Cypriot energy player looks to draw Gulf capital into the East Med

Exclusive: Cynergy is looking to raise up to $500 million from the region to consolidate stranded gas assets and stunted infrastructure in the basin

A picture taken on June 24, 2019 in the Mediterranean Sea off Cyprus approximately 20 nautical miles north-west of Paphos shows the drilling vessel Fatih, which was deployed by Turkey to search for gas and oil in waters considered part of the EU state's exclusive economic zone (EEZ). Cyprus has launched legal proceedings against three firms that it accuses of supporting illegal Turkish oil and gas exploration in its waters, a foreign ministry official said. Ankara considers much of the Cypriot-designated EEZ to be part of its continental shelf and granted exploration licences to Turkish Petroleum in 2009 and 2012. But on June 20, the EU threatened sanctions against individuals and companies involved in Ankara's "illegal drilling activities".
 / AFP / -

Cyprus-based Cynergy Group, an investment firm focused on the energy sector, is lobbying investors in the Arabian Gulf including sovereign wealth funds to raise as much as $500 million (Dh1.83 billion) that will be part of $10bn raised from a pool of investors used to consolidate Eastern Mediterranean gas assets.

"[The] Gulf can play an important collaborative role in bringing East Med [and] Middle Eastern assets together through Cyprus, so I'm looking at the potential of Abu Dhabi and other Gulf interests looking at employing $500m plus," Cynergy co-founder and group chief executive Mike Germanos told The National in Abu Dhabi.

"I’m not saying one investor does all. This region takes all. I see this region taking a $500m ticket on the side of the wider consolidation of regional assets,” he added.

The Cypriot firm, which first came into prominence with its plans to shake up the Eastern Mediterranean industry by looking to spend $5bn to $10bn in unlocking gas assets over the coming years, is setting its sights on Gulf sovereign wealth funds to revitalise the Eastern Mediterranean energy value chain. Cyprus’ biggest discovery is the offshore Aphrodite gasfield with estimated gas reserves of around 7 trillion cubic feet. The Israeli gas firm Noble Energy was awarded rights to explore the concession in 2008, but the Cypriot nation has yet to make progress, particularly on developing a terminal and finalising off-takers for its vast untapped resource base.

Mr Germanos, who was in the UAE capital to engage with Abu Dhabi-based energy entities as well as Gulf-based funds, said there was significant potential for capital to flow into Egyptian and Cypriot gas infrastructure, particularly liquefied natural gas terminals.

“You have a room to monetise. There will be a combination with midstream ... in Egypt, it's mostly stunted with not many cargoes passing through,” said Mr Germanos.

Egypt, the biggest player in the Eastern Mediterranean, rose to prominence following the discovery of the giant Zohr field by Italian energy major Eni in 2016.

The discovery has propelled Egypt, which had been an energy importer, to become a net gas exporter, leading the push in the region for the development of a gas export hub. The North African country has started reviving its liquefaction plants, with one at Idku exporting 800 million cubic feet of liquefied natural gas in February, more than double the volumes of 2018. Egypt has since attracted the likes of Exxon Mobil and Shell after one of its largest concession rounds, which garnered healthy interest from international majors for onshore and offshore exploration blocks.

In an interview with The National in April, Egyptian petroleum and mineral resources minister Tarek El Molla said the country planned to nearly double its LNG export capacity to 2 billion cubic feet per day by the end of 2019.

Mr Germanos believes the region is not yet prepared to fully leverage its discoveries and get gas to market and realise its ambition to become a regional hub for the fuel.

A gas output of even up to 10 trillion cubic feet (tcf) to 40 tcf over the coming years could not be accommodated by current terminals - Idku and Damietta in Egypt - which only have a collective three trains between them, observed Mr Germanos.

Cypriot plans to develop an LNG terminal have languished since 2014 but the country is keen to catch up with its neighbours in what is a geopolitically sensitive region. The country has no diplomatic relations with gas-hungry Turkey, which lies to its south in the Eastern Mediterranean, following Turkey’s invasion of its territory in 1974, which led to the division of the Cypriot state.

Cynergy believes a commercial solution to the region’s various geopolitical entanglements is a viable long-term solution.

With the company looking to raise up to $10bn to support its East Med programme, in a country whose gross domestic product is only $22bn, Cynergy’s ambitions should be well received at home.

"Cyprus is only taking its first baby steps now. It’s going to take some time but what we bring to the table is the ability for the parties to come together and get capital from sources that have not just a commercial but also a geopolitical interest in the region,” said Mr Germanos.

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