Conference and Plenary Meeting of the PCC in

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 3/17/2018 1

Conference and Plenary Meeting of the PCC in Cyprus 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 3/17/2018 2

Conference and Plenary Meeting of the PCC in Cyprus 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 prices in Asia- changing 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 3/17/2018 3

Conference and Plenary Meeting of the PCC in Cyprus 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 3/17/2018 4

Conference and Plenary Meeting of the PCC in Cyprus The Intern. & Regional Markets of N. G. (cont. ) source: Exxon. Mobil 2012 outlook for Energy 3/17/2018 5

Conference and Plenary Meeting of the PCC in Cyprus The Intern. & Regional Markets of N. G. (cont. ) Import dependencies arise in Asia and Europe 3/17/2018 BP Energy Outlook 2030 6

Conference and Plenary Meeting of the PCC in Cyprus The Intern. & Regional Markets of N. G. (cont. ) Europe Energy Demand Vs Supply 3/17/2018 7

Conference and Plenary Meeting of the PCC in Cyprus 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 Total E&P Activities Petrolieres (operator), NOVATEC Overseas Exploration & Production GMb. H and GPB Global Resources BV from Russia Total E&P Activities Petrolieres 3/17/2018 Plot Number (block) 12 2 -3 (under negot. ) 9 (under negot. ) 11 (under negot. ) 8

Conference and Plenary Meeting of the PCC in Cyprus 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 (6 yrs) = 10 bn, Phase B = 8 bn, Phase C = 6 bn • 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 3/17/2018 9

Conference and Plenary Meeting of the PCC in Cyprus 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, 5 bln/tcf (＄3, 5 - ＄ 4, 25/tcf), USD 1, 28: EUR 1. Reserve Estimate 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 3/17/2018 Reserve Value (EUR bln) 175 8, 75 ≃2, 19 10

Conference and Plenary Meeting of the PCC in Cyprus 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, 19 bl • 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 3/17/2018 11

Conference and Plenary Meeting of the PCC in Cyprus 4. The CY Economy and the Property Market 3/17/2018 12

Conference and Plenary Meeting of the PCC in Cyprus The CY Economy and the Property Market (cont. ) 3/17/2018 13

Conference and Plenary Meeting of the PCC in Cyprus The CY Economy and the Property Market (cont. ) 3/17/2018 14

Conference and Plenary Meeting of the PCC in Cyprus The CY Economy and the Property Market (cont. ) 60% up 3/17/2018 15

Conference and Plenary Meeting of the PCC in Cyprus Property Market RICS Cyprus Average price index (All types) H W O R A 3/17/2018 16

Conference and Plenary Meeting of the PCC in Cyprus 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 3/17/2018 17

Conference and Plenary Meeting of the PCC in Cyprus 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 € € 500 m Phases (A, B, C) Phase A: € 60 m 3/17/2018 Compulsory Acquisition of Properties and Rights 18

Conference and Plenary Meeting of the PCC in Cyprus Impact of NG on CY Economy (Cont. ) (ii. ) Submarine gas pipelines (200 km) – Estimated cost € 1, 56 bln (iii. ) Exploration (2 nd round of license) Expected income from signatures € 200 m (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) 3/17/2018 19

Conference and Plenary Meeting of the PCC in Cyprus Impact of NG on CY Economy (Cont. ) (vii. ) Research, Development and education will be promoted through the N. G activities e. g ØUniversity of Nicosia: M. Sc in Oil, Gas and Energy Mgt ØFrederick University: M. Sc in Oil, Gas and offshore eng. ØUniversity of Cyprus: M. Sc in Petroleum engineering ØIntercollege: offers oil and gas Diplomas Ø Disaster management and environmental and seashore pollution issues 3/17/2018 20

Conference and Plenary Meeting of the PCC in Cyprus R & D Statistics 30 yrs to reach EU av. 3/17/2018 21

Conference and Plenary Meeting of the PCC in Cyprus 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 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) 3/17/2018 22

Conference and Plenary Meeting of the PCC in Cyprus 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 m 3) 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 m 3) 1 st Qrt. 2014 2. (a) New - CY N. G Distribution Network infrastructure (Phase A) 20132014 € 65 m >> >> (b) CY N. G Distribution Network infrastructure (Phase B and C) 2018 - € 500 m >> >> 3. Development of LNG Terminal for internal use and exports 2013 2019 € 10 blns 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 € 6 bln Gov. public fin. € 1, 5 bln 3/17/2018 Effects Improve current economic climate Est. Gov. Rev. € 16 m p. a. Improve current economic climate 23

Conference and Plenary Meeting of the PCC in Cyprus Impact of NG on CY Property Market (Cont. ) Oil tank investments at Vasiliko by VTTV Distribution of CY Gas on mainland 3/17/2018 Energy Center 24

Conference and Plenary Meeting of the PCC in Cyprus 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: Ø Financial stability Ø Real development growth on the island Ø Reorganize gov. and semi gov. Sectors (not excluding part privatization i. e. 20%) Ø Service based economy & Tourist/Marina/sailing destin. Ø Modernize the existing econ. model (comp & comp. adv. ) Ø Managing Resources (natural, HR) 3/17/2018 25

Conference and Plenary Meeting of the PCC in Cyprus 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……. . ! 3/17/2018 26

Conference and Plenary Meeting of the PCC in Cyprus THANK YOU FOR YOUR ATTENTION WELCOME TO CYPRUS