Cyprus talks of 'new era' wealth but gas bonanza comes with challenges

There is a demand for solution to problem of Turkish Cypriots before drilling commences for the divided European island.

NICOSIA // Faces beamed in Greek Cypriot cafes yesterday as regulars read jubilant newspaper headlines trumpeting the confirmation of multi-billion dollar gas reserves in an offshore field that could meet the small island's energy needs for decades.

President Demetris Christofias's announcement on Wednesday that the prospect holds between five and eight trillion cubic feet (tcf) of gas was a timely festive season boost after a traumatic year.

Cyprus lost half its electricity supply in July when an accidental explosion destroyed its largest power station. And the island's economy needed a €2.5 billion (Dh11.9bn) loan from Russia this month to protect its public finances.

Concerns development of the gas field may stoke tension with Turkey did not dampen the euphoria. Simerini newspaper proclaimed a "new era" has dawned for Cyprus while the Cyprus Mail declared "Gas find worth 'tens of billions'".

Noble Energy, a Houston-based US company, announced on Wednesday a "significant" and "exciting" find in the Aphrodite field, where it began exploratory drilling in September.

Cyprus is home to just one million people and has the third-smallest economy in the Euro zone. Now it hopes to become a prosperous regional energy hub that will help Cyprus punch above its weight on the geo-political scene.

Mr Christofias, the leader of the Greek Cypriot community which represents the divided island internationally, said the "historic" discovery puts Cyprus on Europe's energy map. The find is attracting many foreign investors and enables Cyprus, a member of the European Union, to contribute to the bloc's energy security, he added in a television broadcast.

His commerce and industry minister, Praxoula Antoniadou, calculated the Aphrodite field is worth €100bn and could supply Cyprus's energy needs for 210 years.

The bonanza does not come without challenges. An increasingly assertive Turkey had demanded the Greek Cypriots postpone drilling until the long-running Cyprus problem was settled. Otherwise, Ankara argued, the Turkish Cypriots, whose breakaway state is recognised only by Turkey, would lose out on a share of any gas riches.

Tensions soared in the east Mediterranean in September when Noble Energy began exploratory drilling.

A furious Turkey sent a military-escorted oil and gas research vessel into the area and signed its own continental shelf agreement with the Turkish Cypriots.

Turkey has challenged not only the right of Cyprus, an EU member that it does not recognise, but also Israel, a spurned ally and fellow regional superpower, to exploit their offshore resources. The Aphrodite field lies 185km south of Cyprus near a huge Israeli gas field, Leviathan, which Noble Energy confirmed last December holds 16tcf of gas.

Cyprus has been primed as the obvious location for a liquefaction plant to process gas from both countries, which would then be ferried by tanker to Europe. Unless that is, there is a deal to re-unify Cyprus. Then the most viable route would be by pipeline to Turkey where it could mesh with existing pipelines.

Greek Cypriots argue the gas should be an incentive to accelerate a peace accord that would enable Turkish Cypriots to share in any hydrocarbon riches and also benefit Turkey.

"We call on Turkey to demonstrate a spirit of peace and reconciliation and to refrain from any adventurist actions and provocations that cause problems to the [re-unification] talks and tension in the eastern Mediterranean," Mr Christofias said.

Cyprus, a former British colony, has been divided since a Turkish invasion in 1974 triggered by a brief coup in Nicosia engineered by the military junta then ruling Greece.

Leaders of the Greek and Turkish Cypriot communities have engaged in laboured UN-sponsored peace talks for decades. Mr Christofias and Dervis Eroglu, the Turkish Cypriot leader, head to New York next month for a peace summit with the UN Secretary-general, Ban Ki-moon.

The aim is to re-unite the island by the middle of next year when Cyprus assumes the rotating EU presidency.

There was no early response from Ankara to Wednesday's gas announcement. But Turkish Cypriots were unimpressed.

"In our view, the Greek Cypriots should be investing more in the negotiations, and not in things that cause further disputes," Kudret Ozersay, the chief aide to Mr Eroglu, said.

An editorial in yesterday's Cyprus Mail said the re-unification talks were going nowhere and without a peace deal "the gas bonanza could prove to be more of a curse than a blessing for Cyprus".