Novatek Shows Interest in Cyprus Offshore Oil, Gas Licenses

OAO Novatek (NVTK), Russia’s second-biggest natural-gas producer, is looking at bidding for licenses to explore off Cyprus after the island nation’s first gas discovery attracted global companies.

Leonid Mikhelson, Novatek’s billionaire chief executive officer, flew to Cyprus for talks yesterday, Neoklis Sylikiotis, Cyprus’ commerce and industry minister, told reporters in Nicosia today. The country is accepting applications for a second licensing round until May 11.

Houston-based Noble Energy Inc. (NBL) reported the first discovery off Cyprus’s coast in December, with results from the Cyprus A-1 well indicating as much as 8 trillion cubic feet of gas. The find prompted “a lot of interest” in the area, Sylikiotis said.

Cypriot President Demetris Christofias also met with Mikhelson and a Russian delegation including OAO Gazprombank Chairman Andrei Akimov, said Phidias Pilides, the chairman of the Cyprus Chamber of Commerce and Industry.

Novatek’s press service confirmed the company is considering participating in the announced tenders.

The Siberian company’s natural-gas production and sales are now limited to Russia where state-run OAO Gazprom (GAZP), the world’s biggest producer, controls the pipeline network and exports. Novatek ended a concession agreement last year to its only exploration project outside Russia, the El-Arish project in Egypt, after drilling didn’t find commercial prospects.

Gas Liquefaction

The Russian gas producer may invest in Cyprus’s gas industry, including gas production, transport and processing, if it is successful in the licensing round, Pilides said by phone from Nicosia. Liquefaction and petrochemical projects may follow, he said.

Chinese companies have already submitted proposals for construction of a gas facility, Sylikiotis said last week.

The east Mediterranean island is working with Israel, 300 miles (480 kilometers) south across the sea, on plans to build a pipeline to link their gas fields before the fuel is liquefied for export to Europe or Asia, Israeli Prime Minister Benjamin Netanyahu said Feb. 16.

Cyprus must hold a “considerable” stake in a proposed liquefaction plant to export its gas, Sylikiotis said on March 28. As construction costs will be “extremely high,” Cyprus is seeking “multiparty cooperation with the involvement of other important countries and energy giants,” he said at the time.

To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net; Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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