Cyprus signed a Memorandum of Understanding (MoU) with three energy companies on Wednesday, leading to detailed negotiations for the construction of a natural gas terminal and a liquefaction natural gas plant (LNG) on the eastern Mediterranean island.
The LNG plant and associated projects, possibly involving a gas pipe to Europe, will set the ground for Cyprus to become a major energy supplier.
The memorandum was signed by Commerce and Energy minister Giorgos Lakkotrypis and officials of U.S.A.-based Noble Energy Internationla Ltd and two Israeli energy companies, Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership.
The signing ceremony was attended by the Ambassadors of the United States and Israel, in a move signaling official sanctioning of the project by the two countries -- a significant factor in the face of Turkish opposition to gas development by Cyprus before a solution to the island's political problem.
Noble Energy has discovered a field estimated to contain up to 8 trillion cubic feet of natural gas and is now in the process of an appraisal drilling expected to provide confirmation as to the quantity and quality of the gas by October.
The two Israeli energy companies are close associates of Noble Energy and are also in charge of developing major Israeli gas reserves near the Cypriot gas fields.
The Israeli government decided on Sunday to export 40 percent of its gas reserves, opening the way for joint Cypriot-Israeli projects. These involve a pipe to the south Cypriot coast, where the LNG terminal will be constructed.
Investment in the LNG project, involving a single production line, known as train in the gas industry, is estimated at 6 billion euros.
An additional 3 billion euros will be invested by France's Total energy company, which is reported to have signed an outline deal to add a second train in the plant, to handle its own gas supplies.
Total is expected to start drilling for gas and oil in a Cypriot field next year.
A consortium made up of Italy's ENI and South Korea's Kogas companies has also obtained licenses to explore for gas, starting in late 2014 or early 2015.
The Cypriot exclusive economic zone is estimated to contain up to 65 trillion cubic feet of natural gas, placing the island among the top 25 gas producing countries.
Cyprus is keen to develop its natural gas resources as soon as possible to help it get out of an economic crisis which has forced it to request EU/IMF bailout, involving harsh austerity measures.
Lakkotrypis said the LNG terminal and associated projects are the start of positive developments toward economic recovery following many years of recession.
"It is an ambitious project of strategic importance involving the largest investment in the history of the Cyprus Republic," Lakkortrypis said.
Work on the project is expected to start in early 2016 and LNG exports from 2019.
John Tomich, regional director of Noble Energy, said at the signing ceremony that the LNG project will enable the full development of natural gas from its find and potentially bring important benefits for Cyprus for many years to come.
The project will provide jobs for about 8,000 people at a time of rising unemployment, which has reached about 14 percent.