The consortium, composed of Italy’s ENI S.p.a and South Korea’s Kogas, is licensed to drill in three of 13 segments, or blocks, that make up Greek Cyprus’ 19,700 square mile (51,000 square kilometer) exclusive economic zone. The three blocks lie above a gas field that holds an estimated 5-8 trillion cubic feet (140-230 billion cubic meters). “The discovery of hydrocarbons…creates new realities and prospects for transforming Greek Cyprus into a regional energy hub,” Sylikiotis said at the signing ceremony.
Eni’s Vice President for Eastern Europe, Valerio Bracaccia, said industry officials believe that the waters between the RoC, Lebanon and Israel hold great promise in terms of gas deposits. Greek Cypriot officials have been arguing in their negotiations over the country’s bailout that revenue from the gas will help secure its longer-term public finances. They hope such revenues can be viewed as a financial guarantee, easing the need for Greek Cyprus’ creditors to impose harsher conditions in exchange for the bailout loan of up to 17 billion Euros ($22.66 billion). Economists estimate such a loan would push the country’s public debt load to as high as 150 of gross domestic product, too much for the country to bear.
The south is currently negotiating with French firm Total S.A. for a license to drill in other blocks. Greek Cyprus is also talking to Israel, which has likewise discovered offshore gas deposits, on how best to jointly exploit their mineral reserves. One option is to pipe the gas to Greek Cyprus where it could be processed for export to Europe and beyond. The processing facility liquefying the gas for easier transport would take years to complete and cost as much as 10 billion Euros ($13.33 billion).
But Greek Cypriot gas discovery has also ratcheted up tensions with neighbouring Turkey, which doesn’t recognize the Greek controlled part of the island as a sovereign country