LONDON — Cyprus, seeking to rebuild its economy after the collapse of its banking industry, will announce on Thursday an agreement with Total, the French oil giant, to develop a plant to liquefy natural gas, the Cypriot energy minister said.
Many questions remain, including where the gas would come from, given that Cyprus’s own offshore natural gas reserves have yet to be developed — or even fully explored. But the government is intent on liquefying natural gas to turn it into a shippable export product, part of a long-term strategy to pull the economy out of the deep recession that followed its financial crisis this year.
The deal with Total is highly speculative, though. The pact will be nonbinding and will depend on Total’s discovering gas in the offshore areas it is now exploring.
“Total follows with interest and supports the government’s efforts to promote the development of a gas liquefaction project in Cyprus, whose membership in the E.U. is a major asset,” the company said.
Building the facility, which could cost as much as $6 billion, “is not going to solve all the problems,” the energy minister, Yiorgos Lakkotrypis, a former Microsoft executive, said in an interview on Tuesday in London. “But it is going to go a long way for psychological reasons.”
Converting natural gas to liquefied form makes it feasible to export by ship, rather than requiring the construction of new pipelines.
Cyprus is still years away from having a natural gas industry of any sort. But the involvement of Total would give credibility to the effort. “What it potentially brings is an experienced player into the monetization of Cypriot gas,” said Catherine Hunter, an analyst at IHS, a market research firm in London.
Cyprus also probably hopes that Total would confer a kind of European seal of approval to ward off potential opposition from Turkey, which still controls the northern part of the island, a legacy of its 1974 invasion of Cyprus. Turkey objects to the Cypriot government’s awarding exploration tracts to foreign companies on the grounds that any oil and gas wealth should be shared with the island’s Turkish Cypriot residents.
Ms. Hunter said a liquefied natural gas, or L.N.G., plant on Cyprus might be eligible for European Union funds on the grounds that a new source of gas within Europe would contribute to energy security and create competition for dominant suppliers like Gazprom of Russia.
But Turkish hostility is only one of the obstacles to Cyprus’s gas export ambitions. The biggest question mark lies over the availability of the gas itself.
Noble Energy, based in Houston, found a large gas field called Aphrodite in deep water off southern Cyprus in 2011. Originally the amount of gas was estimated at five trillion to eight trillion cubic feet. But after Noble conducted further testing, Mr. Lakkotrypis said, the estimate was lowered to 3.6 trillion to six trillion cubic feet.
Either way, that is a lot of gas. If Cyprus used gas instead of burning fuel oil for most of its needs, about 10 percent of that would be enough to power the country for 20 years, Mr. Lakkotrypis said.
Yet it may not be enough to supply an L.N.G. facility by itself, analysts say. The industry rule of thumb is that a single-unit L.N.G. facility, which chills the gas to a liquid, requires about six trillion cubic feet of gas to make the plant economically viable.
A two-unit plant, which Mr. Lakkotrypis said could cut unit costs 30 percent, would require about 12 trillion cubic feet, far more than Cyprus’s estimated reserves.
It is possible that more gas will be found. Both Total and the Italian energy company Eni are exploring. Cyprus is in an area called the Levantine basin, where exploration began only in the last couple of decades and which the industry thinks contains large amounts of gas.
Cyprus has already identified the site for the L.N.G. plant at Vasilikos, an industrial zone on the south coast of the island, and is beginning the design work. Noble has been helping with that effort, but Mr. Lakkotrypis says that Total would probably be in charge. “Only the likes of Total can be the operator,” he said.
In some respects, building the plant could take on a life of its own. Mr. Lakkotrypis said construction would employ about 4,000 people — enough to make at least a small dent in the 75,000 unemployed. Cyprus, he said, is already on its way to becoming a regional hub for the energy industry.
Noble, which has Israeli partners, has found a very large field called Leviathan in Israeli waters not far from the boundary with Cyprus. J. Keith Elliot, Noble Energy’s head of eastern Mediterranean operations, said in an interview this summer that the company thought there was more to find in its own exploration block and in others. “In our view there is quite a bit of exploration left to do,” he said.
But finding more gas would take time. There have been hopes that Israeli gas from Leviathan might go to a Cypriot plant, if built. But talks on the subject have yet to produce an agreement, and Israel has many options — including building its own L.N.G. facilities and sending gas by pipeline to its neighbors.
There are questions, though, about who would buy the gas. Demand for L.N.G. has been weak in Europe of late and the production of shale gas in the United States could soon lead to American exports. “Global dynamics in the L.N.G. market paint an uncertain picture for future demand,” said Katan Hirachand, managing director for energy project finance at Société Générale in London.
