Fresh hopes for Cypriot gas [Gas in Transition]
It was over a decade ago when the first natural gas was discovered off the coast of Cyprus, but development has been stymied by difficulties finding a suitable route to market. However, recent positive test results at a discovery not far from Egypt’s Zohr field could mean Cyprus can finally monetise on its offshore resources, with the government expressing hope that first gas could be achieved as early as 2026.
There was encouraging news this month from Italy’s Eni, which reported “excellent” test results from an appraisal well at its August 2022 Cronos gas discovery off Cyprus. The test demonstrated that the well could produce more than 150mn ft3/day (4.25mn m3/d), and was “instrumental in progressing with the studies to select the best fast-track development option,” Eni said.
Cronos is located at Block 6, where Eni is partnered with TotalEnergies. The pair are also working together at six other blocks off Cyprus.
The two companies have committed “to progress swiftly towards the selection of the most suitable and economically viable development solution, which will contribute to the supply of gas to Europe and the region,” Eni said.
Cronos is among a number of gas finds to be made off Cyprus over the past decade and more. The play-opening Aphrodite discovery – estimated to hold up to 125bn m3 of gas – was made in 2011. The field is currently operated by a consortium of Chevron, Shell and Delek. Another discovery of note is the nearby Glaucos deposit, made by ExxonMobil at Block 10 in February 2019, and estimated to hold as much as around 230bn m3 of gas. Eni and TotalEnergies have made two more discoveries at Block 6: Calypso and Zeus.
Various options have been discussed over the years on how to export this gas. The one that attracted the most attention over the years was the EastMed project, which would have run 1,900 km from Cyprus to Greece. Initially it enjoyed strong EU support, and was included on the bloc’s Projects of Common Interest (PCI) list in 2015, putting it in line for funding and an easier permitting process.
However, Brussels went cold on the project amid questions about its economic feasibility and whether Europe would really need the extra 10bn m3/year of proposed gas supply in light of its green ambitions. Even after Russia drastically cut gas deliveries to Europe after invading Ukraine, EU interest was not revived, with policymakers instead opting for increased LNG imports to pluge the supply gap.
Alternatively, Cyprus considered developing its own LNG export terminal as well, but this plan never gained nearly as much traction.
Turning south
Cyprus’ attention has therefore shifted over the years to linking its gas fields to established exporters to the country’s south – Israel and Egypt. The new centrist government that came to power in March 2023 has put its support firmly behind this strategy. In June of that year, Cypriot energy minister George Papanastasiou described the construction of a Cypriot-Israeli pipeline as a “win-win” option.
Cypriot gas could be pumped to Israel and then converted into LNG there, if Chevron, the operator of the Israeli Leviathan and Tamar fields, goes ahead with a proposed plan to build a floating LNG terminal. Alternatively, it could be piped along with Israeli gas to Egypt, for use in the domestic market but also for re-export in LNG form from Egypt’s liquefaction terminals.
With a much shorter length than EastMed of 300 km, the Cypriot-Israeli link would be much cheaper and faster to build. It would also not have the political obstacles as EastMed, whose development has been strongly opposed by Turkey.
The plan for Cronos, on the other hand, would likely involve directly connecting the discovery with Egypt’s Zohr field, just 75 km away. Given how much gas has been found off Cyprus – conservatively around 425bn m3 according to the government – this is not necessarily an alternative option to the Cypriot-Israeli pipeline but a complimentary one.
This is a natural fit for Eni, which operates the giant Zohr field. At the time of its discovery in 2015, Zohr was estimated to hold 850bn m3 of gas. It was brought on stream two years later, helping to meet surging demand growth in Egypt and enabling the country to resume exports from its liquefaction terminals at Idku and Damietta.
In recent years, however, the field has had persistent problems with water leakages, impacting production levels. Output dropped 11% in the 2022-23 fiscal year to 24.8bn m3, even though the field was originally expected to deliver almost 29bn m3 at peak. Egypt is counting on strong performance at Zohr to meet rising energy demand, driven by strong economic and population growth.
Highlighting how energy supply has not kept up with demand, Egypt suffered a series of blackouts last summer when hot weather led to a surge in use of air conditioners. The country has had to rely increasingly on gas supply from Israel’s Leviathan field as domestic production falters, and the risk of this dependency was demonstrated last autumn, when the Israeli-Hamas war led to a one-month reduction in flow.
Fast-tracked development of Cronos could help prop up Egypt’s gas supply in the years to come. A lot will depend on how quickly Eni and TotalEnergies take a final investment decision (FID), and the pair are yet to provide guidance on this.
The Cypriot government expects it to be the first field to come on stream, in either 2026 or early 2027, energy minister George Papanastasiou told Reuters earlier this month. But government expectations can prove overly optimistic. But if Cyprus is to finally establish itself as a gas exporter, this may be the simplest and fastest road to achieving that.