* Cash-starved Cyprus considers advance gas sales
* Cyprus tries to bring natgas drilling forward
* Gas revenues could be $400 billion
By Peter Apps
NICOSIA, March 14 Cyprus, urgently needing
revenues from its newly found natural gas reserves, hopes to
begin exports by 2018 and will target sales at fellow European
Union members, its energy minister said.
George Lakkotrypis also said gas could be sold in advance or
used to help the government, which is now negotiating a
multibillion-dollar bailout, to issue new debt on international
markets in future.
U.S. company Noble Energy and the Cypriot government
announced in 2011 that they had discovered gas deposits of
around 7-8 trillion cubic feet (200 billion cubic metres), 40
percent of the EU's annual demand.
Aphrodite, as the gas field is known, has more gas than
Cyprus could use in over a century, so the government hopes to
boost its revenues through exports to the European Union.
"It is important to us not just economically but also
geostrategically," Lakkotrypis told Reuters in an interview,
referring to potential exploration partners.
"So EU member countries are obviously appealing."
Experts believe Cyprus, an energy sector novice, could be
sitting on hydrocarbons worth up to $400 billion.
Such revenues would be welcome to a government that is now
negotiating a bailout from the European Union, International
Monetary Fund and the European Central Bank so it can
recapitalise its banks, service debt and support government
But as the gas reserves are still unproven pending an
appraisal drilling this year, they have barely been taken into
account by lenders discussing aid to the island.
A draft bailout deal calls for the establishment of a
resource fund to manage revenue and place debt on a downward
course, though the creation of such a fund could be years away.
Lakkotrypis, barely in office two weeks following last
month's election, said the financial crisis had made development
of the gas fields for exports much more urgent. The new
government wished survey work had progressed faster to give
Cyprus a stronger economic position and less need for a bailout.
"If it had been a year ahead, it would have made a real
difference," he said.
To monetise its deposits as fast as possible, the government
was pushing Noble Energy to bring forward appraisal drilling to
confirm its gas findings, Lakkotrypis said.
"It's a pity we are under so much pressure. Every week
counts," he said.
Lakkotrypis said Cyprus was in the final months of
deliberation over deals to run an onshore liquefied natural gas
(LNG) plant to process the gas for export by ship.
ADVANCE GAS SALES
Lakkotrypis said the government hoped production could begin
as soon as 2018. Once an appraisal confirms initial findings
there was a range of options on how to use the reserves to raise
cash, including advance sales, he said.
That would probably further anger the de facto Turkish
Cypriot state that has run northern Cyprus since a Turkish
invasion following a brief Greek inspired coup and effective
partition of the island in 1974.
The Turkish Cypriot side says Greek Cypriots did wrong by
unilaterally striking deals with foreign firms and should at the
very least share gas revenue with them. Greek Cypriots say that
can only happen once the island is reunited.
Cyprus is not the only country in the region that is hoping
to benefit from a gas bonanza.
Geologists believe the eastern Mediterranean could contain
up to 122 trillion cubic feet (3.45 trillion cubic metres) of
recoverable reserves, enough to cover EU gas demand for around
The biggest finds have so far been made in Israeli waters,
where the Tamar and Leviathan gas fields will cover Israel's gas
demand for decades while generating huge export potential.
Because the Leviathan and Aphrodite gas fields lie in close
proximity, the governments of Israel and Cyprus agreed on joint
exploration of some of the gas, making development more
attractive for potential investors.
Earlier this year, Cyprus announced the results of some of
the second round of bidding for offshore exploration blocks,
bringing France's Total, Italy's Eni and
South Korea's KoGas into Cypriot energy exploration.
Cyprus's second licensing round, in which it received 15
expressions of interest by 29 companies either on their own or
in consortia for 9 offshore blocks, will be wrapped up by the
end of May.
So far five blocks have been awarded in the second round.
(Additional reporting by Michele Kambas and Oleg Vukmanovic;
Editing by Henning Gloystein and Anthony Barker)