The Cypriot energy minister announced that the country has reached an agreement with French oil giant Total to develop a plant to liquefy natural gas. Energy minister Yiorgos Lakkotrypis, a former Microsoft executive, said in an interview that building the facility would cost as much as $6 billion and it still “is not going to solve all the problems. But it is going to go a long way for psychological reasons.” Liquefying natural gas to create a shippable export product is part of a long-term strategy to pull the economy out of a deep recession. After the collapse of its banking industry, Cyprus is seeking to rebuild its economy.
However, many questions remain on how the government is going to succeed in its goals. Cyprus’s offshore natural gas reserves have not been fully explored or developed. The deal with Total is nonbinding and depends on discovering gas in the offshore areas Total is now exploring. The company said, “Total follows with interest and supports the government’s efforts to promote the development of a gas liquefaction project in Cyprus, whose membership in the E.U. is a major asset.”
A liquefied natural gas plant on Cyprus could be eligible for European Union funds as it would contribute to the energy security of Europe and would create competition for dominant suppliers like Gazprom of Russia. The deal with Total would also give the country a kind of European seal of approval to ward off potential opposition from Turkey, which still controls the northern part of the island. Turkey objects to the awarding of exploration tracts to foreign companies on the grounds that any wealth obtained from oil and gas exports should be shared with the island’s Turkish Cypriot residents.
Catherine Hunter, an analyst at market research firm HIS, said that the involvement of Total would give credibility to the effort. She continued, “What it potentially brings is an experienced player into the monetization of Cypriot gas.” Converting natural gas into a liquefied form makes it possible to export the natural gas by ship instead of having to build pipelines. However, even with the new plans in place, Cyprus is still years away from having any type of natural gas industry.