Italy's oil and gas company Eni SpA (E - Analyst Report) has inked an exploration and production sharing contract with the Ministry of Commerce, Industry and Tourism of the Republic of Cyprus for three exploration blocks.

The consortium comprising Eni and Korean company Kogas, was officially awarded blocks 2, 3 and 9 through an international competitive tender, which was completed in May 2012. Located in the Cypriot deep offshore section of the Levantine basin, the blocks span approximately 4,800 square miles.

Eni, the operator of the three blocks has an interest of 80%, while its partner the Korean company Kogas holds a 20% stake.

With these blocks Eni has made its debut in the eastern Mediterranean island’s prospective – but controversial – offshore play. The oil and gas industry focuses on this region as it is considered rich in largely unexploited reserves.

U.S. explorer Noble Energy, Inc. (NBL - Analyst Report) is known to have found around 5–8 trillion cubic feet of natural resources in the Aphrodite gas discovery in Block 12, in 2011. Several other important gas discoveries have been made there since Noble’s expedition.

The tracts – block 2, 3 and 9 – are situated to the south and south-east of the island, while two of them rest vertically above the major gas discovery.

Cyprus is also in talks with France’s Total SA (TOT - Analyst Report), which has bid for two other blocks. The bid is expected to close soon.

The energy minister of the island is of the opinion that the licensing to Eni and Kogas would create synergies. Two of the blocks move in the path of a pipeline proposed to carry gas from the Noble concession to a terminal, where the gas will be converted into its liquefied form onshore.

Eni holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months. Royal Dutch Shell plc (RDS.B - Snapshot Report) is another oil and gas stock, carrying a Zacks Rank #1 (Strong Buy) and thus expected to perform better over the next one to three months.