natural gas in cyprus: choosing the right option

7/29/2019 Natural Gas in Cyprus: Choosing the Right Option

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MEDITERRANEAN PAPER SERIES 2013

NATURAL GAS IN CYPRUS

CHOOSING THE RIGHT OPTION

Anastasios Giamouridis
http://www.gmfus.org/


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Cover photo: An oshore exploration platorm. AndrCGS
http://www.gmfus.org/http://www.gmfus.org/programs/climate-energyhttp://www.gmfus.org/programs/climate-energyhttp://www.gmfus.org/


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Natural Gas in Cyprus

Choosing the Right Option

Mediterranean Paper Series

September 2013

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The German Marshall Fund of the United Statesii

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5/35

Natural Gas in Cyprus iii

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7/35

Natural Gas in Cyprus 1

1Economic Context

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F M L, Cyprus bailout and Israel-Turkey dtente present new opportunities, 5 M , www.f.; R, Factbox: outlines of Cypruss bailout bythe euro zone, 6 M , www...
http://www.gmfus.org/http://www.gmfus.org/http://www.reuters.com/http://www.reuters.com/http://www.gmfus.org/http://www.gmfus.org/


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The German Marshall Fund of the United States2

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9/35


10/35


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current status and way forward; E P, 8 .. , 4 J ,www..; S L, : , M , www...

8 I qf fwk, f wf z x j f - , w , j.

3Is Aphrodite a Commercial Discovery
http://www.oxfordenergy.org/http://www.energypress.gr/http://www.sigmalive.com/http://www.sigmalive.com/http://www.energypress.gr/http://www.oxfordenergy.org/


11/35


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Figure 1 Basic parameters determining the commercial viability of agas project

Figure 2 Basic breakdown of the revenue of a natural gas project
http://www.oxfordenergy.org/http://www.nobleenergyinc.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.nobleenergyinc.com/http://www.oxfordenergy.org/


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Figure 3 Basic breakdown of the cost basis of a natural gas project

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Development

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fields, 9 J , www.zf..

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M f f f CE, KRETYK CEO, E M NwF f w k A -, L, Cypruss offshore exploration: the current status and way

forward.
http://www.eia.gov/http://www.gazprominfo.com/http://www.cna.org.cy/http://www.cyprus-mail.com/http://www.cyprus-mail.com/http://www.cyprus-mail.com/http://www.cyprus-mail.com/http://www.cna.org.cy/http://www.gazprominfo.com/http://www.eia.gov/


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4Second Licensing Round

New Licenses Under Cypruss Second Round

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15/35


Structure of Economic Benefits

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5Liely Economic Beneitsand Time Horion
http://www.bi.no/http://www.bi.no/


16/35


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Figure 4 Structure of economic benets in Cyprus from hydrocarbons developments
http://www.hrdauth.org.cy/http://www.cyprusgasnews.com/http://www.cyprusgasnews.com/http://www.hrdauth.org.cy/


17/35


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Improvements in Economic Competitiveness and

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5 T ff f f C, f f ( ) . F f f , f x P MC, How can small-scale LNG help grow the European gasmarket?, J , www...
http://www.hrdauth.org.cy/http://www.energy.eu/http://www.poyry.com/http://www.poyry.com/http://www.energy.eu/http://www.hrdauth.org.cy/


18/35


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Signature Bonuses

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6 M A G, The offshore discovery in the Republic ofCyprus: monetization prospects and challenges, Oxf If E S, J , www.xf..

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Table 1 General economic benets from hydrocarbons developments in

Cyprus

Opportunity When? Value?

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19/35


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gains at 4 bln a year, says Kretyk, 5 A , www.f-.. Q f BP, Statistical Review2011, www...
http://www.mcit.gov.cy/http://www.financialmirror.com/http://www.financialmirror.com/http://www.bp.com/http://www.bp.com/http://www.financialmirror.com/http://www.financialmirror.com/http://www.mcit.gov.cy/


20/35


Pre-Selling Rights to Block 12

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.; R,Mozambique Oks PTT bid for Cove, despiteShell, 9 M , www...

