Transcript Natural Gas and the Impact on Property Market in Cyprus

Conference and Plenary Meeting
of the PCC in Cyprus
Natural Gas and the Impact on Property Market
in Cyprus
Title
Speaker: Varnavas Pashoulis
Senior Land Valuation Officer, Valuation Section
(BSc Land Mgt, MBA, Proj. Man, MRICS, Member of ΕΤΕΚ)
CYPRUS LANDS AND SURVEYS DEPARTMENT
7/4/2015
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Table of Contents
1. The International and Regional Markets of Natural Gas
(NG)
2. The NG reserves found in the Exclusive Economic
Zone (EEZ) south of Cyprus
3. The Cyprus Economy and the Property Market
4. The impact of the NG on the Cyprus Economy
5. The impact on the Property Market
6. Expected signs of Recovery
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The Intern. Regional Markets of N.G. (cont.)
Energy Prediction
Energy demand/supply difficult to predict due to the
turbulent environment. Examples of failure to predict:
i.
Changes in Nuclear Energy - Japan Fukushima
accident - high gas demand and prices in Asiachanging policies in EU.
ii. Shale gas in USA the last 5-10 yrs. Investments on
import LNG regasification terminals were made and
now thinking to export liquefaction facilities
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The Intern. & Regional Markets of N.G. (cont.)
Non-OECD economies drive energy consumption growth…
• Energy growth 96% from Non-OECD, and 4% from OECD
• Gas & non-fossil fuels gain share against coal and oil
• Fastest growing energy: renewable 8,2% p.a, NG 2,1% p.a,
oil the slowest 0,7% p.a
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The Intern. & Regional Markets of N.G. (cont.)
source: ExxonMobil 2012 outlook for Energy
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The Intern. & Regional Markets of N.G. (cont.)
Import dependencies arise in Asia and Europe
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BP Energy Outlook 2030
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The Intern. & Regional Markets of N.G. (cont.)
Europe Energy Demand Vs Supply
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3. The N.G reservoirs in the EEZ of Cyprus
Granted License for
NG exploration
Noble Energy USA
(already granted)
Eni – Italy
Kogas- S. Korea
Plot Number
(block)
12
2-3
(under negot.)
Total E&P Activities
Petrolieres
(operator), NOVATEC
Overseas
Exploration &
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Production GMbH
(under negot.)
and GPB Global
Resources BV from
Russia
Total E&P Activities
Petrolieres
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11
(under negot.)
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The NG reserves found in EEZ of Cyprus
• Surveys suggest more than 100 trillion cb.f (2.831 trillion
cb.m) of reserves in the EEZ of Cyprus
• Equals almost world’s total annual consumption
• According to Noble Energy, block 12 only, is estimated to
have mean average of 7 trillion cb.f
• LNG Storage plant needed in Cyprus
cost: Phase A (6yrs) = 10bn, Phase B = 8bn, Phase C = 6bn
• Early October 2012, the government established a new
Hydrocarbon Company (KRETYK), 100% state ownership
• NG for domestic use by 2015 and commercial exploitation
by 2019
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The NG reserves found in EEZ of Cyprus (cont.)
Expected Revenue = International NG prices Vs
Extraction cost
Total capacity of 13 Blocks:
• 20 yr exploitation life span, 25% ! profit, NG price say
＄ 3,5bln/tcf (＄3,5 - ＄ 4,25/tcf), USD1,28: EUR1.
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Reserve Estimate
Reserve Value
(EUR bln)
Annual Income
(EUR bln)
Gov. Income p.a
(EUR bln)
7 tcf
24,5
1,25
0,25
15
52,5
2,65
0,66
25
87,5
4,38
1,1
50
175
8,75
≃2,19
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The NG reserves found in EEZ of Cyprus
• Forecasting on a 20 yr period ahead is risky
• Assuming 50 tcf of reserves, annual income is 2,19bl
• Cover gov. budget deficit of 17,5 bn in 5-10 yrs time
horizon (excluding exposure in Greek market)
• Subsidiary infrastructure required in Vasiliko area
Vasiliko Area
Energy Center
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4. The CY Economy and the Property Market
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The CY Economy and the Property Market (cont.)
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The CY Economy and the Property Market (cont.)
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The CY Economy and the Property Market (cont.)
60% up
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Property Market
RICS Cyprus Average price index (All types)
105
100
95
90
H
85
W O
80
R
A
75
70
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012
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Apartments
Houses
Retail
Warehouse
Office
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5. Impact of NG on CY Economy
Total expected income from N.G exploration
Revenue is to be exploited in three areas (i.e. Norwegian
Model)
Reserved to finance N.G infrastructure projects
Reserved for the Government Development
Budget and (cover loan repayments to Troika)
Reserved for Future Generations
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Impact of NG on CY Economy (cont.)
