Cyprus' Onshore LNG terminal May Be Off the Agenda
The Atlantic Council hosted a public event on 9 March 2015 focused on the natural gas developments in the Eastern Mediterranean and the challenges that Cyprus may face in its path towards gas production.The event featured the Minister of Energy, Commerce, Industry, and Tourism of the Republic of Cyprus, Yiorgos Lakkotrypis, who delivered a keynote speech. The discussion was moderated by the Atlantic Council’s Eurasian Energy Future Initiative Director David Koranyi. Natural Gas Europe had the pleasure to speak with David Koranyi for insights on the main takeaways of the meeting.
Minister Lakkotrypis’ remarks at the event revealed a change of priority regarding Cyprus’ export strategy. Koranyi explained that Minister Lakkotrypis stressed on the high probability of exporting Cypriot gas to neighbouring Egypt and using Egypt’s unused export terminals to access far-reaching markets. Lakkotrypis also announced a Gulf interest to finance the pipeline that would carry the gas from the Aphrodite field offshore Cyprus to Egypt. Koranyi told Natural Gas Europe that the onshore LNG terminal project seems off the agenda for Cyprus due to the hitherto modest quantities of gas discovered in Cypriot waters. The Egyptian option is technically feasible and makes commercial sense for Cyprus, added Koranyi. The regulatory hurdles that Israel is facing also put Cyprus at an advantage in its negotiations with the Egyptians. The potential delays in the development of the Leviathan due to an ongoing dispute between the partners in the Leviathan and Israel’s Antitrust Authority may prompt Egypt to look for alternative suppliers in the region, such as Cyprus.
The second takeaway of the event, explained Koranyi, is the Cypriot desire to enhance regional cooperation. Minister Lakkotrypis revealed Cyprus’ master plan to initiate a regional dialogue around the optimal way to develop and monetise the offshore riches in the Eastern Mediterranean. Such a dialogue would involve regional players such as the Egyptians, the Israelis, the Lebanese and even possibly the Turks. Exploration activities off the island’s coast will be halted in April for technical reasons for a few months; the break may allow a resumption of the UN-led peace negotiations between the Greek Cypriots and the Turkish Cypriots aimed at reunifying the island, said Minister Lakkotrypis. Koranyi said that the break in hydrocarbon activities may indicate a positive change and may eventually point to more openness by the RoC Government to allow for the introduction of a hydrocarbon element to the peace talks. Cyprus has good diplomatic relations with all its neighbours except Turkey, and a fair settlement must be achieved to allow for an optimum scenario in developing and monetizing Cyprus’ energy resources.
Finally, and despite rumours that TOTAL may be withdrawing from Cyprus’ Exclusive Economic Zone, Minister Lakkotrypis confirmed that the French giant and the Cypriot Government were in talks to extend TOTAL’s presence in Cypriot waters. Koranyi explained that the Minister was optimistic about TOTAL’s involvement in Cyprus and hopeful that the new seismic surveys will reveal drillable prospects that would encourage further drilling. The general tone of the event was positive: Cyprus is determined to pursue its exploration activities, with ENI and possibly TOTAL planning exploratory works off the island’s coast in 2015; exporting gas via Egypt has replaced Cyprus’ onshore LNG terminal as the island’s top priority for the monetisation of its riches; Cyprus is determined to engage in a positive and constructive dialogue with all regional players to optimise the development of offshore resources.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat