MoU between Cyprus & Egypt signed: a Milestone Towards Monetization of "Aphrodite"
On Monday 16 February the ministers of energy of Egypt and Cyprus signed an MOU in Cairo pledging cooperation in the field of energy. Since its discovery of the Aphrodite field in 2011, the island has been studying various export options for its 4.54 trillion cubic feet (tcf) field. The country has been pursuing gas explorations in the hope to discover additional quantities of the hydrocarbon that would justify the commercial viability of export projects such as the planned LNG terminal in Vassilikos. TOTAL’s recent withdrawal from the island and ENI’s preliminary disappointing results raised fears that Cyprus would not monetize its offshore riches in the near term.
Cyprus’ talks with Egypt could however signal otherwise. The island’s negligible gas demand may not justify production of Aphrodite; however, exporting the gas to a regional customer would encourage the development of the Cypriot field. Egypt is in desperate need for gas as it undergoes a severe energy crisis caused by a growing demand and a flat production. The country was considering importing gas from Israel despite domestic sensitivities hostile to energy deals with the Israeli neighbour. Regulatory setbacks in Israel have prompted Egypt to look for a Cypriot alternative.
The development of the Aphrodite would turn Cyprus into a net natural gas exporter and would also allow the island to reach natural gas independence. Cyprus has good diplomatic ties with all its neighbours. In 2003, Cyprus and Egypt signed a delimitation agreement of their exclusive economic zones based on the median line principle and have enjoyed good-neighbourliness. The MOU is not the only one of its kind. On November 8, a tripartite cooperation agreement was signed between the President of Egypt Sissi, Greek Prime Minister Antonis Samaras and the Cypriot President Nicos Anastasiades. The agreement, known as the Cairo Declaration, announced the beginning of a close cooperation between the two countries and included mentions of the Cyprus’ problem and Turkey’s violations of Cyprus’ EEZ. It is expected that Cyprus and Egypt will conduct advanced talks in the coming weeks over the exploitation of Aphrodite and the best way to deliver the Cypriot gas to Egypt.
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