4 F f - f LNG z Tz Mzq, D L, East Africa gas potential for export, OxfI f E S, M , www.xf.; f f xU O, Indians confirm Mozambique block deal, 5J , www...

Table 2 Direct hydrocarbons revenue opportunities for the government

of Cyprus

Opportunity When? Value?

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Tx D -

S f

R f

O C / xk

S
http://www.mees.com/http://www.bloomberg.com/http://www.bloomberg.com/http://www.reuters.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.reuters.com/http://www.bloomberg.com/http://www.bloomberg.com/http://www.mees.com/


21/35


w .5

T f w $9

$ f f- Bk

5 Hw, fff ( w ) f f I x 4 f . A A, W q f 5 k jf f -. M f W I ff Nw.., Woodside holds off on$750 m for Israel, 5 J , www.w..; G, Wood-side reviewing Israel plan report, J , www..

.; N E, A f, 6 D ,www..;U O, Woodside takesLeviathan stake, D , www.. ; F T, Woodside snaps up Leviathan stake, D , www.f..

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w $6 $. f

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x

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A .

I , f, - k

f f C.
http://www.news.com.au/http://www.globes.co.il/http://www.globes.co.il/http://www.nobleenergyinc.com/http://www.upstreamonline.com/http://www.ft.com/http://www.ft.com/http://www.upstreamonline.com/http://www.nobleenergyinc.com/http://www.globes.co.il/http://www.globes.co.il/http://www.news.com.au/


22/35


Monetization

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ff (w w), (.. f

k),

, f,

k k, f f

x.

C x

f qf

w k A, E,

; f G

Tk, E

k. T M x w. T

z f

S H.6

Pipeline to Turkey

Cost Element

Tk ff f x

f -

Tk.7 Hw,

6 S H, N G Ex O f I C, M P P, G M F

f U S, S , ://www.f.//--x--f---/.

7 S f x Ak,Akdenizdeki gaz dmnn zTrkiyeden geiyor, J , www.k.. ; K C, : , J , www.k..; K C, : , D ,www.k...

f f

w R f C

Tk. T fw f

f

, .

A Tk w

w

z ( G

qf), f x

f C Tk. I w ff C

w k w

. D w k

Tk w

fw q

f x ,

f

w . Tk

q f, f, f x

-

f w ( w ) w

x .

Hw, f w

A Tk,

- , f

f

Tk

f

f .8

Market Risks

P f C (/ I)

w k f

Tk k. T

k w

z w.

8 Sf w j-f w w kw f , q . I, D L x $.75 . S D L, East Africa gas potential

for export, Oxf I f E S, M ,www.xf..

6Eport Options
http://www.gmfus.org/archives/natural-gas-export-options-for-israel-and-cyprus/http://www.gmfus.org/archives/natural-gas-export-options-for-israel-and-cyprus/http://www.aksam.com.tr/http://www.kathimerini.com.cy/http://www.kathimerini.com.cy/http://www.kathimerini.com.cy/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.kathimerini.com.cy/http://www.kathimerini.com.cy/http://www.kathimerini.com.cy/http://www.aksam.com.tr/http://www.gmfus.org/archives/natural-gas-export-options-for-israel-and-cyprus/http://www.gmfus.org/archives/natural-gas-export-options-for-israel-and-cyprus/


23/35


Map 1 Examples of available monetization options in the Eastern Mediterranean

Source: Oxford Institute of Energy Studies

F, Tk Gz x

, f G, E

k f fw k

E w

k. Hw, R

f k (

w) f k

Tk ff . T

f f

C Tk k.

S, w w f Tk

w C . T

f C

f LNG A

k. U

k f (.. ,

, .),

. I f,

z f E

M ( C)

Tk f

.

T, w C

Tk w k f

f , f . A w

q f f

f f.

T C (/ I )

w w


24/35


f Tk 4. O , f C I

f ww f w

k w

f.9

T, f -

w Tk

ff k

f k , w

w f -

k w

. T w k (

) k, w

f f

x f C .4

O j w f Tk

k S Dz f Azj. T

BP- f (4

f) S Dz f w f

f (.. S Dz P II)

f . U , w

x 6 Tk k,

w G, I,

E k T-

A P (TAP).4

T k

, f w :

) S Dz f , ,

9 P w - f w k, f f k.

4 Tk f

f R, Azj, I, A (LNG), N (LNG), w LNG f k. F f Tk k, f x E Mk R A(EPDK), Natural gas market: 2011 sector report, , www...k(www.k..k).

4 U O, EU hails TAP boost to European energysecurity, 8 J , www.. ; BP,About BPCaspian: Shah Deniz, A , www...

j ;

) S Dz fx w

x k ( )

w f w

f . F Az

(.. S Dz II) k

-, f

A, ACG , U, f.4

B w Az ,

Tk k ( w

f ) Iq,

I, Tk. I, w

k f x

Tk k w

ff. A

f ff

Bk S E , w

Tk f fw w

f ff (Bk S, Tk)

(T,

A, S Lk, S ) .4

F, C E M

f w . If C

I x Tk

5 (7 ) k f x

f A f, Tk k

f . Tk

4 S S P, Central Asian and Caspian gas produc-tion and the constraints on export, Oxf I f ES, D , www.xf..

4 T U.S. E If A Tk 4 f f . T f - , w w w f .M E If A-, Technically recoverable shale oil and shale gas resources: anassessment of 137 shale formations in 41 countries outside theUnited States, J , www...
http://www.emra.gov.tk/http://www.emra.gov.tk/http://www.epdk.gov.tk/http://www.upstreamonline.com/http://www.bp.com/http://www.oxfordenergy.org/http://www.eia.gov/http://www.eia.gov/http://www.oxfordenergy.org/http://www.bp.com/http://www.upstreamonline.com/http://www.epdk.gov.tk/http://www.emra.gov.tk/http://www.emra.gov.tk/


25/35


w, w w ww .44

I f , w

f f C

( I) Tk w

x

q.

Other Pipeline Options

Pipeline to Greece

Mz f C I ff

- G f k:

(..

), ff ,

f x w f,

k k f .45 A

- G w ff f w

,

Tk . T z )

, f

-

ff f E M

w G ( , k); )

G w f ff k,

Gk k

Tk k.

Onward Transit to Other European Markets

C w f x

Tk / Gk k.

44 I , PSC C ff ff C, f . T f C, w ff f

f C. I w k Tk.

45 T z G(-w) w DEPA SA. F - f w CEO j fw, f x H S, The role of the ITGISystem: New opportunities and synergies rise from the East Medi-terranean, P C E S, 6J , www...

B w f C Tk E k w x

f C w f f

Tk .

A f f w $ $5 ,

f f k ,

Tk , ..

Tk Gk B ,

f x f C

w $ $ . T

x $.5 f

k C E. I w w f

k S E.

S x q

Tk

. If Tk f

z, w .

T Tk fwk w

w C

. Lk f

w k f f.

T x f C I w q

ff TAP , w S C E q

f . Hw,

TAP - x f

f , w w

f S Dz II , w

f fw f .46

F,

j

S E C E

w w ff

.47

46 R, TAP gas pipeline project gets vital legal approval, 7M , www...

47 F f S E f f A G S P,Security of gas supply in Southeastern Europe: potential contribu-tion of planned pipelines, LNG, and storage, Oxf I fE S, J , www.xf..
http://www.iene.gr/http://www.reuters.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.reuters.com/http://www.iene.gr/


26/35


M, k f k

w f

f . F x, f

S E

w

k .

