Cyprus-Egypt to build pioneering Med pipeline
It will also be a source of secure energy supply for Europe
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.