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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. Table of Contents.

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  1. 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

  2. Table of Contents The International and Regional Markets of Natural Gas (NG) The NG reserves found in the Exclusive Economic Zone (EEZ) south of Cyprus The Cyprus Economy and the Property Market The impact of the NG on the Cyprus Economy The impact on the Property Market Expected signs of Recovery

  3. 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: • Changes in Nuclear Energy - Japan Fukushima accident - high gas demand and prices in Asia- changing policies in EU. • Shale gas in USA the last 5-10 yrs. Investments on import LNG regasification terminals were made and now thinking to export liquefaction facilities

  4. 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

  5. The Intern. & Regional Markets of N.G. (cont.) source: ExxonMobil 2012 outlook for Energy

  6. The Intern. & Regional Markets of N.G. (cont.) Import dependencies arise in Asia and Europe BP Energy Outlook 2030

  7. The Intern. & Regional Markets of N.G. (cont.) Europe Energy Demand Vs Supply

  8. 3. The N.G reservoirs in the EEZ of Cyprus

  9. 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

  10. 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.

  11. 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 17,5bn in 5-10 yrs time horizon (excluding exposure in Greek market) • Subsidiary infrastructure required in Vasiliko area Vasiliko Area Energy Center

  12. 4. The CY Economy and the Property Market

  13. The CY Economy and the Property Market (cont.)

  14. The CY Economy and the Property Market (cont.)

  15. The CY Economy and the Property Market (cont.) 60% up

  16. Property Market RICS Cyprus Average price index (All types) H O W R A

  17. 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)

  18. 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

  19. 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)

  20. 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

  21. R & D Statistics 30 yrs to reach EU av.

  22. 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)

  23. Impact of NG on CY Property Market (Cont.)

  24. Impact of NG on CY Property Market (Cont.) Oil tank investments at Vasiliko by VTTV Energy Center Distribution of CY Gas on mainland

  25. 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) • R & D, etc

  26. 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……..!

  27. THANK YOU FOR YOUR ATTENTION WELCOME TO CYPRUS

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