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East Med natgas cooperation: Mission (im)possible?

01 May, 2013

* Cyprus-Lebanon-Israel in East Med oil and gas alliance? Basin may hold 100 tcf; Cyprus goes ahead with natgas plant *

Cyprus has not yet realised it, but it has been given a golden opportunity to help develop a regional energy roadmap with economic and political benefits to the island and its neighbours.
President Nicos Anastasiades announced on Friday, within the framework of a package of measures to revive the economy, generate growth and create jobs that his government will go ahead and build a natural gas liquefaction terminal in the Vassilikos area.
This plant should, initially, satisfy the island’s energy needs, with ready liquefied natural gas imported over the next few years and coming on stream into the national electricity grid in order to reduce carbon emissions generated by the EAC’s diesel powered stations.
With an estimated 100-120 trillion cubic feet of natural gas reserves waiting to be explored and pumped out from offshore gasfields lying between Cyprus, Israel and Lebanon, the Vassiliko terminal could also act as a common production platform for the eastern neighbours that have yet to decide on a similar liquefaction plant.
This is an issue that President Anastasiades will discuss during his visit to Israel in mid-May, with prospects of cooperation in oil and gas production and exports.
Israel, that is facing immense opposition from environmental groups not to build such a plant on its soil, also faces the national strategic issue of dealing with exports of own resources, as regional conflicts and the security of its borders have imposed a necessity to store as much of its own energy supply as possible.

COMMERCIAL AGREEMENT
“Cyprus must first get its LNG programme going and then conclude a commercial agreement with Noble. Combined with the political decision to built the plant, this would give Cyprus some more credibility, even within the world gas industry,” said energy analyst Gary Lakes, who chaired the Cypriot-Greek Oil & Gas Summit held in Limassol last week.
Noble Energy is expected to conclude its appraisal drilling within its Block 12 in the Cyprus Exclusive Economic Zone in June, after which it will have a clear picture of the gasfield’s potential, currently estimated at 7 tcf. The company has already confirmed some 30 tcf of reserves within its Israeli licenses adjacent to the Cyprus EEZ, with Cypriot officials optimistic that all 12 blocks could contain anything from 30tcf and higher.
“Noble has strong indications through the evaluation of their 3D survey data that there is another gas field in Block 12, possibly of the order of about 3-5 tcf,” Charles Ellinas, executive chairman of the Cyprus National Hydrocarbons Company (Kretyk) said at the same conference, organised by IRN.
“There are strong indications of hydrocarbons in Blocks 2, 3, 9, 10 and 11 (awarded to) ΕΝΙ/KOGAS and Total… and all indications are that Block 9 holds substantially more gas resources than Block 12,” Ellinas said.
Total is expected to be drilling for oil as well, while it is a front runner in the pre-qualifying round for oil and gas exploration within Lebanese waters, despite the Cyprus EEZ agreement not yet approved by the parliament in Beirut.
A recent visit by Trade and Energy Minister George Lakotrypis to the Lebanese capital is expected to have raised this question, that should now reach its final stage.
However, although there is as yet no peace agreement between Lebanon and Israel, international energy experts do not exclude some sort of cooperation over the years, if the political tensions between the two is diffused.

LEBANON BIDDING
In any case, Lebanon will be opening its bidding round at the end of April and will close by November, which means that it does not plan to award any blocks any time before March 2014, with exploration expected to take another three years. Experts believe that Lebanon holds some 30 tcf of natural gas reserves towards its southern EEZ blocks.
Georges Mosditchian, Europe and Central Asia Manager for the French group GEP-APTP, also posed a rhetorical question at the Limassol conference last week, suggesting that “Beirut, Nicosia, Jerusalem and Paris provide new opportunities in the Mediterranean gas industry.” He said that there are some major technological issues and a team is already in the region investigating how to develop cooperation in the eastern Mediterranean.
Meanwhile, Kretyk’s Executive Director Solon Kasinis also told the Limassol conference last week that the second licensing round for Cyprus closes on May 26 and that the government may extend that deadline, adding that Lebanon is expected to decide on ten natural gas blocks in May and that there are prospects for synergies with oil companies exploring within the Cyprus EEZ.
Lebanon’s new Ambassador to Cyprus, Youssef Sadaka, said during the presentation of his credential to President Anastasiades, that he hoped "our two countries continue to cooperate closely for the exploitation of the respective Exclusive Economic Zones for the benefit of our two nations."
In his reply, President Anastasiades said “we shall be concentrating on developing various sectors of the economy, such as shipping, tourism, infrastructure projects, education, health, research and development and, of course, energy. The discovery of natural gas reserves within Cyprus’ Exclusive Economic Zone has created a new impetus for cooperation between Cypriot and foreign businesses, including Lebanese," he said.
He added that "the creation of a network of natural gas transportation projects in the Eastern Mediterranean will strengthen regional energy security and attract foreign investments, leading to job creation, thus giving a necessary boost not only to Cyprus, but also to the economies of the countries in the region."