S, w f k

f

-x k f

f f

.48

P x G, I, S

E, C E w

w x

f R w w Az

f S Dz P II

f. I , x f E

M w

x f w E

Iq, I, Tk w

ff Bk S

S E.Pipeline to Neighbors in the Eastern Mediterranean

P x

J, L, S, E

C.

I f ,

f

f f f w

. T

f f f C I,

48 T f ( f ) f , q f w w - k .

fff x f E S.49

T x f x k

E M ff f

q f f

w w. Hw,

k w f

:

T f k,

w j f

x ;

T f

f f w

;

T f w

ff

w f

x;5

T k f f

E,5

ff , x f Iq

I.

49 S Hk D, L E-K, B F,East Mediterranean gas: what kind of a game-changer, OxfI f E S, D , www.xf; B Sff, Energy resources and markets in the eastern

Mediterranean region, E M E Pj:P Bf, G M F f U S, J, www.f.; S H, Energy discoveriesin the eastern Mediterranean; source for cooperation or fuel fortension, M E Pj: P Bf, GM F f U S, J , www.f..

5 F f w z

, B F J S (.), Naturalgas markets in the Middle East and North Africa, Oxf If E S, , www.xf..

5 M f w f E ff w f x f f A A, Between a rock and a hard

place: Egypts new natural gas supply policy, A PI C, V 8, N , M , www...
http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.gmfus.org/http://www.gmfus.org/http://www.oxfordenergy.org/http://www.apic.com/http://www.apic.com/http://www.apic.com/http://www.apic.com/http://www.oxfordenergy.org/http://www.gmfus.org/http://www.gmfus.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/


27/35


Liquefaction and Hybrid Options

Liquefaction

Lqf z f

C , w

f f

LNG f f 5 .

A k,

f (MU) J

f f qf

Vk w

Bk , .. N E

Dk D A O Ex.5

A KRETYK, Vk q f - , w

C

qf f w

. T w w C

f LNG, f

k .5

Lqf ff

z

( Tk, G, ).

LNG k f

, f LNG w f f

w. T w f

LNG x

f LNG

w.

5 MU w / FID f LNG j. T w f 6 ff f f ,w w . S, MU f k fw , f C

qf j f , LNGf f - EU . M f MU CG Nw,Memorandum of understanding signed, 6 J ,www.w.; U O, Cyprus inks MoUon LNG, 6 J , www.. .

5 E P, 8 .. , 4 J , www...

LNG w- w k . F x,

w E w

LNG f. T f

C w w w

LNG , ,

ff LNG k

. O

f LNG

- LNG f

.54

LNG fx

k f .

T k A L

A, w

-, -x

. T w

E k w f

-x.55 P fx

,

54 S f x P f Vw P M- C LNG wk : How can small-scale LNG help grow the Euro-

pean gas market?, J , www...

55 F f f E f Pk H, Continental European gas hubs: are they fit for

purpose, Oxf I f E S, J , www.xf.; J S Hw R,The transition to hub-based gas pricing in continental Europe ,Oxf I f E S, M , www.xf-.; J S, Continental European long-term

gas contracts: is a transition away from oil product linked-pricinginevitable and imminent, Oxf I f E S,S 9, www.xf..
http://www.cyprusgasnews.com/http://www.upstreamonline.com/http://www.energypress.gr/http://www.poyry.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.poyry.com/http://www.energypress.gr/http://www.upstreamonline.com/http://www.cyprusgasnews.com/


28/35


f f w A A-Pf B.56

T , w

LNG k, f x f

A - , US ,

E Af ff . T k k

k L A, A

w ,

f , .57

N

f LNG ff k

ff f j f, f C

j

A ( f

f

fx).58

Combination of Monetization Options

T f

f

qf fw

x f G P G

56 N, fx x- f x qf . I f Gf, f - w , f j. T j k f f ( -) . Hw, q f - LNG w( f ) f wfx x qf , ff f fx . O w, x / - ( ) j , f w f . F k A LNG j

, Hw R, LNG trade-flows in the Atlanticbasin: trends and discontinuities, Oxf I f ES, M , www.xf..

