The tiny Mediterranean island of Cyprus is not one you'd necessarily identify as a major oil and gas player on the global stage. However, major energy companies are lining up to buy offshore licenses, as they seek to tap into potentially huge natural gas reserves.
Late last year Cyprus' Ministry of Energy, Commerce, Industry and Tourism awarded three offshore blocks. One of those went to Eni, another to an Eni/Total partnership, and the final one to ExxonMobil and Qatar Petroleum.
Part of the reason for the excitement around the Cyprus blocks is that some of the blocks bare a geological similarity to an area just kilometers away in Egyptian waters, where Eni discovered the 30 trillion-cubic-feet Zohr natural gas fields.
Eni already has interests in three blocks in Cyprus, after a second international bid round in 2012. The company also holds three exploration blocks in nearby Egyptian waters: Shorouk, where Zohr is located, Karawan and North Leil.
It is believed that some of the blocks in Cyprus sit on an undersea mountain range called Eratosthenis, considered to be the source of all the hydrocarbons in the eastern Mediterranean.
Eni's CEO Claudio Desbalzi said the company will use the same knowledge base from the activity related to Zohr, for the Cyprus blocks. He also said the deal could play an important role in the future energy security of the area, and the energy security of Europe.
The Egyptian Zohr field
The Zohr field is located in the Shorouk Concession and was discovered by Eni in August 2015. It is the largest natural gas field ever found in the Mediterranean and boasts a total potential of 850 billion cubic meters of gas. First gas from the project is expected by the end of 2017.
"Our exploration strategy allows us to persist in the mature areas of countries which we have known for decades and has proved to be winning, reconfirming that Egypt has still great potential. This historic discovery will be able to transform the energy scenario of Egypt in which we have been welcomed for over 60 years," Claudio Descalzi commented when the field was discovered.
"The exploration activities are central to our growth strategy: in the last 7 years we have discovered 10 billion barrels of resources and 300 million in the first half of the year, confirming Eni's leading position in the industry. This exploration success acquires an even greater value as it was made in Egypt, which is strategic for Eni, and where important synergies with the existing infrastructures can be exploited allowing us a fast production startup."
Cyprus, like most countries, comes with its own political challenges. The main cause for concern in the small Mediterranean island is Turkey, its neighbor which objects to drilling in Cyprus without the participation of Turkish Cypriots. However, there is hope that the two countries will be on friendlier terms soon. Cyprus has been divided since Turkey invaded the north of the island in 1974. The country was then effectively partitioned, and the northern third was inhabited by Turkish Cypriots, with Greek Cypriots living in the other two-thirds. The United Nations has overseen a ceasefire line between the two sections ever since.
The President of Cyprus and the Turkish Cypriot leader are both committed to a unification plan, and with new energy deals a possibility, many believe a settlement is in sight.
The discoveries of Israel
Nearby Israel has also enjoyed large scale gas discoveries in recent years. The country plans to export gas to Turkey via a pipeline, but the easiest way to do so is to run the pipeline through Cypriot waters. This would only really be possible if a peace agreement is reached between Turkey and Cyprus.
Other European countries have kept a close eye on the gas developments in the Levant Basin, where Israel, Cyprus and Egypt are all located. Major European countries see this gas as a way to lessen their reliance on natural gas from Russia.
In fact, it has been reported that government representatives from Italy, Greece and Israel have met to discuss a natural gas pipeline from the east Mediterranean gas fields to Greece and Italy. The pipeline could cost $5.7 billion and would connect the Israeli Leviathan gas field, the offshore Cypriot Aphrodite gas field and possibly other gas fields to countries in Europe.
The potential for a huge discovery in the near future off the shores of Cyprus appears to be significant, and when it does happen, it will be beneficial to the island, to the region, and to the whole of Europe.