On 28 May Andreas Neocleous & Co LLC presented a conference on Oil and Gas: Developments and Prospects, at which the principal speaker was the Minister of Energy, Mr Yiorgos Lakkotrypis. Below we give a summary of the Minister's presentation.

The Minister gave a comprehensive overview of the latest developments and prospects in hydrocarbons activity in the South-East Mediterranean from a Cyprus perspective, informing the audience that this was inevitably a snapshot, due to the rapid pace of developments. The Minister set out his vision for Cyprus as an energy centre within the Eastern Mediterranean, providing geopolitical stability in a hitherto volatile region, and described the four pillars of the strategy that had been adopted in order to achieve this vision, namely:

  • exploration and exploitation of the resources within Cyprus's EEZ;
  • the LNG plant which is being planned for the area of Vasilikos;
  • the establishment of Cyprus as a regional logistics and service center for hydrocarbons activities;
  • the development of Cyprus as a regional hub for liquid fuel.

The Minister then outlined the potential benefits flowing from recognition as a centre of excellence in the energy field. Of course, the oil and gas itself is a substantial benefit in the medium-term, and the creation of an oil and gas knowledge-based sector should create further export opportunities in the longer term. In addition, there is an immediate benefit, in the form of increased opportunities for the services sector. Two leading international oil services companies have recently announced their decision to make Cyprus their base for their activities in the region and this will provide a platform for longer-term development of the island as a key regional energy centre, based on the unique combination of advantages offered by Cyprus's location, its political stability, its high quality human resources and services and its business-friendly environment.

The Minister went on to summarise the various operators' plans for 2014 and 2015 with respect to seismic prospecting and evaluation and drilling operations, saying that further seismic prospecting and evaluation has been taking place in Block 12 during the first half of 2014, and that drilling operations for a second exploration well will commence later in the year.

The Minister then outlined the government's strategy for monetising Cyprus's hydrocarbon resources. The preferred option is by means of an onshore LNG plant, as this offers the maximum potential benefit due to economies of scale. While current estimates of reserves might not be adequate to make an onshore LNG plant viable, the Minister was hopeful that further gas supplies would be secured, either from Cyprus or elsewhere, to ensure viability. If this proved not to be achievable a floating unit or a pipeline to Egypt would provide an alternative, though less optimal, solution.

The Minister also touched upon the relevance of EU energy policy in the matter. The EU accepts that it has a real and pressing need to diversify both its energy sources and energy routes in order to reduce the risks that currently arise from its dependency on other countries. The establishment of alternative routes through the Eastern Mediterranean provides a means to accomplish this.

In the conclusion to his presentation the Minister informed the audience that the government's immediate attention would be focused on bringing the existing licences to production rather than undertaking a third licensing round. The Ministry has succeeded in attracting substantial talent in order to assist in the evaluation and implementation of projects. Nevertheless, the government is keen to cooperate with other countries in the region and prepared to act as an intermediary if this will expedite progress.

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