Optimism on Cyprus Gas Amidst Political Obstacles
Prospects for the development of Cypriot natural gas reserves have received a boost lately, according to the commentary and findings of local and regional stakeholders gathered at the 2nd Cyprus Energy Forum held in Nicosia.
The general director of Cyprus' Ministry of Energy, Solon Kassinis, relayed to the public that his country’s offshore Exclusive Economic Zone (EEZ) is estimated to hold 60 trillion cubic feet of gas and the Block 12, known also as Aphrodite that is being explored by Noble Energy, has around 10 billion cubic feet, although final estimation will be made in March 2013 when the last drill in depth of 6 kilometers will commence.
Kassinis assured the stakeholders that although an offshore pipeline connecting Block 12 with a potential LNG installation onshore is a costly endeavor, it is technically feasible and in fact the flow of the gas could commence in mid-2017, whereas the LNG terminal would be fully functional by early 2019.
The Cypriot official also expressed his views that the Cyprus-Israel natural gas collaboration is moving along but cited his concerns that Tel Aviv is hesitant into reaching a final ground on where and how the gas is going to be transferred in the world markets. His overall view was that Eastern Mediterranean gas reserves are crucial in terms of European energy security.
The high-level official from Cyprus' ministry of foreign affairs, Euripides Evriviades, moved along in similar lines, but also added on the political obstacles surrounding the gas reserves, and more specifically the Turkish stance that until so far seems hesitant into agreeing of the country's EEZ and subsequently its right to explore these reserves.
The President of a Cypriot electricity company, Stelios Stylianou, cited another domestic political obstacle and that is the multitude of agencies being preoccupied with natural gas issues, prohibiting in many cases the formation of a common strategy to be followed. He also added that in some cases political patronage in strategies related to natural gas exploration have negative consequences for a smooth exploration of the reserves and that the country needs an over sighting body as soon as possible to take charge on what best policy should be implemented.
The Israeli Ambassador to Cyprus, Michael Harari, commented on the excellent relations his country enjoys with Cyprus on the energy sector and gave his country's view on why it delays to proceed in a clear cut policy for future gas exports. He emphasized the fact that Israel wants first to ensure a 100% future cover of its domestic needs and thus it needs some time in order to examine that aspect.
Lastly the owner of the energy company Pamboridis LLC, George Pamporidis, expressed his optimist view that the Eastern Mediterranean contains in total 122 trillion cubic feet of gas and 1.7 billion barrels of oil, the vast majority of those to be located in either Cypriot or Israeli EEZ's. He then added that these are more than enough to cover both countries needs for decades to come, therefore they should both proceed fast into establishing a joint venture LNG terminal for mass exports, mostly to Europe. It is interesting to note that he also commented on the Turkish role where he pointed out that an energy connection between Cyprus and Turkey would be cost effective and should the political problems between the two countries resolve that strategy could be followed as well.
Overall, it seems that at a purely technical level, all stakeholders agree on the abundance of gas reserves in the region and gave some thoughts as to the best way to proceed with exploiting them. What is of importance though, and not solemnly depending on either Cyprus on Israel, is the wider political climate in the region, such as Turkey's stance that could increase political risk for investments considerably or the deteriorating situation in Syria that could spread into destabilizing Lebanon and the Levantine basin.
Moreover the political climate in the nearby locales of Gaza, Egypt and also Libya has to be taken into consideration for an eventual windfall of natural gas extraction and transportation investments in the Eastern Mediterranean. Israel from its part is also assessing the situation in both the Palestine territories and Jordan so as to use its own gas to fulfill their domestic needs for the coming decades, but this could only be achieved if a long-term normalization of relations is achieved between Tel Aviv and Ramallah. Should Israel achieves that goal then its collaboration with Cyprus will weaken to an extent since their gas strategies will diverge, with the former looking to the East and the latter to the West for exports.
Last but not least, the EU has paid most of its focus into establishing the "Southern Corridor" strategy of transferring Azeri gas to Europe through Turkey and the Balkans, but has not until the time being developed any concrete policy on the newly found gas offshore Cyprus. This is also an important factor for consideration for any potential investor, since the EU seems to be the main market where this gas is destined to.