However, the Memorandum stipulates that the legal framework governing natural gas activities should be reviewed by the programme partrners.

Replying to a comment that the Troika as the representatives of our creditors would like to make sure that the Cypriot plans are viable, Ellinas said this could be easily resolved by the figures of block 12.
"The quantity initially discovered in Aphrodite, the 7 tcf, amounts to at least an income of 70 billion dollars," Ellinas said, pointing out that the relevant infrastructure, that is, the LNG terminal, the offshore installations and the pipeline connecting the offshore block with the terminal are estimated at 10 billion dollars.

"Even if you add up the operational expenses for the next 25 years it would by far lower than 70 billion. Therefore the LNG terminal is viable with the resources of Aphrodite alone," he went on to say.
"So if we don’t place the project on the map with agreements and all the other necessary actions, we leave the initiative to others to propose other issues," he concluded.


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