57 S f x P,Japan seeking U.S. LNG, to ask for U.S.waiver during Kuwait meeting, M , www...

58 C qf w f f EU, f.

C DEPA SA, w z f C ( I)

z . Hw,

f ,

f ff

C, q f -

. T

f x w

f f

j .

LNG j f

f x, -

ff. Fx, 65-7

f f f .

T j f

f f f f .

S

- x

w 65 f

.

F, x j x

qf f -- k

. T

LNG

fx . H,

z C

f

.. f

w

x f qf

f Vk j
http://www.oxfordenergy.org/http://www.platts.com/http://www.platts.com/http://www.oxfordenergy.org/


29/35


f f .59

Choosing the Right Option

T f z

f ff f

f . I q

. T

f

f f(), w

k f . D

w f

, ,

fx, ,force majeure ,

f (f ). O f

wk

x k, w C

59 T f f Sk z - f qf - f x (Gz, T, S) f wf f f . F f x U O, Shtokman revamp could center onLNG, A , www.. ; UO, Statoil backs LNG bid on Shtokman, A , www...

.6

A C ,

w.

B f,

f LNG f ff k

f w E Af,

N A, w

k. A f C LNG

k E

M , I

L. If

C f qf, w

f , f f

.

6 F f z , A G, The offshore discovery in the Republic ofCyprus: monetization prospects and challenges, Oxf If E S, J , www.xf..
http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.upstreamonline.com/


30/35


Unitization Agreements

C w I

f f

f z

z. T f

, w ff

, . T f z

f f

. C- z

, N S

f w.6

I E M, z

q w C

I f A f w,

x Bk

I EEZ. D w w

w . Uz

w L E w f

f k w ENI-KOGAS T

x EEZ.

Uz q

fwk, ff f,

, ff. C I

k . I ,

f ,

f f x,

. T C

6 If f A L W, The North Sea experi-ence an analysis of cross-border unitization and move towardsestablishing an international legal framework, U fD, C f E, P M Lw P, www...k; Az Ikkw Aw, Unitiza-tion of contract areas: is it an obligation defeating the stabilityof international petroleum agreements, U f D,C f E, P M Lw P, www...k.

w ,f f f .6

Joint Monetization

Definitions and Relevance for Cyprus

T f f

w f -

k f A (/

, f

). Hw, z f

k, f f

z f w x

f, w w k f f qf . A k,

j z f C w

f f

ff (..

) f.

C f f

C

f qk w

w w f f ENI-KOGAS

/ T w

ff k. M, j z f C w

j

( f), f A

w. T

/

, f

f.

6 If f F M, Cyprus, Israel offshoregas fields to get navy protection, M , www.f-.; w ff, A J ; IC G,Aphrodites gift: can Cypriot gas power a newdialogue, E R N 6, A , www.-.; E P, , J ,www..; S K, The status of hydro-carbon exploration in Cyprus, P I BCf, T A, I, D , www....

7Commercial Cooperation ith Israel
http://www.dundee.ac.uk/http://www.dundee.ac.uk/http://www.dundee.ac.uk/http://www.financialmirror.com/http://www.financialmirror.com/http://www.crisisgroup.org/http://www.crisisgroup.org/http://www.energypress.gr/http://www.mcit.gov.cy/http://www.mcit.gov.cy/http://www.mcit.gov.cy/http://www.mcit.gov.cy/http://www.energypress.gr/http://www.crisisgroup.org/http://www.crisisgroup.org/http://www.financialmirror.com/http://www.financialmirror.com/http://www.dundee.ac.uk/http://www.dundee.ac.uk/http://www.dundee.ac.uk/


31/35


Potential Partners

I , q f (x-) j

z E M

w R f C I. C

f I ff f f

- j qf

Vk C.

