Cyprus licenced Italy's ENI and South Korea's Kogas for offshore gas exploration yesterday (24 January), in a boon to an economy in line for an international bailout because of its exposure to debt-crippled Greece.

Cyprus, which discovered natural gas at sea in December 2011, issued licences covering three offshore areas lying south and southeast of the island to a consortium made up of both firms.

"The discovery of hydrocarbons [around] Cyprus, in conjunction with those found in the wider Mediterranean region, create new realities and prospects for the country," Cypriot energy minister Neoclis Sylikiotis said.

Cyprus sits in the Levant Basin, an area of the eastern Mediterranean thought to be rich in largely untapped reserves.

US Noble Energy reported discovering between 141 billion to 226 billion cubic metres  in Cyprus's first attempt to find natural resources offshore in December 2011. Neighbouring Israel has made major natural gas discoveries there in the past few years.

Turkey has in the past voiced objections to the island exploring for oil or gas. Cyprus was split in a 1974 Turkish invasion after a brief Greek-inspired coup and the exploration is being carried out by the internationally recognised Greek Cypriot government (see background).

Now in line for an international bailout, Cyprus hopes the prospect of sitting on sizable hydrocarbons reserves will give its stuttering economy a boost.

The island sought aid from the EU and the IMF in June 2012 to recapitalise a banking system badly exposed to Greece. It expects to conclude in March a bailout deal anticipated to be as high as €17.5 billion, equivalent to its national output.

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In signing production sharing contracts with the consortium of the two companies, the state will earn €150 million, badly needed as Cyprus has been limping along on short-term high-yield borrowing for the past few months.

Speaking to Reuters before the signing ceremony on Thursday, Sylikiotis said separate talks with France's Total, bidding for another two blocks, were progressing well.

"There are very strong indications of gas, and possibly oil, in the area," Sylikiotis said, referring to the offshore maritime area known as the exclusive economic zone.

He said there would be synergies from the licencing to ENI and Kogas, since two of the blocks run in the path of a pipeline planned to transport gas from the Noble concession to a terminal which will convert gas into its liquefied form onshore.

Cyprus sees the discovered natural gas reserves in its economic zone as an incentive for unblocking the island’s stalled reunification talks.

Lest July, Sylikiotis told EurActiv that income sharing with the Turkish-populated Northern part of the island could be solved by creating a national hydrocarbon’s fund.