Egypt and Cyprus Launch a New Gas Route

Egypt and Cyprus Launch a New Gas Route

Hend Soliman, Alessandro Scipione
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The plan is to transport the "blue gold" extracted from the vast Aphrodite gas field to the Idku terminal, near Alexandria, via a 300 km gas pipeline, and to then export it from there. Cyprus's Energy Minister Georgios Lakkotrypis talks about the project

The Eastern Mediterranean is of growing strategic importance for the region’s gas supply routes.  By 2040, European gas imports are expected to grow by more than 100 billion cubic meters compared to 2016 levels, or almost one-third of current total imports. To avoid increasing its gas imports from Russia, the Old Continent will need to find alternative sources, and Israel, Cyprus and Egypt have vast gas reserves. On July 25, Egypt’s capital Cairo hosted the second ministerial meeting of the East Mediterranean Gas Forum (EMGF), a new initiative taking place against the background of growing tensions between Turkey and various countries in the region over exploitation of the Eastern Mediterranean’s oil and gas reserves. The meeting was attended by delegates from Italy, Israel, Greece, Cyprus, the Palestinian Authority, Jordan, France and the United States. Cyprus was represented by Energy Minister Georgios Lakkotrypis.

The member of Nicosia’s government said he had informed colleagues of Turkey’s violations of Cypriot sovereign rights. Since last spring, Turkey has sent two drillships to the region – first the Fatih, followed by the Yavuz. The survey vessel Barbaros Hayreddin Paşa has also been carrying out exploration activities in the area since April 2017. Lakkotrypis said he had pointed out that the first drilling attempt by the ships is only 35 nautical miles off the shore of Cyprus and over 80 miles off Turkey. The second drilling, he added, is currently taking place at less than 12 nautical miles off Cyprus and inside its territorial waters. In mid July, in response to the European Council’s decision to suspend high-level talks with Turkey due to its activities off the coast of Cyprus, Turkish Foreign Minister Mevlut Cavusoglu announced that Ankara would be sending a fourth drillship to the area, the Mta Oruc Reis. Lakkotrypis said he had explained to his colleagues the seriousness of the situation and of Turkey’s violations, reiterating the Cypriot government’s commitment to continued bilateral, trilateral and multilateral collaboration within the framework of initiatives such as the East Med Gas Forum, and its desire to work in partnership with countries that show mutual respect and which, most importantly, observe international law.

 

A gas pipeline carrying 8 billion cubic meters per year

Cyprus and Egypt are working on a strategically important project to transport natural gas from the vast Aphrodite field to the Idku terminal, east of Alexandria. The idea is to construct an underwater 240-to-320 km gas pipeline to deliver around 8 billion cubic meters (bcm) of gas a year to Egypt for liquefaction. From Egypt, the gas produced by Cyprus could then be transferred to gas tankers and exported to Europe and elsewhere via the Suez Canal. The Aphrodite gas field, located within drilling bloc 12 in Cyprus’s exclusive economic zone (EEZ), was discovered in 2011 and was the country’s first ever gas discovery. In June 2019, the Cypriot government signed a preliminary agreement with energy companies Noble Energy, Shell and Delek Drilling for the allocation of revenues from the utilization of the Aphrodite field.

Lakkotrypis explained that the companies operating on the Aphrodite field – Noble, Shell and Delek – will be working in partnership with the Egyptian companies receiving the gas, like Idku. He said that Cyprus is also preparing a midstream consortium and that talks are underway to determine its participants. Under the companies’ development plan, gas from the Aphrodite field should begin to reach Egypt between 2024 and 2025. But the Cypriot Energy Minister pointed out that since this is a large-scale project, it is impossible as yet to be very specific about the schedule. The project, he said, involves the construction of both the gas pipeline and the gas production facility itself, adding that his government expects to finalize the gas field development plan in the upcoming weeks. Once this step has been completed, Lakkotrypis noted, the schedule for achieving the final goal of having the first gas deliveries reach the terminal by 2024-2025, would be clear.

As to the cost of the project, Lakkotrypis said it would be very expensive. The initial estimate, he explained, is around USD1 billion, and added that once the midstream consortium has been put together, the final financing arrangements would also be agreed upon. When you have a buyer and a seller, he noted, financial backers usually begin to line up. Finally, the Cypriot government minister said that the European Union has shown interest in the project, with the European investment Bank (EIB) being one possibility, adding that contacts have already been made to this effect.

 

An alternative hub to Turkey

This is an ambitious plan that forms part of Egypt’s strategy to act as a regional energy trading hub and of Cyprus’s strategy to become an energy exporting country. It involves the creation of a major alternative energy hub – which will also include Israel – to Turkey, Cairo’s political and economic rival, and a route competing with (or complementary to) the TAP gas pipeline that would transport gas produced in Azerbaijan to Italy via Anatolia. It is no coincidence that Israel is soon to resume gas exports to Egypt, with estimated flows of around 7 billion cubic meters per year. In June 2019, the two countries settled a seven-year dispute sparked by the suspension of gas exports to Israel. In April 2012, Egypt unilaterally stopped supplying gas to Israel via the Arish-Ashkelon gas pipeline, following a series of jihadist attacks in the Sinai Peninsula. The 90 km infrastructure is owned by the Egyptian company East Mediterranean Gas (EMG). In September 2018, Israel’s Delek Drilling, the American company Noble Energy (also partners in the Aphrodite project itself) and Egypt’s Egyptian Gas Transportation Company East Gas (EGCL) acquired a 39 percent stake in EMG.