Cyprus-Egypt to build pi­o­neer­ing Med pipe­line

It will also be a source of se­cure en­ergy sup­ply for Europe

Financial Mirror (Cyprus) - - CYPRUS -

Nicosia and Cairo on Wed­nes­day signed an in­ter-state agree­ment paving the way for the Mediter­ranean’s first sub­sea pipe­line to carry Cyprus nat­u­ral gas to Egypt for re­ex­port to Europe.

Af­ter sign­ing the agree­ment, Cypriot En­ergy Min­is­ter Ge­orge Lakkotrypis and his Egyp­tian coun­ter­part Tarek El-Molla called the deal a land­mark for de­vel­op­ing Cyprus gas and en­ergy pro­duc­tion in the wider re­gion.

Sup­plies would be di­rected to LNG plants in Egypt, some 645 kilo­me­tres from Cyprus’ Aphrodite gas field.

Gas dis­cov­er­ies off Cyprus, Is­rael and Egypt could cre­ate a cen­tre of gas pro­duc­tion on Europe’s doorstep.

The Euro­pean Union of­fers an at­trac­tive mar­ket for the re­gion as Brus­sels moves to di­ver­sify sup­ply away from Rus­sia.

“To­day’s sign­ing is an im­por­tant mile­stone, not only for Cyprus but also the en­tire Eastern Mediter­ranean re­gion,” said Lakkotrypis on Wed­nes­day.

“The Pipe­line In­ter­gov­ern­men­tal Agree­ment…is, in fact, the first of its kind in our shared re­gion, reaf­firm­ing once more the close tra­di­tional ties be­tween Cyprus and Egypt,” he added.

He said the agree­ment was cru­cial in ef­forts of both coun­tries to chan­nel gas from the is­land’s ‘Aphrodite’ reser­voir to Egypt and at­tract multi-bil­lion in­fra­struc­ture in­vest­ments.

A joint com­mit­tee will be set up in 30 days to over­see the project.

Egyp­tian Oil Min­is­ter El-Molla said the sign­ing was a pos­i­tive step to­ward monetization gas dis­cov­er­ies in Cyprus, as well as en­cour­ag­ing fur­ther ex­plo­ration ac­tiv­i­ties in the Med.

“En­ergy is a win-win op­por­tu­nity for the new po­lit­i­cal part­ner­ships, the in­te­gra­tion of the mar­kets and the guar­an­tee of sta­bil­ity and growth in the re­gion,” El-Molla said.

“Egypt has the po­ten­tial to be­come a phys­i­cal, re­gional trad­ing hub by shar­ing fu­ture nat­u­ral gas re­sources, ex­port and trans­porta­tion in­fra­struc­ture of Egypt with neigh­bour­ing coun­tries,” he added.

Texas-based No­ble En­ergy in 2011 made the first dis­cov­ery off Cyprus in the Aphrodite block es­ti­mated to con­tain around 4.5 tril­lion cu­bic feet of gas but it has yet to be ex­tracted.

But the Aphrodite con­sor­tium – also in­clud­ing Is­rael’s Delek and Royal Dutch Shell - seeks to rene­go­ti­ate its rev­enue­shar­ing con­tract on the gas field be­fore it plans to tap the gas. It is cur­rently in talks with the Cypriot govern­ment over a big­ger share of the prof­its to make the project vi­able. The dis­cov­ery of nearby Egypt’s huge Zohr off­shore reser­voir in 2015 has stoked in­ter­est that Cypriot wa­ters hold the same riches.

Wed­nes­day’s agree­ment sets the frame­work for co­op­er­a­tion be­tween the two coun­tries which is backed by the EU in its search for se­cure en­ergy sources.

“Af­ter all, we are es­sen­tially talk­ing about a Euro­pean pipe­line, in­tended to trans­port Cypriot nat­u­ral gas to Egypt for re-ex­port to Europe in the form of liqui­fied nat­u­ral gas (LNG),” said Lakkotrypis.

“Ul­ti­mately…the pipe­line will al­low for the trans­port of the first mol­e­cules of East Med gas to the EU, thus con­tribut­ing to the Union’s much sought-af­ter se­cu­rity of sup­ply and di­ver­si­fi­ca­tion routes,” he added.

The pres­ence of Euro­pean Com­mis­sion rep­re­sen­ta­tive Anne-Charlotte Bournoville at the sign­ing cer­e­mony un­der­lined the im­por­tance Brus­sels at­taches to the move.

She said Brus­sels strongly sup­ports the de­vel­op­ment of the East Med re­gion as a gas hub and a fu­ture gas sup­plier to the EU.

“We highly value gas sup­plies from the re­gion as a ma­jor al­ter­na­tive source and route which can make a valu­able con­tri­bu­tion to our EU di­ver­si­fi­ca­tion pol­icy,” Bournoville said.

She said Europe was a very at­trac­tive mar­ket for East Med gas, be­cause it would con­tinue to im­port a lot of gas due to the de­pres­sion of do­mes­tic re­sources and be­cause it has a deeply in­te­grated and com­pet­i­tive gas mar­ket.

“This com­bined with the geo­graphic prox­im­ity and the mag­ni­tude of re­sources in the re­gion makes us ideal part­ners in work­ing to­gether to bring for­ward the very sig­nif­i­cant in­vest­ment that will be needed to tap the huge re­sources of the Eastern Mediter­ranean,” Bournoville said.

She ar­gued that de­spite a num­ber of dif­fer­ent ex­port routes which were avail­able to con­nect Europe with the Eastern Mediter­ranean, they did not pre­clude each other and could be mu­tu­ally re­in­forc­ing.

The EU at­taches high i mpor­tance to pro­mot­ing LNG as an al­ter­na­tive source of sup­ply and the use of the ex­ist­ing LNG ter­mi­nals in Egypt.

Bournoville said the EU would con­tinue play­ing the role of fa­cil­i­ta­tor and pro­vid­ing po­lit­i­cal sup­port, diplo­macy, tech­ni­cal sup­port and fi­nanc­ing for the de­vel­op­ment of East Med gas.

Lakkotrypis said the agree­ment con­cerns at this stage Cyprus and Egypt but hailed it as a model for re­gional co­op­er­a­tion.

The agree­ment pro­vides that Cyprus’ nat­u­ral gas will be both re-ex­ported, as well as used for do­mes­tic con­sump­tion.

Con­struc­tion of the pipe­line de­pends on how fast com­mer­cial agree­ments ad­vance with the in­vestors. Cyprus aims for nat­u­ral gas to start flow­ing to Egypt’s LNG fa­cil­ity in 2022, there­fore gen­er­at­ing its first rev­enue from nat­u­ral gas in the same year.

Cairo used to ex­port gas to coun­tries in­clud­ing Is­rael and Jor­dan un­til a few years ago as pro­duc­tion and ex­plo­ration de­clined.

Egypt, now an im­porter, is ex­pected to be­gin meet­ing all its needs in 2018, thanks to pro­duc­tion from the Eni-op­er­ated Zohr field.

It has wider am­bi­tions of once again sup­ply­ing other coun­tries and has en­acted a new law that al­lows pri­vate com­pa­nies to im­port gas and re-ex­port it through the coun­try’s LNG fa­cil­i­ties.

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