ATHENS – Cyprus President Nicos Anastasiades, Egypt’s President Abdel-Fattah el-Sissi and Greek Prime minister Alexis Tsipras endorsed a gas export pipeline from Cyprus to Egypt and the EastMed gas pipeline at a bilateral and trilateral meeting in Nicosia last week.
During a visit to Cyprus on November 20, el-Sissi and Anastasiades reportedly agreed to start talks in December towards an agreement to build the pipeline to deliver natural gas to Egypt from Cyprus’ Aphrodite gas field.
A day later, at a meeting that included Tsipras, the three leaders discussed the new gas deposits in eastern Mediterranean.
“During the last few days we had successful bi- and tri-partite meetings in Nicosia involving the heads of state of Cyprus, Egypt and Greece. Politically very important to the countries involved but also in promoting stability and cooperation in the region,” Cyprus Natural Hydrocarbons Company CEO Charles Ellinas told New Europe on November 24, following a conference by IENE in Athens. He added that these meetings might now be enlarged to include Italy and Lebanon, and indirectly Israel.
“The odd man out of course is Turkey who does not recognise Cyprus. And I say the odd man out, because all other countries in the region recognize Cyprus’ right to explore its EEZ (Exclusive Economic Zone) and export its hydrocarbons to international markets,” Ellinas said.
“The meetings endorsed a gas export pipeline from Cyprus to Egypt and the EastMed gas pipeline. Unfortunately these were portrayed as done deals. In other words the pipelines are now reality and will be constructed. This, of course, is not the case. These are inter-governmental framework agreements facilitating the pipelines. Even though essential, before these become projects we have the small matter of securing gas sales agreements. It’s only then that the oil and gas companies will make final investment decisions and commit the multi-billion dollar investments required for construction,” he said.
Ellinas repeated earlier comments that the challenge in implementing these projects “has been, and remains to be, global gas prices. These are low and with the relentless penetration of renewables and the glut of gas/LNG (liquefied natural gas) in the market they will remain low”.
He stressed that new gas projects that strive to export hydrocarbons from the East Mediterranean will only succeed if they keep costs low and can work within the price range prevailing in the global gas markets.
“I hope that the gas pipeline talks between Egypt and Cyprus companies lead to success and that Aphrodite gas secures export markets through this route. But this is a challenge,” Ellinas said, adding that if it were easy, US energy company Noble and its partners “would have done it by now, after five years of trying. They would be the first to monetise their assets”.
Israeli prospects to export gas to Egypt are challenging. “In addition to other problems, Egypt reconfirmed recently that the International Chamber of Commerce Court of Arbitration decision ruling that the Egyptian companies must pay IEC close to $2 billion is still an obstacle. And, of course, any such exports face the same gas price challenges I described above for Cyprus gas going to Egypt for liquefaction and export,” the Cyprus Natural Hydrocarbons Company CEO said.
The European Union is looking to import newly discovered gas supplies from the East Mediterranean to increase its energy security. Ellinas said that combining all gas resources of Israel, Cyprus and Egypt would create a much bigger pool, which could be more attractive to Europe. “However, the price issue will still be the main limitation. It is difficult to see how East Med gas can reach Europe at prices within average annual gas price prevailing in Europe, of the order of $5/mmBTU. More expensive gas will find it difficult to find buyers,” he said.
On the positive side, drilling is restarting in Cyprus with Italian energy major ENI planning to drill in Block 6 end of November, with more to follow next year, Ellinas said, adding, “Prospects look good. However, the main problem is not discovering more gas. Securing gas sales exports is the challenge”.
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