(i) DEFA – N.G. PLC company controlled by state – Totally
responsible CY Gas Internal Market – CY Gas Distr. Network
Total Est. cost €
€ 500m Phases
(A, B, C)
Phase A: €60 m
Compulsory Acquisition of
Properties and Rights
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Impact of NG on CY Economy (Cont.)
(ii.) Submarine gas pipelines (200 km) – Estimated cost
€ 1,56 bln
(iii.) Exploration (2nd round of license) Expected income from
signatures € 200m
(iv.) Construct LNG (liquefied) Terminal – Estimated cost
€ 7,8 bln
(v.) Demand for specialized services (Financial, legal, real
estate, electromechanical, engineering, construction, energy
piping, logistics etc). Human Resource Development
Authority study: Yrs 2015 to 2019 - 4.000 new jobs
(vi.) New dynamic markets for Port Authorities and shipping
industry (new ports, jetty, platforms, reservoirs etc)
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Impact of NG on CY Economy (Cont.)
(vii.) Research, Development and education will be promoted
through the N.G activities e.g
University of Nicosia: M.Sc in Oil, Gas and Energy Mgt
Frederick University: M.Sc in Oil, Gas and offshore eng.
University of Cyprus: M.Sc in Petroleum engineering
Intercollege: offers oil and gas Diplomas
 Disaster management and environmental and seashore
pollution issues
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R & D Statistics
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R & D as a % of GDP
2,50
2,00
2,01
1,86 1,87 1,88 1,87 1,83 1,83 1,85 1,85 1,92
2
1,50
CY R.D as a % of GDP
EU -27
1,00
0,50
0,49 0,50
0,37 0,41 0,43 0,44 0,43
0,35
0,30
0,25 0,26
30 yrs to reach EU av.
0,00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.400
Higher Education Graduates 2000-2010
PhD degree holders
1.200
1.000
University degree holders
989
975
930
851
TOTAL
800
1.088
1.064
Post-graduate degree holders
725
Linear (TOTAL)
618
600
512
371
400
245
229
221
176
237
265
325
216
290
265
175
227
141
212
104
116
159
216
284
345
368
385
355
372
387
0
177
369
456
427
405
96
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170
105
200
397
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
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5. Impact of N.G on Property Market
(i.) Need to establish a property strategy to
accommodate basic Infrastructure for N.G, thus:
• Master plan for the main and subsidiary uses as well
as future developments in the area (mainland and sea)
• Capacity building
• Need to rezone specific areas and define buffer zones
• Impact Assessment study for the region
• Security and safety measures for the region
(ii.) Land Acquisition Issues (compulsory acquisition,
Land Assembly, Reclamations, buy/sell/lease, property
rights)
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Impact of NG on CY Property Market (Cont.)
Calendar of Activities/Events
Year
(timing)
Investment cost
1.(a) Construction : Phase A: New 20
oil tanks at Vasiliko (357.000 m3) and
1,2 Km jetty-VTTV Vasiliko Ltd
20122014
€300 m
1.000 casual
jobs, 60 perm.
(b)Phase B: Another 9 oil tanks at
Vasiliko (286.000 m3)
1st Qrt.
2014
2.(a) New - CY N.G Distribution
Network infrastructure (Phase A)
20132014
€65m
>>
>>
(b) CY N.G Distribution Network
infrastructure (Phase B and C)
2018-
€500m
>>
>>
3. Development of LNG Terminal for
internal use and exports
2013 2019
€10blns
Economy is expected to
improve
4.(a) Estimated Revenue per year
(b) Rprt my Merrill Lynch on
viability of CY – Expected
Revenue
2018 -
€2,2 bln p.a
Repayment of CY debt
Between €1.7 to Banks €10 bln
€2.4 billion p.a
Gov. maturing debt €6bln
Gov. public fin. €1,5 bln
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Effects
Improve current
economic climate
Est. Gov. Rev. €16 m p.a.
Improve current
economic climate
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Impact of NG on CY Property Market (Cont.)
Oil tank investments at Vasiliko by VTTV
Distribution of CY Gas on mainland
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Energy Center
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6. Expected Signs of Recovery
Forecasted Real signs of ECO/PROP recovery after 2015
Signs of recovery will first appear in the industrial market,
then commercial and finally residential and tourist
market as a derived demand
The speed of recovery will depend on the strategies and
actions to be followed by the gov. to promote and secure:
 Financial stability
 Real development growth on the island
 Reorganize gov. and semi gov. Sectors
(not excluding part privatization i.e. 20%)
 Service based economy & Tourist/Marina/sailing destin.
 Modernize the existing econ. model (comp & comp. adv.)
 Managing Resources (natural, HR)
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6. Expected Signs of Recovery - Property Cycles
!
Where are we .! The question is the timing for recovery !
What do we until then ! And how we manage and best
utilize our resources……..!
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THANK YOU FOR YOUR ATTENTION
WELCOME TO CYPRUS