articles | 26 June 2013

Cyprus says KRETYK is its natgas "commercial arm"

Cyprus has confirmed that the National Hydrocarbons Company (KRETYK) will be “the commercial arm of the government” and that it will have a “substantial role” to play in the future development of oil and gas discoveries and exports.

The clarification from Energy, Trade and Tourism Minister George Lakotrypis ends weeks of political wrangling over Kretyk’s status that has prevented the company from hiring staff and negotiating future deals with oil and gas companies. Kretyk was established nearly two years to undertake sales contracts based on prospective oil and gas exports from offshore areas south of the island’s coast, currently being explored by multinational companies. However, realising that too many privileges were given to Kretyk by the previous administration, the present government was thinking of merging it with DEFA, the state natural gas distribution company. Speaking after signing a memorandum of understanding with Houston-based Noble Energy and Israeli partners Delek Drilling and Avner Oil Exploration to build a natural gas liquefaction plant at the Vasiliko energy hub in Cyprus, Lakotrypis said that Kretyk will a substantial role in all future commercial agreements with exploration and production license holders.

Noble, that has already spent 57 mln dollars on its first drilling effort within Block 12 of the Cyprus Exclusive Economic Zone that lies adjacent to the Israeli EEZ where it already operates gasfields in the Leviathan basin, is currently drilling an appraisal well to confirm the average 7 trillion cubic feet of natural gas reserves. Lakotrypis said that “negotiations for the MoU will be concluded by 2015 after which work will start on building the plant,” currently estimated to cost about 6 bln dollars, and that apart from the output from Block 12, the aim is to attract other license operators to liquefy their natural gas for export. “Our aim is to become a regional energy hub, first for our own resources, and then to attract other countries as well,” Lakotrypis said.

France’s Total, that is expected to start exploratory drilling in two offshore blocks south of Cyprus next year, has also shown interest to develop a second train at the Vasiliko LNG plant at a cost of about 3 bln dollars. Italy’s ENI and South Korea’s Kogas have licenses to explore for oil and gas in two other blocks east of Cyprus, adjacent to the Lebanese EEZ. Once construction work begins at the LNG terminal in 2016, the first phase of the project should be completed by 2019 to accommodate the first natural gas exports from Cyprus gasfields by 2019.

But Kretyk executive president Charles Ellinas told the Financial Mirror that a task force is urgently needed that will involve the government, the oil and gas sector, the education sector and social partners, to learn from similar examples in other countries and be prepared for the labour needs once natural gas is produced within the Cyprus EEZ. Ellinas said that building the LNG terminal in Vasiliko will create some 7,500 low-skilled jobs, with a third expected to be recruited locally, thus helping to relieve the burden of rising unemployment in a country faced with a major economic crisis created by the collapse of its banking sector.

Source: Financial Mirror

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