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After crippling bailout, Cyprus eyes energy development

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(Globalpost/GlobalPost)

By Michele Kambas

NICOSIA (Reuters) - Cyprus said on Friday it would seek further diversity to its economy and focus on developing its offshore energy reserves as it struggles to rally from the austerity inflicted by an international financial bailout.

The Mediterranean island faces the prospect of a double-digit contraction in growth over the next two years after bank savers were forced to pay for the recapitalisation of its two largest banks, heavily exposed to debt-crippled Greece.

In return for 10 billion euros (8.5 billion pounds) in international aid, Cyprus's banking sector has been left in tatters by a raid on deposits, known as a "bail-in". As a result, the banking sector, as a proportion to national output, will shrink to 350 percent of GDP compared to a previous 550 percent.

In coming months, the island would turn to energy, but also to investments in tourism through the licensing of casinos, as well as farming, in an attempt to recoup lost ground, Cypriot President Nicos Anastasiades said in a statement.

"Any attempt to gloss over the tough measures imposed upon us would be an indication of weakness in comprehending the real problems society now faces, and a lack of vision and decisiveness from the state in restarting the economy," he said.

U.S. company Noble Energy <NBL.N> and the Cypriot government announced in 2011 they had discovered gas deposits of around 7 trillion cubic feet, worth an estimated $80 billion. Earlier this year the Cypriot government also signed production sharing agreements with another three companies for other fields.

Aphrodite, as the Noble gas field is known, has more gas than Cyprus could use in over a century, so the government hopes to boost its revenues through exports to the EU. An LNG plant would process any reserves for dispatch to Europe.

Noble is expected to start an appraisal drilling on Aphrodite this year to verify initial finds.

"We will go ahead with the construction of an LNG terminal for Cyprus," Anastasiades said, essentially reaffirming comments from previous officials on the issue.

He said technocrats had been asked to come up with an energy policy roadmap over the next two weeks.

Government officials have previously said they hoped natural gas production could start by 2018.

Cyprus's attempts to tap offshore wealth have been met with objections from Turkey, which invaded the island's north after a brief Greek inspired coup in 1974. Ankara says natural wealth on the island also belongs to Turkish Cypriots, who run an unrecognised breakaway state in northern Cyprus.

(editing by Ron Askew)

http://www.globalpost.com/dispatch/news/thomson-reuters/130419/after-crippling-bailout-cyprus-eyes-energy-development