| CYPRUS PROBLEM |Politis

WHERE WILL THE NATURAL GAS PIPELINE FINALLY PASS THROUGH?

ΕΛΛΗΝΙΚΑ (GREEK) TÜRKÇE (TURKISH)

According to the prevailing Greek Cypriot analysis, it cannot be done without a solution to the Cyprus problem. On the other hand, in the event of a solution, the routes will probably change as well since, according to existing plans, the most viable approach would be the construction of a pipeline towards Turkey via the Karpass Peninsula.

So far, the greatest asset of the new Minister of Commerce George Papanastasiou is that he does not mince his words or, to be precise, he says more than his last two predecessors did. In today’s [May 28] interview with Politis he explains why Cyprus will only be able to procure Israeli natural gas over the coming years, despite the fact that Chevron on Friday told us in general and vague terms that it too is geared towards bringing gas from the Aphrodite field to Cyprus.

The inflow of natural gas from Israel is a realistic scenario: The neighbouring country has large and concentrated fields located in close proximity to each other. In particular, Tamar and Leviathan have around 30 trillion cubic feet (at least half of which is reserved) for which the subsea infrastructure for its exploitation already exists. Large quantities are already being pumped into the country. It is not difficult to build a pipeline to Cyprus within the next 2-3 years.

Aphrodite

Cypriot reserves, according to what the Minister tells us, are not easy to exploit. We all know that in the smaller but still important Aphrodite field, in block 12, two wells have been drilled since 2011 and a third is ongoing 12 years later. As a result, whatever reserves Aphrodite has are not yet considered proven. The same is true for the other fields in the Cypriot EEZ. Namely, [reserves] have been announced but not confirmed:

  • Cronos 2.5 trillion cubic feet
  • Aphrodite 4.5 trillion cubic feet
  • Calypso 3.5 trillion cubic feet
  • Glafcos 6.5 trillion cubic feet.

Under normal circumstances the above quantities, after such a long and fruitless lapse of time, the depth at which they are located, the distance between them, the market prices and the EU’s decision to turn to alternative energy sources, would be doomed to remain in the bowels of the earth. A small window of opportunity presented itself in 2022 due to the war in Ukraine and Europe’s ban of Russian gas imports. The timeframe is of course short, with Cyprus gas perhaps being eligible for some exploitation somewhere around 2030.

However, some argue, for objective reasons but also because of our own foot-dragging, that Cyprus has lost the gas game for good.

The truth

In this particular case, the truth probably does not lie somewhere in the middle. It leans towards the negative scenario. But then again, even the transfer of only Israeli gas to Cyprus, if it ever takes place, would be a positive development for a number of reasons:

* Natural gas will finally come to Cyprus. This might reduce the production of pollutants and help bring about cheaper electricity prices.

* It is possible that part of it could also be used by the Turkish Cypriot community, thus creating relationships of cooperation between G/Cs and T/Cs.

* The construction of an LNG plant would turn Cyprus into a small exporter of natural gas, thereby expanding the sectors of its economy, allowing for less dependence on the services sector.

* It will enhance the efforts to generate and export electricity from Cyprus through international projects such as the Africa – Asia Interconnector.

* Along the way the whole project will put pressure on Eni, Exxon and Total to see what can be done with Cypriot gas. In any case, if the existing pipeline generates more demand, then logically Cypriot natural gas could also be exploited.

Descalzi

Eni’s CEO, Mr Descalzi, muddied the waters a bit last week. The Italian technocrat had upset us a few years ago when he announced the discovery of a huge gas reserve in the Cypriot EEZ. The reserve shrunk, of course, a few days later. In the meantime, however, Eni’s price on the Stock Exchange managed to skyrocket, bringing in massive profits. This is how Noble Energy also played it with block 12 on the Wall Street Stock Exchange in 2011.

Descalzi, speaking last week before the Foreign Affairs Committee of the Italian Parliament, referred to the construction of the EastMed pipeline towards Italy and clarified the role that Turkey should play. According to serious analysts, what’s important to take away [from his address] is the Italian’s position that without Turkey there is no possibility of exploiting Cypriot gas. Eni says this for two reasons:

  1. Unlike Chevron (block 12) and Exxon (10), which Turkey considers to be outside the Cypriot EEZ, Eni has undertaken drilling in blocks which Turkey more or less disputes, considering them to be part of its EEZ.
  2. Eni, and to a lesser extent Total, are operating in the Cyprus EEZ area with a fixed analysis in mind. That is, that due to quantities, distances, prices and geopolitics, Cypriot gas, if it were to arise, has only one advantageous route. Turkey. Indeed, diplomatic sources say that both companies came to the Eastern Mediterranean region after consultations also with Turkey as the most likely buyer of Cypriot gas. The Americans, and in particular the then Vice President Joe Biden, had also moved in this direction, inviting Exxon to operate in the region, followed by Chevron.

Cyprus problem solution

This, of course, according to the prevailing Greek Cypriot analysis, cannot be done without a solution to the Cyprus problem. On the other hand, in the event of a solution, the routes will probably change as well since, according to existing plans, the most viable approach would be the construction of a pipeline towards Turkey via the Karpass Peninsula. In this case, the pipeline that we want to build in Vassilikos will probably be forgotten. Cyprus will be able to obtain gas through a hub in Karpasia and the Israeli, Cypriot and perhaps Lebanese reserves will move to Turkey. Without a solution, the pipeline to Turkey will be built by Israel through the Lebanese EEZ. Cypriot gas will also be channelled to Turkey at a later stage through Israel, by reversing the course of the pipelines.

Some decisions will be taken at the end of this year after appropriate arrangements have been made with the new Turkish government. In an attempt to address all these scenarios, Energy Minister Mr Papanastasiou has submitted a confidential note to the President of the Republic.

Source: WHERE WILL THE NATURAL GAS PIPELINE FINALLY PASS THROUGH?

 

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DIONYSIS DIONYSIOU | POLITIS
Director of Politis Newspaper. Born in Limassol, he studied history at AUTH (Aristotle University of Thessaloniki) and Queens College NY. He started as a journalist in 1986, working in newspapers, magazines, radio and television. Since 1999, he is a Publishing Consultant at Politis newspaper, and from 2016 its Director. He lives in Nicosia.

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