Cyprus wants to sign a letter of intent with Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL) for the construction of a multibillion-dollar LNG facility, Cypriot Minister of Commerce, Industry and Tourism Yiorgos Lakkotrypis told "Globes" in an interview. He added that connecting the Tamar gas field to Cyprus was the best way to export Israeli gas to the Far East.
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 Energy and Water Resources Silvan Shalom, Minister of Industry, Trade and Labor Naftali Bennett, and Minister of Tourism Uzi Landau. The visit, one month after Lakkotrypis's appointment, comes against the backdrop of Cyprus's severe financial crisis and the EU rescue package, which includes restrictions on money transfers out of the country.
These restrictions are liable to affect the operations of Israeli companies in Cyprus, including Mekorot National Water Company and IDE Technologies Ltd. (a joint venture of Delek and Israel Chemicals Ltd. (TASE: ICL)), which are building a desalination plant; BSR Europe Ltd. (TASE:BSR), which owns the country's largest mall; and foreign currency trading firms.
"Our first priority is to stabilize the banking system," said 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."
Yesterday, Noble Energy chairman and CEO Charles Davidson met Anastasiades, who asked Davidson to bring forward the drilling of the Block 12 appraisal well, which is scheduled for the third quarter. "The appraisal well will enable us to obtain recognition of our gas reserves, which makes it very important for us," said Anastasiades.
"Globes": Given your condition, how will you be able to build a $10 billion LNG facility for exports?
Lakkotrypis: "We've already received queries by investors interested in building the facility. 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.
"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. As for the Block 12 discovery, Noble Energy and Delek have promised to connect it to the Cypriot shore. We believe that this will happen in 2018 or 2019. In our opinion, the most interesting economic option is to connect Tamar to the Cypriot shore via a pipeline through Block 12."
In the past few months, Cyprus has been in talks with Israel to buy Israeli gas until the start of gas flow from Block 12. "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."
Cyprus is due to award more gas and oil exploration licenses soon for blocks considered less attractive than the ones for which licenses were awarded in late 2012. However, one of them, Block 8, might be awarded to Cyprus Opportunity Energy plc (CSE: GAS), controlled by Israelis Ronen Halman and Uri Aldubi, and sister company of Israel Opportunity Energy Resources LP (TASE: ISOP.L).
"I believe that the tender will be closed in May," said Lakkotrypis. "We're examining the bids from every aspect, not only commercial, but also strategic."
Published by Globes [online], Israel business news - www.globes-online.com - on April 10, 2013
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