Jan 12, 2012 | 12:24 GMT

3 mins read

Cyprus' Natural Gas Find

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Cypriot President Demetris Christofias announced Dec. 28 the discovery of 5 trillion to 8 trillion cubic feet (140 billion cubic meters to 225 billion cubic meters) of natural gas in the Cypriot sector of the Mediterranean Sea. The United Kingdom-based firm Noble Energy, which has been exploring in Cypriot waters for several weeks, made the find in the Block 12 Aphrodite field.

Cyprus' main challenge will be finding a market for the natural gas. Even if the political situation allowed for export to Syria, Damascus is broadly self-sufficient in natural gas. Israel is too far away to make exploitation of the field economically feasible. Turkey is an enthusiastic user of natural gas, but its territorial disputes with Cyprus eliminate Cyprus as a possible source of the fuel. Moreover, the field is not large enough to justify a liquefied natural gas export terminal, which would cool the natural gas into liquid form, allowing it to be poured into specialized tankers for transport elsewhere.

The discovery is still beneficial to Cyprus, however, due to a recent disaster. At present, Cyprus does not use natural gas; most of its electricity comes from oil-burning power plants. In July 2011, an ammunition dump at the Evangelos Florakis Naval Base exploded, destroying the country's primary electricity-generating facility — an oil-burning power plant — at Vassilikou. Since then, the Cypriots have been rationing power as they attempt to rebuild. Cyprus suffers from many of the same budgetary problems as other struggling EU member states; only an emergency loan from Russia allowed Cyprus to keep electricity running without having to seek a bailout like Greece, Ireland and Portugal.

Switching to natural gas would normally be too costly for the Cypriots. But since they must rebuild a power plant after the explosion, and since they have the option of a domestic fuel source, switching to natural gas makes sense. Even the field's relatively small size is not an obstacle. With just 750,000 citizens, Cyprus does not need a massive field to supply its energy needs. One hundred billion cubic meters of natural gas should be enough to meet Cyprus' energy needs for decades.

Such a switch would still cost billions — the field must be developed, a new power plant must be constructed and the two must be connected by subsea infrastructure. Cyprus' finances are going to get worse before they get better, but the natural gas discovery gives Cyprus the opportunity to independently satisfy its energy needs for many years to come.

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