Prospects in the Eastern Mediterranean from the discovery of natural gas

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By Praxoula Antoniadou Kyriacou
Minister of Commerce, Industry & Trade of Cyprus

The Eastern Mediterranean Region is currently being confronted with a novel challenge. With the sequential findings of natural gas reserves in the area -initially in Egypt, recently in Israel, most recently in Cyprus and possibly in the near future in Lebanon- our countries are faced with a defining challenge. The challenge ahead is to manage these new variables in the equation of the area with ultimate responsibility, so as to improve – rather than to destroy- the prospects of both current and future generations; improve prospects both in terms of economic and social development, in terms of sustainability and certainly in terms of establishing and strengthening peaceful and hence productive international relations.
Furthermore, given the interdependency of economies worldwide and the way the financial crisis has affected through this interdependency most of the world, leaders in the Eastern Mediterranean region have to consider how developments in our area can be constructively exploited so as to positively contribute, through this same interdependency, to the recovery of the economy not only of the countries of our neighbourhood but also of those participating in our wider European family.
Cyprus has so far been an energy island –an isolated energy system- and has till recently been almost totally dependent on imports of oil which burden the current account balance, the level of CO2 emissions and very often the rate of inflation.
As part of its medium term planning and in response to EU wide policies to support sustainable development, Cyprus has planned and is implementing a National Action Plan for the gradual increase of the contribution of renewables to the energy balance, aiming at reaching a target of 13% percent by 2020. Still as we all know, renewables given their high cost cannot comprise the full answer in the short term. A bridging solution with reference to a low carbon economy is required for the medium term, until long term targets about the contribution of renewables to the energy mix can be attained. And natural gas seems to that answer for the medium term.
As it has been announced last month, a natural gas discovery was made in Cyprus in Block 12 in the exclusive economic zone of Cyprus.
Noble Energy which has conducted the exploration drilling is initially estimating a gross resource range of 5 to 8 tcf with a gross mean of 7 tcf. Drilling of an appraisal well is expected to follow sometime in the second half of the year. (Prior to the exploration activity, an Environmental Impact Assessment was carried out on the basis of the relevant criteria of Annex III of Directive 85/337/EEC.)
Furthermore, the Republic of Cyprus has recently decided to proceed to the 2nd round of licensing for exploration and production with reference to all the other sites in the exclusive economic zone of Cyprus. An official announcement to this effect has already been sent to the European Commission for translation and subsequent publication in the Official Journal of the European Union. Applications by interested persons may be submitted within 90 days of the date of publication of the notice in the Official Journal of the European Union.
The criteria on which evaluation of applicants will be made are explicit and will be simultaneously published in the official journal. They primarily include the technical and financial capability of the applicants and the financial consideration that the applicant will be offering to obtain the licence; without prejudice to the provisions of the directive regarding national security.
In the meantime, the Government is in the process of defining long term strategic planning in the area of hydrocarbons and hence of examining the type of infrastructure to be developed and technology to be used with reference to both bringing natural gas onshore Cyprus for use in the local market, as well as to exporting excess supplies abroad. Such planning will be made with reference to exploitation of reserves in all sites in the EEZ of Cyprus, given the high probability of identification of reserves in other sites, as this probability is indicated by geophysical studies and substantiated recently by the discovery in Block 12.
Discoveries of hydrocarbons in the area of the Eastern Mediterranean come at a time of increased demand for fossil fuels by the EU, as a follow up to the nuclear accident in Japan and to consequent changes in the energy mix in Europe.
This coincidence of developments places the region in a potential position of contributing to the enhancement of the energy security of Europe. More specifically, Cyprus and its neighbours will be in a position to contribute to the energy security of Europe through the provision of additional sources of energy and through possible participation in new energy infrastructure linking Europe to sources of energy, as this infrastructure is envisaged in the relevant proposed regulation.
Discoveries in individual countries of the area reinforce the identity of the Eastern Mediterranean as a new source of hydrocarbons, and cooperation in one or the other way can only add value to individual effort.
The countries of the Eastern Mediterranean Region are hence confronted with a huge opportunity of utilizing these recently traced gifts of nature in a way that will benefit both the area and its European Partners.
It is hence high time that efforts for a resolution of problems of the past are intensified so that we can all embark on a course of permanent peace, cooperation, development and prosperity.
Opportunities for investment are already arising both in activities that are directly related to the exploitation of hydrocarbons but also with reference to sectors and activities that are supportive or complementary. Furthermore an increased interest of Foreign Direct Investment in one of the sectors will certainly be boosting real Estate Development, as well as long stay tourism.
We do however need to keep looking beyond the energy sector, so that our economies remain diversified. Human capital has been the main strength of Cyprus so far, as it has been the strength of many countries in the area. This is why the services sectors have been growing steadily over the last years and why tourism has saved the day for the Cyprus economy in 2011. It is also very important to note the very high level of private medical care that exists in Cyprus, both in terms of highly specialized medical Doctors and staff, as well as in terms of state of the art premises. Significant opportunities of cooperation exist in this area. Similarly, the high level of private tertiary education in Cyprus also offers prospects for enhanced cooperation.
With regard to the benefits that will accrue to the Cypriots once hydrocarbons start to be exploited, I would like to reiterate the words of President Christofias that the Turkish Cypriots are citizens of the Republic of Cyprus and as such they can enjoy within the framework of a reunited homeland the benefits of any natural wealth that Cyprus has. The President furthermore indicated that the exploitation of natural gas reserves in the exclusive economic zone of Cyprus can potentially motivate the attainment of a solution to the Cyprus problem soon, so that all the Cypriot people, Greek Cypriots and Turkish Cypriots, can benefit from any positive development.
The President furthermore added that Turkey has a lot to benefit from the solution of the Cyprus problem, since the solution will lead to the normalization of relations with Turkey, to cooperation between the two countries and to the conclusion of agreements between the two in various areas, including in the energy sector.
Turkey now has a golden opportunity to prove itself to be a true peacemaker in the area of the Eastern Mediterranean, by respecting the sovereignty rights of all EU member states, through both words and actions; and by truly contributing to the success of the peace process with reference to Cyprus through the encouragement of the Turkish Cypriot leadership to work for an agreed solution of the Cyprus problem that will be reunifying Cyprus on the basis of the commonly agreed basis of a bizonal, bicommunal Federation with political equality as this is defined in relevant UN resolutions.
A bright horizon of peace, cooperation and economic growth will then open for the whole area of the Eastern Mediterranean to the benefit not only of the countries and peoples of the area but also to the benefit of our wider European family.
In shaping the world of today and tomorrow through their decisions on energy issues, visionary leaders will aim at improving the prospects of both current and future generations in terms both of economic and social development and of sustainability and certainly in terms of establishing and strengthening peaceful and hence productive international relations.