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Europe

Cyprus gas field to supply EU

media A fighter jet prepares to land at RAF Akrotiri, a military base Britain maintains on Cyprus, April 14, 2018. ©REUTERS/Yiannis Kourtoglou

Egypt and Cyprus signed a bilateral agreement for the construction of an underwater pipeline to export natural gas to Egypt. The deal was signed at the presidential palace by Energy Minister Yiorgos Lakkotrypis and Egypt’s Oil Minister Tarek el Molla. Cypriot gas will then be treated by an Egyptian refinery, to be sold to third parties.

The Cypriot Aphrodite gas field is part of a group of gas fields in the South East of the Mediterranean, and is located at block 12 of the Exclusive Economic Zone.

Production of gas is going to be very difficult without a solution of the Cyprus problem
Cyprus and Egypt want joint gas project 19/09/2018 - by Jan van der Made Listen

With some 140 billion cubic metres in reserve it i small compared to the Zohr and Leviathan gas fields of Egypt and Israel (with reserves of 850 and 620 billion m3 respectively) and even smaller than Israel’s Tamar field (280 billion m3).

But the joint development with Egypt may be a breakthrough. “It is the first of a few steps that need to take place before the gas can actually be exported,” says Fiona Mullan, director of Sapienta Economics, a Nicosia-based consultancy.

“What we need to see next is the actual contract between the companies. What does it mean for Europe? It is the beginning of the Eastern Mediterranean being able to supply Europe at least with LNG, Liquefied Natural Gas. So the idea is that there will be a pipeline from the Cypriot Aphrodite Field, to an energy plant which is currently idle, in Egypt, and from there the idea is to sell it to Europe,” she says.

This potentially means competition for Russian’s gas giant Gazprom, Europe’s biggest provider of natural gas.

The EU currently imports 164 billion m3 gas per year to the EU, followed by Norway, with 112 billion m3, and Algeria, with 32 billion m3. Domestically, the Netherlands provides the EU with another 42 billion m3/year.

But recent plans to expand the Russian flow of gas into Europe. “The plan of South Stream [a pipeline that was to cross the Caspian sea and enter Europe through the Balkans] was effectively killed by the European Commission, says Vasily Astrov, an economist with the Vienna Institute.

“It was seen as a project which would raise Europe’s dependence on Russia. And there were very strong objections, basically the argument that the South Stream pipeline didn’t comply with EU regulations on competition issues.

“Now the main discussion is around North Stream II. So there is already the North Stream I pipeline which runs through the Baltic Sea, and brings gas from Russia to Germany. And now there is the project of constructing North Stream II pipeline which will run parallel to the North Stream I pipeline, which would bring another 55 billion cubic meter of gas, and that would be essentially a re-orientation of Russian gas which currently runs through Ukraine,” he says.

Meanwhile, before the Cypriot-Egyptian project can take shape, a lot of problems have to be solved.

One of the most difficult ones is probably the position of Turkey.

Just last February, Turkey sent war ships to prevent Italian oil- and gas company Eni from exploiting gas reserves south of Cyprus:

“The position of the Turkish Cypriots is that they are co-founders of the Republic of Cyprus,” says Mullen.

“And as a result, they are co-owners of any natural resources in the waters around Cyprus.

“So when the Republic of Cyprus makes a significant move, you get a response both from the Turkish Cypriots and the government of Turkey objecting to this, so in the long term, production of gas is going to be very difficult without a solution of the Cyprus problem,” she says.

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