Energy consultant Peter Wallace publishes the following article in Turkish daily Hurriyet Daily News (online, 14.09.11) with the above title:

“A lot has been a lot written recently on the planned drilling by Noble Energy Inc. in Block 12 in Cyprus’ Exclusive Economic Zone (EEZ). However, not much seems to have been written about possible obstacles and technical expertise questions that go beyond the regional ownership and rights issues and other political misalignments.

The need for cooperation between Turkish and Greek Cypriots should be broadened from the political level to technical matters. The region could do well from drawing from the Norwegians’ ability to strategically exploit their North Sea reserves and their early understanding of the need to identify their need to confront national administrations and import technically formidable expertise. Norway has become one of the world’s leaders in offshore oil and gas technology and exploitation.

Thus, it is this importation of expertise that appears to have far been overlooked, and I have only read a small number of articles that have addressed the problem. Although the ownership and drilling rights issues are hugely important, the practical matters of what will happen, if the drilling that is being planned confirms the size of the estimated subterranean reserves, seems to have been forgotten. High-level governmental agreements are vitally important for the transfer of specialized knowhow.

Since time is of the essence, the sooner such agreements are formalized the better. Estimates of reserves in the two primary fields in the Levant Basin are believed to be in the region of 24.5 trillion cubic feet (Leviathan 16 tcf and Tamar 8.5 tcf). To put this volume in perspective, this amount of gas is 694 cubic kilometres or the same volume as nearly 10 billion shipping containers.

For any sensible exploitation to take place, Israel and Lebanon would need to cooperate and the Greek and Turkish Cypriots would need to put aside, for a while, their past differences so that all of the parties could jointly recognize that the entire region could benefit from the discovery. Consider also that the amount of gas estimated so far is equal to half the known reserves of the United States, which has a population of almost 310 million, and then consider that the total population of the territories claiming ownership rights to the two main fields in the Levant Basin is only around 13 million people.

If there were any sense to any of this, then the parties should now be considering what their options are and start considering the most beneficial method of exploiting this huge amount of gas.

Some recent articles have mentioned the possibility of exporting the gas via a pipeline to the European Union mainland. If this pipeline needed to be routed through Turkey because of the depth of the Mediterranean between Cyprus and mainland Greece, then an amicable relationship between Turkey and Greek Cyprus must be formed.

Another option would be to build a liquefaction plant to produce Liquefied Natural Gas, or LNG, but the size, the scale, and the costs of building a plant big enough to handle the volumes of gas involved are immense. In today’s money, an estimate of costs for a plant capable of producing in excess of 10 million tons of LNG per annum, and coming on stream in about eight to 10 years’ time, would be in excess of $10 billion. And to put this sum in perspective, the 2010 GDP for Cyprus was $25 billion.

It is these long-time frames on projects of this scale which dictate that the governments involved should form an international committee of experts to begin considering what the options are. Planning for a project of this scale needs to start right now as a plant big enough to handle the volumes of gas involved can take up to 10 years ? and sometimes longer ? to complete. There are also the issues of funding and investment, as well as the need to seek customers, which can take time, but can also have a major influence on the size, scale and type of plant that would be needed to process the gas.

The respective governments also need to consider new legislation for natural gas imports and exploitation that attract investment rather than frightening it away. Big oil and gas financial interests will only arrive in the region if there are financial incentives to encourage investment. Any agreements with companies involved in the exploitation should also have provisions in their contracts to train government and private-sector employees.”