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    Greece, Cyprus Push for East Med Pipeline Amidst Difficulties



Greek and Cypriot governments persuade the EU to back the East Med. natural gas pipeline route, while a set of difficulties are ahead and regional energy competition is raging.

by: Ioannis Michaletos

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Natural Gas & LNG News, News By Country, , Cyprus, Greece, Israel, Pipelines, East Med, Top Stories

Greece, Cyprus Push for East Med Pipeline Amidst Difficulties

The European Commission's recent approval of the East Med Pipeline as a Project of Common Interest (PCI) has lifted hopes both in Athens and Nicosia that the plan may eventually go ahead in coming years. More specifically, according to the Greek Ministry of Energy, the prospective project includes separate alternatives in order to cover all possibilities and interested parties.

The basic plan will see the pipeline stretch from the Leviathan field offshore Israel on to Cyprus ending in eastern part of the Island of Crete in Greece. Three alternate routes were discussed:

  • To the Peloponnesus Peninsula joint via spur with the Trans-Adriatic Pipeline (TAP)
  • From Crete to northern Greece where it would join the Interconnector Greece-Bulgaria (IGB)
  • From Crete to the Revythousa LNG terminal close to Athens. The terminal would be significantly upgraded to accomodate large amounts of gas exports thereafter

The inclusion of the proposed pipeline as a PCI enables an easier future financing of the plan by international investing houses, as well as direct funding from the EU. A crucial step would be the final acceptance as a PCI by the EU Council, which will likely take place during Greece's EU Presidency after January 1st 2014. Moreover it should be noted that the East Med Pipeline submitted proposal encompasses a past Cypriot plan of the so-called 'Trans Med Pipeline' which has been effectively merged with the aforementioned Greek plan. Thus, both countries are joined together in order to proceed with their project. The capacity of the pipeline is scheduled at 8-10 bcm per annum, while equivalent quantities could be available for the proposed LNG terminal in Cyprus. According to the authorities of these countries, both projects could function in parallel.

On the other hand, a set of technical, financial and even geopolitical factors prohibits an easy construction of such a pipeline. The sea depths in the eastern Mediterranean basin and the Aegean Sea could prove to be a great challenge, which will also make the whole endeavor one of the most expensive in the world. The most important variable though is Israel and what direction it will follow for its exports, since a large part of the designated gas quantities are scheduled to originate from Israeli offshore locations.

For the moment Tel Aviv's position is for an export of at least 40% of its proven reserves after a relevant decision of its High Court. On a political level though there are various levels of interactions between Israeli and Turkish companies that call for the construction of a pipeline into Turkey that will eventually connect with the TANAP system. The security and defense establishment of Israel is for the moment adamant on not accepting such a solution due to the deteriorating relations with Ankara on a number of bilateral issues. The US is examining the situation very carefully, but from a neutral standpoint as a set of political difficulties prohibit a final solution of an Eastern Mediterranean gas export route, in any direction.

Italy's Eni, which has a stake in Cypriot terriroty, assesed in a report that the East Med Pipeline may cost up to $20 billion and is not a feasible project. Moreover, the Italian corporation clearly favors the establishment of a Cypriot -based LNG terminal, while similar views are said to be expressed by the French Total as well. The role of the Russian Gazprom is still unclear, which looks further to the East and in particular, Lebanon, where significant reserves are said also to be found. The resolution of the Syrian crisis will play a determinating role into examining Moscow’s stance in the above developments.

Regarding the EU decision, it seems that Brussels is content on having a positive outlook of a new supply route from the Mediterranean, but on the other hand it is unlikely that it could play any strong role into any direction. Moreover, since the Southern Corridor route has been selected via the TAP, whilst South Stream is progressing steadily in the Northern Balkans, it seems likely that any plans to deliver Mediterranean gas straight into EU markets will take a while, taking into consideration that the stagnated European gas consumer markets do not need excessive amounts of the commodity for the coming years. Lastly, Israel is assessing very carefully, and has been for a number of years, the potential to export its gas directly to lucrative Asia-Pacific markets through the proposed Eilat LNG terminal.  If this is the case, the East Med Pipeline project would be effectively terminated.