* Cyprus sitting on gas worth potentially 400 bln
* Presidential candidates tap political gains
* Cypriot gas could be extracted 2018-2019
* Turkey says move is illegal
By Michele Kambas
NICOSIA, Feb 15 Huge untapped gas deposits
almost 20,000 feet below the surface of the Levantine Sea could
be a life-changer for debt-crippled Cyprus and candidates in
Sunday's presidential election are rushing to reap political
Experts believe Cyprus, a novice in the energy sector, could
be potentially sitting on hydrocarbons worth up to $400 billion.
That would dwarf a 17.5 billion euro financial bailout under
discussion with international lenders.
"Prima facie, its huge. Much bigger than anyone is talking
about," said Michael Economides, an energy consultant based in
But this treasure is buried deep in the Mediterranean and is
trapped in one of the most bitterly-contested regions of the
world, with arch-rival Turkey openly branding Cyprus's efforts
to tap it illegal.
With a massive bailout bill from lenders amid a deep
recession, Cypriots are bracing themselves for years of
austerity and the gut-wrenching frustration that billions might
be languishing under the Mediterranean sea bed.
The three main candidates in the island's election have
sensed the potential to score points and the gas has become a
One contender has suggested "securitisation" - pledging
future profits to secure loans in advance, so that Cyprus can
solve its financial problems without waiting for the gas to
flow. It is an idea that is gaining currency in Brussels, where
the finances of the small island are a big headache for the EU.
But even if Cyprus does try to sell its future gas revenues
early, getting any money is still probably years away. Other
countries have pledged future oil and gas revenue to securitise
loans, but only from proven reserves that are ready to produce.
Cyprus's sales pitch on what lies below the surface is a
compelling one, sharing a sea boundary with Israel, where two of
the world's largest gas finds of the past decade were reported.
The U.S. Geological Survey estimates a mean 122 trillion
cubic feet of recoverable gas in the basin. There could also be
1.7 billion barrels of recoverable oil.
Of that, experts believe between 50 and 60 tcf could lie
within Cyprus's maritime boundaries.
"The ultimate value to Cyprus is enormous," said energy
consultant Economides. "Even if we take a conservative number of
50 tcf of gas, without encountering oil, you are looking at
potential revenue of $400 billion by the time it is commercial."
Cyprus's outgoing, Communist-led government has proposed a
"National Resource Fund" when revenue starts trickling in.
Revenues would be used to support industry, and pay for new
infrastructure, invest with long term returns and boost the
national budget, the energy ministry said in a written
statement. The plan is backed by Communist presidential
candidate Stavros Malas, who places second in most polls.
Conservative front-runner Nicos Anastasiades has a similar
proposal for future gas revenues to be paid into a sovereign
wealth fund. Both he and Malas say any attempt to sell future
revenues too far in advance would amount to giving the country's
wealth away too cheaply.
However, third-placed candidate George Lillikas, who is
backed by the Socialist Party, thinks the discovery is bankable
enough to swiftly extricate Cyprus from onerous bailout terms,
and has suggested either pre-selling or securitising reserves.
"Cyprus should not be economically dependent on anyone,
because states that have an economic dependence have political
dependence too. That is why I intend to utilise natural gas
immediately," he said.
Such a proposal is tempting for Cypriots who are fed up with
austerity, and for lenders in Brussels searching for a way to
guarantee that Cyprus can sustain a bailout loan. But economists
say it is too soon to hope for a quick fix.
"In the short term the prospects of Cyprus's gas-related
wealth is not going to help it," said Laura LeCornu, a partner
with Strata Insight consultancy. "This is a long-term prospect
and there are so many uncertainties."
Cyprus reported its first natural gas find in late 2011.
U.S. based Noble Energy reported a gross mean of 7
trillion cubic feet (tcf) in a well south-east of the island.
Experts believe it can only start producing in 2018 or 2019.
Energy officials say a conservative estimate valuing the
specific Noble find, based on present gas prices, is 80 billion
euros. Taking into account the whole offshore area under Cypriot
control still untapped, that figure could potentially rise
Noble is carrying out a second appraisal well on its 2011
find this year, and only at that point will it decide if it is a
Meanwhile, the prospect of a gas bonanza is fueling
long-simmering regional disputes. Turkey, which supports a
breakaway Turkish Cypriot state in north Cyprus, says tapping
the gas would be a "legal transgression" by Greek Cypriots
running Cyprus's internationally recognised government, and gas
should be used equally and by both Greek and Turkish Cypriots.
"I see this as a handicap to relations we are trying to
nurture," Turkish Energy Minister Taner Yildiz told Reuters.
Turkey has warned companies of repercussions if they get
engaged in Cyprus. ENI which signed a production
sharing contract with Cyprus in January, has been warned that
its involvement could impact its Turkish operations.
The Italian firm is a partner in BlueStream, a pipeline
which supplies Russian gas to Turkey. It is also a partner in
the Shah Deniz project supplying natural gas from Azerbaijan
through Turkey, as is France's Total, another company
awarded an exploratory contract by Cyprus.