Business & Economy

Eastern Mediterranean region may play a decisive role in the supply of energy to Europe

07 December, 2012

Current developments in the energy sector at Cyprus Energy Forum

Current developments in the energy sector and the prospects from the exploitation of natural gas within Cyprus’ Exclusive Economic Zone (EEZ) as well as future cooperation with Israel were the focus of the 2nd Cyprus Energy Forum which took place, on Thursday, in Nicosia.

Addressing the forum, Cyprus Energy Service Director Solon Kassinis said the Eastern Mediterranean region may play a decisive role in the supply of energy to Europe, adding that it is estimated that there are approximately 60 tcf of natural gas of a value of 300 – 600 billion euro within Cyprus’ EEZ.

He expressed optimism that reserves within block 12 will prove to be much greater than current forecasts, adding that the next drilling is expected to take place within the 1st quarter of 2013 at a depth of 5,950 meters from sea surface.

Kasinis said studies are underway for the connection via a pipeline of block 12 with the Cyprus coast, adding however that it is not going to be an easy feat due to the ground’s morphology. Natural gas from block 12 is expected to start being pumped between 2017 and 2018, he noted, whilst work for an LNG plant in Vassiliko area, in Limassol District could be completed by 2019.

The Energy Service Director also said that prospects from the exploitation of energy reserves in the area will contribute towards energy security in Europe and will result in a dramatic growth and will enhance the geostrategic stability of the region.

On his part Acting Permanent Secretary of the Ministry of Foreign Affairs Evridipidis Evriviadis referred to the prospects present for Eastern Mediterranean countries from the exploitation of energy reserves in the region. Natural gas, he said, could act as a factor of stability for all the countries in the region.

He further said that the discovery of energy reserves within Cyprus’ EEZ has the potential of significantly changing dynamics within the area of security as well as turning Cyprus into an energy export country.

Referring to Turkish threats as regards the exploration and exploitation of natural gas within the Republic’s EEZ, he pointed out that Ankara’s actions have no legal basis. Despite the above, he added that Cyprus cannot overlook the fact that Turkey is a regional power and a neighboring country, with which Nicosia would wish to have relations of cooperation. For this reason, he said, Cyprus supports Turkey’s EU accession under certain conditions.

Addressing the forum Electricity Authority of Cyprus (EAC) General Manager Stelios Stylianou referred to the need for planning an energy strategy in Cyprus, expressing his view that right now there is none. He expressed concern over existing decision making structures due to the fragmentation of the energy sector between different ministries and bodies, something which according to Stylianou results in a non productive and complex system. To redress the above, he put forward a proposal for the introduction of a National Planning Council which will comprise energy specialists and will draft a long term plan for Cyprus.

In his concluding remarks, EAC General Manager pointed out that the people should not expect a significant reduction in energy costs once natural gas is imported - an option pursued as an interim measure before the use of Cyprus’ own reserves – explaining that operational costs will be high.

On his part Israel Ambassador in Nicosia Michael Harari referred to his country’s policy on the exploitation of hydrocarbons and the prospects for export to international markets. He said that from an energy point of view, “Israel in an island”, highlighting Tel Aviv’s relations with the region’s countries and the fact that its own energy needs have to be met first before looking into exports.

He noted however that progress in Cyprus – Israeli relations has been impressive in recent years, adding that a true prospect for strategic partnership between the two is emerging. In the years to come the governments of Nicosia and Tel Aviv should continue the open and franc dialogue already underway and look into the best possible options available with a view to promote energy matters.

Addressing the conference Pamboridis LLC Managing Partner Giorgos Pamborides referred to different studies in the Levantine region which show, as he said, the existence of 122 tcf of natural gas and 1.7 billion barrels of petrol, a fact which turns the Eastern Mediterranean into a force to be reckoned with as regards energy.

On his part Energy Stream CEO Antonis Livanios suggested a bilateral agreement between Cyprus and Israel on the common energy course be signed along with strategic cooperation with the EU. He said that LNG will be the most safe and advantageous option for both Nicosia and Tel Aviv. The two countries, he said, have no choice but to join forces.

Addressing the conference Khaznah Strategies Managing Director Peter Kaznacheeve spoke of the different scenarios on energy infrastructure. He said that the construction of a pipeline between Cyprus and Greece is next to impossible, adding that the option of LNG will provide easy access to international markets. However, at the same time he highlighted the fact that great quantities of natural gas will be needed, more capital, as well as the inclusion of other players in order for the whole operation to be viable.

The ongoing plans of constructing an LNG plant in Vassiliko was the subject matter of an address given by VTT Vassiliko Managing Director Giorgos Papanastasiou, who spoke of the advantages of Cyprus as regards the project, such as its geographic position, its EU membership, its services and the high level of education of its workforce.

Finally, the forum was also addressed by French Ministry of Finance Head of Strategic Analysis Jean Louis Tetrian who outlined the French energy policy. France’s goal, he noted, is for there to be a balance between an environmentally responsible energy production and the contribution of the sector in the economic growth of the country.

Exploratory drilling conducted by Huston-based Noble Energy in Block 12 of Cyprus’ EEZ revealed a gross natural gas reserve from 3 to 9 trillion cubic feet (tcf) with a 60% probability of geologic success. Noble is expected to extract and transfer to Cyprus natural gas by late 2018.

The Cabinet decided on October 30 for negotiations to begin on four blocks within the Republic’s Exclusive Economic Zone (EEZ) in the context of the 2nd licensing round on hydrocarbons exploration.

Negotiations are ongoing with several consortiums for hydrocarbons exploration on the blocks 2, 3, 9 and 11 the participants of which include Italian ENI, South Korean KOGAS, French Total and Russian Novatec.