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Natural gas - the new leader of the world energy market and the Cyprus economy

Russia Forum 2012, which discussed the current economic situation in the world, was held in Moscow a few days ago. Esteemed economists, professors and politicians, including Kenneth Rogoff of Harvard University, Nobel Prize Winner Paul Krugman of Princeton University, economist Nouriel Roubini, former British Prime Minister Gordon Brown and Russian President Vladimir Putin attended it. 

Among the numerous different views were stated two of the most important components that a country should have in order to start the process of recovery and development - well-trained staff and low energy costs.

Countries such as Nigeria, Iraq and Libya that have only energy resources have not managed to reach the standard of developed countries. On the other hand, countries like Spain that have fully-trained staff but insufficient energy sources lag behind countries such as Norway, where these two components are combined.

Cyprus had no energy sources until recently, but the authorities have established a strong institutional framework and a stable tax system that is favourable for investors. At the same time, the state offers a high level of staff training.

On 28 December last year, Cyprus announced that huge deposits of hydrocarbons, i.e. natural gas and potentially oil, worth 50-80 billion dollars were discovered. Therefore, the country obtained the second component for long-term development - direct access to low-cost energy and energy independence.

It was discussed at the forum how the Mediterranean country could benefit from its new geopolitical position in Southeast Europe. Natural gas deposits can be utilized by using various technologies. The availability of 5-8 trillion cubic feet of natural gas offers the opportunity of building a gas liquefying plant. Its size will depend on the eventual contract that is likely to be signed with Israel for liquefying the deposits in Leviathan, the capacity of which is 16 trillion cubic feet, worth about 150 billion dollars. For geopolitical and security reasons, Tel Aviv is not willing to build this plant in Israel and prefers to build it in Cyprus.

In this case, Nicosia will have to invest around 8-10 billion dollars in the construction of the plant, which will initially produce 5 million tons liquefied natural gas annually. Then, the production will increase to 10 billion tons, the first start-up being possible after 5-7 years. Thus, Cyprus will be able to obtain a 3-4 per cent share of the global liquefied natural gas market before 2020 and attain a turnover of 5 billion dollars annually.

At the same time, the country can arrange the sale of smaller quantities of natural gas. With the revenue received, it can finance the construction of the infrastructure of gas liquefying plants. Comressed natural gas is a good solution for the sale of small quantities in the range of 2-3 million tons within small distances (up to 3000 km). Such a project can be realized in just over two years and natural gas supplies to the islands and mainland of Greece can start.  Sales could reach 3 million tons a year and bring 1.3 billion dollars.

These new circumstances open up development opportunities for the construction companies in the coming years. They will have to build natural gas liquefying plants, ports and facilities for loading, a pipeline network inside the country and from the deposit to the land. Opportunities for development will arise for consulting, accounting and law firms. The Cypriot merchant fleet will also profit from the transportation of liquefied gas. There will be a high demand for the properties, where the plants will be built. The change resulting from the use of "green" energy will have a positive impact on environment too.