T , I

ff J

I k 4

f ff f x.6

Hw, I f

z f x. T

4 x f

w

f

x f I. F x, J ,

A W

w f

k L,

w w LNG

C.64

J z w I C w

f f x j

f.

E x f

(w LNG ), w f z

f f . T

z : ) f

w E k; )

f z 6 R, Israeli government approves 40 pct limit on natural gasexports, J , www...

64 Nw.., Woodside holds off on $750 m for Israel, 5 J, www.w..; C M, Noble suggests quickerway of bringing in gas, J , www.-.;G, Woodside reviewing Israel plan report, J ,www... ; N E, A f, 6 D, www..;U O, Woodsidetakes Leviathan stake, D , www..; F T, Woodside snaps up Leviathanstake, D , www.f..

k ff; ) ff k w

f ; ) q

LNG x .65 T

ff . A

E ff f qf

, f

k j z w C

.

S, C L

. L f

C I x

w f ,

. L ff

fwk, k f ,

ff , k

- .66

Other Legal and Political Risks

I , j z C

f w f

f w. T

x f k,

w k f x, w f , ,

. T

w A T-L

f S LNG j

f ff. T

f qk.

65 Hw, E w k w w fwk , w

w -f . S fx A A , Between a rock and a hard place:Egypts new natural gas supply policy, A P I- C, V 8, N , M , www...

66 S Hk D, L E-K, B F,East Mediterranean gas: what kind of a game-changer, OxfI f E S, D , www.xf..
http://www.reuters.com/http://www.news.com.au/http://www.cyprus-mail.com/http://www.globes.co.il/http://www.nobleenergyinc.com/http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.ft.com/http://www.apic.com/http://www.apic.com/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.oxfordenergy.org/http://www.apic.com/http://www.apic.com/http://www.ft.com/http://www.upstreamonline.com/http://www.upstreamonline.com/http://www.nobleenergyinc.com/http://www.globes.co.il/http://www.cyprus-mail.com/http://www.news.com.au/http://www.reuters.com/


32/35


J z w C I - f

M E. T f

f x

f . A LNG C w I

k . T ff

,

f . C w

I IOC f . T

f ,

, f j

/ . FI, j z w C

w f f

w Tk.67

67 M M L, Cyprus bailout andIsrael-Turkey dtente present new opportunities, 5 M, www.f.; Nw Yk T, ForCyprus a sudden need toplay nice with Turkey, 8 M, www...
http://www.gmfus.org/http://www.gmfus.org/http://www.nytimes.com/http://www.nytimes.com/http://www.nytimes.com/http://www.gmfus.org/


33/35


T f A f f

ff C .

I w f

, f

f

x k f

. I ff ,

f .

T f C ( )

f

, w

xz f. B

, C f f k

f Tk. Tk

f C w EEZ.

I k k C

ff f f

f . T C

j , w

f

f x C ff

k.

S f EU

k, w

-k

- .

T fw w

w, w w j

ff .

P x f C

k f . A f f f z q

f ,

x f ,

ff j f

A f. P-

f f k f f C.

If A f

f, C w k

w f

. P f

f f

Bk , w T ENI-

KOGAS f k w

, / j z w

I qf LNG

C. S

w . T x

ENI-KOGAS T

ff f

z f . E f

x f

f.

C fq , f-

x Tk w

z ,

f . T w

f k k q

f .

T f x

LNG w

f. T

w LNG

f

f

f. T k f -,

. A f x

C (.. f 5-8 f

A), f LNG

w .

Lqf x f LNG j

,

k f

k ( LNG

8Conclusions


34/35


), - k k ( LNG fx f

k f), xz f

f f f

LNG f

. LNG

w , , k

, k-f.

T f f C

w f f

w. I EU

f f

I, ff

, j w , ,

, C w

ff f

ff

f, , , E w.


35/35

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natural gas in cyprus: choosing the right option

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