Cyprus will give France's Total SA a license to drill for offshore oil and gas deposits, a move the cash-strapped country hopes will yield much-needed revenue.
Government spokesman Stefanos Stefanou said Tuesday the licensing deal, which will be signed Wednesday, covers drilling in two of 13 blocks on the southern coast that make up the country's 19,700 square mile (51,000 square kilometer) exclusive economic zone.
The two blocks lie west of a gas field - now being developed by U.S. firm Noble Energy and its Israeli partner Delek - that holds an estimated 5-8 trillion cubic feet (140-230 billion cubic meters).
The deal comes two weeks after Cyprus licensed a consortium made up of Italy's ENI SpA and South Korea's Kogas to drill in three other blocks.
New revenue from gas production would be good news for cash-strapped Cyprus, which is trying to finalize an international rescue loan of as much as (EURO)17 billion ($23 billion) - roughly equivalent to the country's entire economic output - for its ailing banks and economy.
Charles Ellinas, who heads the newly-established Cyprus National Hydrocarbons Company, said Total is looking to drill for oil which is easier to extract and deliver to markets.
Cypriot waters are estimated to hold at least 60 trillion cubic feet (1.7 trillion cubic meters) of gas, according to Ellinas. That would be plenty to cover domestic needs for decades and supply Europe's growing demand for the fossil fuel.
Ellinas said that at the going price of (EURO)7.4 billion ($10 billion) for 1 trillion cubic feet of gas, Cyprus stands to earn big profits once a planned onshore processing facility is built to produce liquefied natural gas, which can then be exported. He said the start of gas exports has been set for 2019.
Cypriot Commerce Minister Neoklis Sylikiotis said the aim is for Cyprus to become a regional energy hub. The country is now in talks with Israel, which has discovered substantial offshore gas fields of its own, on ways to jointly process their reserves at the planned Cypriot facility for export.
Lebanon could also join the project with its own potential offshore gas deposits.
However, Cyprus' gas ambitions face strong opposition from Turkey, which doesn't recognize it as a sovereign country. Cyprus was split into an internationally recognized Greek Cypriot south and a breakaway Turkish Cypriot north in 1974, when Turkey invaded after a coup by supporters of Union with Greece.
Turkey says Turkish Cypriot rights are being ignored, has claimed some of Cyprus' offshore blocks as its own and has warned that it would react strongly to gas exploration by Cyprus.
Cyprus says exploiting its natural resourses is its sovereign right backed by the United Nations and the European Union and that Turkish Cypriots can reap the benefits once a political accord reunifying the island is reached.