Nicosia and Cairo on Wednesday signed an inter-state agreement paving the way for the Mediterranean’s first subsea pipeline to carry Cyprus natural gas to Egypt for re-export to Europe.
After signing the agreement, Cypriot Energy Minister George Lakkotrypis and his Egyptian counterpart Tarek El-Molla called the deal a landmark for developing Cyprus gas and energy production in the wider region.
“Today’s signing is an important milestone, not only for Cyprus but also the entire Eastern Mediterranean region,” said Lakkotrypis on Wednesday.
“The Pipeline Intergovernmental Agreement…is, in fact, the first of its kind in our shared region, reaffirming once more the close traditional ties between Cyprus and Egypt,” he added.
He said the agreement was crucial in efforts of both countries to channel gas from the island’s ‘Aphrodite’ reservoir to Egypt and attract multi-billion infrastructure investments.
A joint committee will be set up in 30 days to oversee the project.
Texas-based Noble Energy in 2011 made the first discovery off Cyprus in the Aphrodite block estimated to contain around 4.5 trillion cubic feet of gas but it has yet to be extracted.
But the Aphrodite consortium – also including Israel's Delek and Royal Dutch Shell – seeks to renegotiate its contract on the gas field before it plans to tap the gas. It is currently in talks with the Cypriot government over a bigger share of the profits to make the project viable.
The discovery of nearby Egypt’s huge Zohr offshore reservoir in 2015 has stoked interest that Cypriot waters hold the same riches.
Wednesday’s agreement sets the framework for cooperation between the two countries which is backed by the European Union in its search for secure energy sources.
“After all, we are essentially talking about a European pipeline, intended to transport Cypriot natural gas to Egypt for re-export to Europe in the form of liquified natural gas (LNG),” said Lakkotrypis.
“Ultimately…the pipeline will allow for the transport of the first molecules of East Med gas to the EU, thus contributing to the Union’s much sought-after security of supply and diversification of sources and routes,” he added.
Lakkotrypis said the agreement concerns at this stage Cyprus and Egypt but hailed it as a model for regional cooperation.
The agreement provides that Cyprus’ natural gas will be both re-exported, as well as used for domestic consumption.
Construction of the pipeline depends on how fast commercial agreements advance with the investors.
Cyprus aims for natural gas to start flowing to Egypt’s LNG facility in 2022, therefore generating its first revenue from natural gas in the same year.
Cyprus has also issued exploration licenses to Italy’s ENI, America's ExxonMobil and France’s Total.