Cooperation: Security and the East Mediterranean Energy Sector
The Greek Prime Minister Alexis Tsipras has now met with the President of Cyprus Nikos Anastasiades and the President of Egypt Abdel Fattah el-Sisi in Cyprus in a meeting that took place on the 29th of April 2015. The main topics on the table were those of the delineation of the exclusive economic zones between the three states, maritime security of the East Mediterranean and the potential for cooperation in the energy sector.
It is well known, that the current situation in Libya could have the potential to destabilize the region. This fact could prove devastating for the success of the 2nd international offshore licensing round for 20 blocks in the Ionian Sea and the Sea on the South Crete, which Greece is currently running. This is because coupled with the low oil prices, and the political changes in Greece, the uncertainly of Libya will add one more factor which any company that is thinking of bidding in this competition will inevitably have to take under consideration. Especially, since this is a factor of safety for anyone who wishes to develop oil and gas production facilities in the area.
It is obvious that if these countries want to unlock the potential of the region as an alternative energy source for Europe, they must take very some very big steps towards regional cooperation. Firstly, they must secure the whole region through military operations, which will reassure the oil and gas companies that nothing will interfere with their operations. Such policy can be implemented with the creation of a joint military force, assigned with the task of ensuring the safety and stability of the Eastern Mediterranean Sea.
With the oil price level having settled between 55$ - 65$ per barrel, the upstream outlook seems particularly gloomy. The exploration of hydrocarbons on deep-water areas is a very risky and expensive process, so co-operation is needed in order to optimize such operations and make them as cost effective as possible. Hopefully this meeting in Cyprus has sent the right message to the industry, and the announcements that will follow will be targeted towards minimizing the concerns of the industry over the political risk of the region.
However, the equation of South-East European natural gas production could prove to be more complex than anticipated. The discussions over the construction of Turk Stream, or the potential for further natural gas volumes finding their way to Europe from the Middle East via the Trans Anatolian Line, can also add additional noise to this. This is mainly due to the fact that any regional production from offshore wells will have to compete against gas from onshore wells, which adding the transportation costs could still prove to be more competitive.
Thus, according to a number of experts, in order to unlock the full potential of the region, the first commercial target for the natural gas from the regional fields of Cypriot and Israel must be the local – regional - markets. Solutions such as that of Compressed Natural Gas (CNG) could prove to be beneficial allowing for the cheapest transportation of natural gas, compared to pipeline and Liquefied Natural Gas (LNG) options, between distances of maximum 2500 km. Technology that becomes even more relevant after the recent merger between Shell and BG Group. This is because any project which involves assets of BG will probably be delayed, and a prime example could very well be the LNG export terminal of BG in Egypt, which was favored for being used for the natural gas production of Cyprus and Israel.
From a geopolitical point of view the stability on the region can only be guaranteed if Cyprus, Egypt, Greece and Israel find a way to cooperate, and launch a common strategy regarding both the maritime security of the region as well as energy cooperation. The grounds for the latter are clearly paved via the EU strategy for Energy Union, as well as the PCI projects that are targeting this region, and enjoy the full support of the EU, allowing them to enjoy a fast track process and easier access to funds.
Athanasios Pitatzis is Member of the Greek Energy Forum. The opinions expressed in the article are personal and do not reflect the views of the entire forum or the company that employs the author. Follow Greek Energy Forum on Twitter at @GrEnergyForum and Athanasios at @thanospitatzis