* Cyprus gas reserves could be as high as 1 trillion cubic
* Also hopes to find oil
(Releads with Cypriot cabinet approving deal)
By Henning Gloystein
LONDON, June 19 Cyprus's cabinet approved on
Wednesday a preliminary deal with Noble Energy, Delek
Drilling and Avner Oil Exploration to
develop a liquefied natural gas (LNG) terminal to tap the East
Mediterranean's vast gas discoveries.
Cyprus aims to begin LNG exports in 2020 and to process not
only its own gas but also supplies from Israel and potentially
Lebanon, government and energy officials said.
The estimated $10 billion needed to build the LNG export
terminal and infrastructure would be the largest investment in
the history of Cyprus.
Deputy government spokesman Victor Papadopoulos announced
the decision but did not give further details.
"Delek confirmed strong interest in our plans and that they
are very interested to invest in our export facility," said
Charles Ellinas, chief executive of state-owned Cyprus National
Cyprus has found almost 200 billion cubic metres (bcm) of
gas in its Aphrodite field and has hopes of finding as much as 1
trillion cubic metres in its six exploration areas.
That would be worth around $400 billion at current European
gas prices and give Cyprus enough gas to cover all of Europe's
demand for two years.
Ellinas said a delegation from Israel's Delek, which along
with U.S. firm Noble is developing Israel's Leviathan and Tamar
gas fields, had recently visited Cyprus to discuss the project.
Cyprus, which needs to restructure its economy as a
condition of a recent bailout, is looking to the gas discoveries
to cut fuel imports, generate revenues and boost industry.
"Developing and introducing domestic gas will be critical
for our competitiveness," Minister of Energy, Commerce, Industry
and Tourism Yiorgos Lakkotrypis said in a phone interview,
adding that at least one company was also looking for oil.
The government is setting up a fund that would be in charge
of spending hydrocarbon revenues with a focus on infrastructure,
debt repayment and saving for the future, Lakkotrypis said.
Part of the East Mediterranean's gas will likely head to
Europe, but its proximity to the Suez Canal also means it could
reach Asian customers, such as top LNG buyers South Korea and
"We are committed to sending gas to Europe and are very keen
to maintain good relations with Europe," Cyprus National's
"Italy and France are interested in our gas for strategic
reasons to supply Europe, he said.
"(Italian and French energy companies) ENI and Total also
have assets in East Africa, where a lot of gas has also been
found, but they will send those supplies to Asia and therefore
Cyprus gas can be used to supply Europe."
Asian buyers currently pay $15 per million British thermal
units (mmBtu) for LNG, versus $9/mmBtu in Europe.
Lakkotrypis said Cyprus planned to export its LNG largely
through long-term contracts, and would offer its gas as
collateral for investors.
As well as Israeli gas, an LNG export plant in Cyprus could
also involve gas from Lebanon, Ellinas said.
Lebanon so far does not have significant known gas reserves,
but the examples of Israel and Cyprus have prompted hopes in
Beirut for similar drilling success in its waters, which it
wants to start soon.
Because direct cooperation between Lebanon and Israel could
prove politically difficult, officials in Cyprus stress the
convenience of a terminal on the island.
"Israel and Lebanon don't need to cooperate directly, but
instead, both could be accommodated in Cyprus to export their
gas," Ellinas said.
(Additional reporting by Karolina Tagaris; Editing by Jason
Neely and Jane Baird)