Israeli gas watched from across the Med

Israel’s decision on where to sell its gas is being closely followed across the Mediterranean in Cyprus.

Noble and Delek have also found gas in the Aphrodite field, which sits 30 miles west of Leviathan in Cypriot waters. At an estimated 5tn cubic feet the reserves are smaller than those in Israeli waters but still have the potential to transform the Cypriot economy, which is reeling from a eurozone bailout.

That is if Cyprus can move its gas to market. If Israel’s relationship with Turkey, the obvious regional buyer, is tricky, Cyprus’ is non-existent, given Istanbul’s claim over parts of the island. As a result, Cyprus has already made commitment to build a permanent LNG terminal to ship gas to global markets.

But only a few banks are willing to fund LNG projects, which take years to build and cost billions of dollars. Cyprus is competing for scarce capital against projects from east Africa to Russia and Canada, which boast large proven reserves.

“For the time being global demand [for LNG] is projected to be much bigger than commissioned projects, but in order to capture that gap it is important for us to be first to a final investment decision,” says Yiorgos Lakkotrypis, the Cypriot energy minister.

He has recently returned from a trip to Jerusalem where he lobbied Israel to commit some of its gas exports to a Cypriot terminal, and is hopeful of an announcement within months.

“[Israeli gas] would add a significant boost to timing issues. With Israel we can start straight away and find considerable financing,” he says.

Cyprus is also hoping to find more gas, which would make it more attractive to would-be financiers, whatever Israel’s decision.

Eni, the Italian energy company, has started exploring for gas in the same Levantine basin that has proved so fruitful for Noble and Delek, while Total of France is scheduled to start drilling in the unexplored Nile Delta basin next year.

A major discovery by either company could catapult Cyprus into the big league of prospective LNG projects, but without more gas Israel may be crucial to Cyprus’ aim of securing a final investment decision before 2015.

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