Friday, March 22, 2013

Cyprus natural gas

Digging a bit into the Cyprus mess, I think the
key is natural gas.
Cyprus got into trouble by joining the EU, accepting
foreign accounts from Russia when had it had its currency
problems, and then investing the money in Greece.
All three mistakes probably seemed like good ideas
at the time but, as a group, they were dumb.
Now Cyprus needs a bailout of about $10B to cover
the bank losses.  Does it have enough assets?
However ... looking at its natural gas fields, it does
have the possibility of plenty of assets.
So far, the lease held by Noble Energy (NBL) looks like
it has about 5-8 trillion cubic feet of natural gas.
Plus several more areas are under exploration that
could contain 20-30 trillion cubic feet.  Or more.
At current prices, those reserves would be worth
at least 10X its debt.

Sooo, Cyprus could sell its family jewels to cover its
debts.  The question is who will buy it?  Russia
currently makes a lot of money selling nat gas to
Europe and wouldn't like the competition if another
country sells nat gas.  That's why Gazprom wanted
to lease the gas fields but its low-ball offer was
rejected.  Maybe somebody else will jump in.

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