Cyprus, Israel seek gas-sharing formula to unlock eastern Mediterranean energy hub

An ownership squabble over Cyprus’ main natural-gas field is threatening to delay multibillion-dollar plans to turn the eastern Mediterranean into a major energy hub.

Prime Minister Benjamin Netanyahu and Energy Minister Yuval Steinitz are flying to Cyprus on Tuesday to spur plans to join the two countries’ electricity grids and construct a pipeline to link newly found gas fields to mainland Europe.

Standing in the way, however, is a dispute over Aphrodite, a gas field discovered in 2011 at the edge of Cyprus’ economic waters. One tip of it stretches across the border into Israel’s maritime zone.

At stake is 7 to 10 billion cubic meters of gas worth close to $1.5 billion, according to one recent estimate in Israel.

That is less than 10% of Aphrodite’s total reserves and a fraction of the gas already discovered in Israel.

Israel says it will not give up on the gas, and the companies operating on the Israeli side are ready for legal action in case Aphrodite is developed without them.

“I assume we will find a solution in good spirit so we can keep cooperating on bigger, more important things,” Steinitz told Reuters.

Several large gas fields have been discovered in the region over the past decade, and Israel and Cyprus have grown close while collaborating in their development.

Steinitz said he and his Cypriot counterpart, Yiorgos Lakkotrypis, have become good friends.

But that does not guarantee a quick solution.

“The government of Israel cannot give up, not even as a gesture of friendship, on its territories or its natural resources,” Steinitz said.

He said the governments have asked the companies to reach an understanding among themselves on how much gas is on each side.

“If they don’t reach an understanding, then we will ask a professional arbiter or a professional group... to examine the findings from both sides and decide on the proper division,” Steinitz said.

The Cypriot Energy Ministry declined to comment, but officials in Nicosia said Lakkotrypis has suggested a similar course of action.

Steinitz said during his visit that the countries may agree on a general format to solve the issue, but a final agreement could take weeks or months.

Charles Ellinas, CEO of energy consultancy e-CNHC, said this should not be a deal breaker. (Reuters)