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Maximizing the Long-term Value of Natural Gas for Cyprus" Workshop by The Cyprus Institute and the Massachusetts Institute of Technology

The Cyprus Institute (CyI) and the Massachusetts Institute of Technology (MIT) held on 22 – 23 November a two-day workshop, the principal focus being to present and discuss the findings of the interim report "Maximizing the Long-term Value of Natural Gas for Cyprus". In the opening session, Dr. George Lakkotripis, Minister of Energy, Commerce, Industry and Tourism, highlighted the importance of the ongoing study and succinctly presented the Government’s position. The MIT team included Prof. Robert Armstrong - Head of the MIT Energy Initiative, Dr. Sergey Paltsev - Principal Investigator of the study, Dr. Frank O’Sullivan and Prof. Henry Jacoby. Speakers from academia, industry and the international scene, among them Prof. Tasos Giannitsis - Former Minister of Interior Greece, Sir Michael Leigh - Senior Advisor to the German Marshall Fund, Dr. Charles Ellinas - Cyprus Natural Hydrocarbons Co and J.L Porcheron – TOTAL, discussed at length the findings of the Study and offered a wide spectrum of suggestions for further investigation. The findings were also discussed by a panel of prominent politicians including Mr. Neoklis Sylikiotis - Former Minister of Energy, Commerce, Industry and Tourism and Mr. Prodromos Prodromou – Member of the House of Representatives who shared their views on the future of natural gas development in Cyprus.

The discussion focused on the monetization of natural gas for Cyprus, placing the greatest emphasis on the Liquefied Natural Gas (LNG) option. The consensus after the workshop is that LNG remains the preferred option from an economic and technical point of view, but it is not a solution without several important issues and considerable risks to consider. Among these are the lower than previously anticipated volumes of gas based on the latest drilling by Noble, the volatility of external markets, the intense emerging competition in the LNG sphere that will intensify even further in the next years, and the great risks involved with an investment of this size, especially in relation to the size of the Cyprus economy. However, it was highlighted that both technological and market developments are fast evolving and options that appear attractive today may not be so in a year or two; time is of essence.

The discussion focused on the monetization of natural gas for Cyprus, placing the greatest emphasis on the Liquefied Natural Gas (LNG) option. The consensus after the workshop is that LNG remains the preferred option from an economic and technical point of view, but it is not a solution without several important issues and considerable risks to consider.

Among these are the lower than previously anticipated volumes of gas based on the latest drilling by Noble, the volatility of external markets, the intense emerging competition in the LNG sphere that will intensify even further in the next years, and the great risks involved with an investment of this size, especially in relation to the size of the Cyprus economy. However, it was highlighted that both technological and market developments are fast evolving and options that appear attractive today may not be so in a year or two; time is of essence.


Dr. Nestor Fylaktos interviewed on Sigma TV about the outcomes of the workshop and the report by MITei and CyI

It was also argued that even though LNG is the preferred choice, the development and assessment of a comprehensive “plan B” is warranted and needs to be developed as a high priority and so is a long term Master Plan of 20 to 30 year horizon. Other possible monetization pathways were also considered, including several scenarios of pipelines to neighbouring countries (Israel and/or Greece), the conversion of gas to electricity for export and the compression of gas for export to the regional markets. The views from industry highlighted the importance of the analytical and pragmatic approach the MIT-CyI study is taking in answering the question of natural gas monetization for Cyprus. Risk assessment and regional and global geopolitical consideration, and the way these can influence the future of the natural gas development, are vital. Important views were exchanged from Israel, Greece and beyond. The message from these talks is that despite the considerable amount of complexity in the regional geopolitics, monetization (and especially any decision for the LNG plant) should go ahead in earnest.

The MIT–CyI will incorporate the input, recommendations and conclusions of the workshop. The study will conclude in the fall of 2014, at which time it will be presented and debated in a public forum. In the interim, as in the past, close consultations with the Cyprus Government will continue.

The study is being conducted in the framework of the tripartite agreement between MIT, the Cyprus Institute and the Research Promotion Foundation.

Sponsor: TOTAL E&P CYPRUS

Communication Sponsor: Cyprus Gas News

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