Cyprus is interested in hooking up with Israel in a scheme to export gas to the Far East, Globes reported on Wednesday.
The near-term objective is a letter of intent that Cyprus wants to sign with Delek Group and Noble Energy for the construction of a multibillion-dollar LNG facility, according to Cypriot Minister of Commerce, Industry and Tourism Yiorgos Lakkotrypis. He said he believes that connecting the new Tamar gas field to Cyprus would be the optimal way to transport Israeli gas to the Far East.
The Cypriots say they are confident that the problems arising from the country’s ongoing financial crisis will not impede such energy development projects.
“We’ve already received queries by investors interested
in building the facility,” Lakkotrypis said. “Our domestic needs are small, and we want to export gas. I understand that Israel is due to make a decision on exports within months, and we’ll be happy to make the facility available for Israeli gas exports. But we also believe that even if Israel does want to export gas through us, we have enough gas to economically justify the project, which will be modular.
But it’s not as though the Cypriots don’t recognize a problem. “Our first priority is to stabilize the banking system,” explained Lakkotrypis. “Without the restrictions on capital outflows, there would have been capital flight and the economy would have collapsed. We’re therefore asking Israeli investors to wait patiently. We’ll be happy to deal with every specific problem. I’m already getting calls from foreign companies, although not from Israeli companies so far.”
Cyprus’s severe financial crisis and the EU bailout includes restrictions on money transfers out of the country, which handicaps its ability to transact business with foreign investors.
These restrictions may affect the operations of Israeli companies in Cyprus, including Mekorot National Water Company and IDE Technologies (a joint venture of Delek and Israel Chemicals), which are building a desalination plant; BSR Europe, which owns the country’s largest mall; and foreign currency trading firms.
Lakkotrypis pointed responded to a question from Globes regarding Cyprus’s financial capacity to build a $10 billion LNG facility for exports by noting current activity:
“We recently awarded licenses to two consortia led by energy majors ENI, Total, and Kogas. Drilling is due to begin by the end of next year, and we’re optimistic.”
In the past few months, Cyprus has been conferring with Israel about buying Israeli gas. “Cyprus has the highest electricity tariff in Europe because we have no natural gas, and we’re forced to produce all our electricity by diesel and industrial oil,” said Lakkotrypis. “We’d be happy to buy gas from Tamar tomorrow. We were impressed that the pipeline to the Israeli shore was built on schedule. We’re examining options of buying LNG, but the price renders the project borderline in terms of being worthwhile.”
Lakkotrypis and Minister of Foreign Affairs Ioannis Kasoulides were in Israel for one day, ahead of the scheduled visit by Cypriot President Nicos Anastasiades in May. Lakkotrypis met Minister of Energy and Water Resources Silvan Shalom, Minister of Industry, Trade and Labor Naftali Bennett, and Minister of Tourism Uzi Landau.