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Andreas Mavrogiannis and Charalambos Ellinas analyze in “P” how we can utilize the Cypriot Natural Gas

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ANDREAS MAVROGIANNIS: Let's bring our gas to Cyprus

The whole world is looking for ways to reduce energy costs to avoid the perfect energy storm. The rally in oil and gas prices has also sent electricity prices soaring, causing chain increases in products/goods and services. At Friday 's European Council, EU member states agreed to the phasing out of the Union' s dependence on Russian gas, oil and coal imports as soon as possible, as set out in the Versailles Declaration. At the same time, the EU agreed with the US on the supply of liquefied natural gas in order to reduce Europe's dependence on Russia. At a time when the EU is discussing the acceleration of the energy transition to renewable energy sources (RES), in Cyprus we have gas since 2011 and we do not know what to do, while we could bring it to the island to meet domestic needs and to combine the economic benefits with the political ones (Cypriot gas in the T/Cs with the aim of resolving the Cyprus problem and reuniting the place). Instead, we build infrastructure in Vassiliko (there are long delays, costs increase) to buy foreign gas and we will send ours to Egypt, which has gas liquefaction terminals (and buy it behind Egypt?) . If and if, of course, we agree on an advantageous price, because after the discovery of the Egyptian “Zor” in 2015 (a supergiant deposit was described by the EMI, 30 trillion cubic meters, the 20th largest in the world), Egypt does not show much interest for the Cypriot natural gas.

With a small pipeline

And the question is why we do not build a small pipeline from the “12”/”Aphrodite” or from another plot/deposit to Cyprus, in order to utilize the Cypriot gas for the needs of the whole island, while gaining economic and political benefits. The EU could finance this infrastructure, the cost of which is estimated at about the same as the European funding for the EusoAsia Interconnector project, for the electricity interconnection of Cyprus, Greece and Israel (657 million euros). As it is known, “Russian companies did not show interest in the Cypriot gas and for the reason that the deposits of the Eastern Mediterranean are & # 8230; “pinuts compared to the quantities that Russia has”, as a former state official characteristically stated to “P”. “The most optimistic scenario estimates that the deposits of Cyprus, Israel, Egypt and Lebanon will reach 5% of what Russia has,” he added. It is noteworthy, he continued, asking not to be named, and the fact that “contracts are still being given (and it seems that this will continue in the immediate future before the energy market is liberalized) for RES at rather unjustifiably high prices. And with all the increases in the price of oil lately, the EAC buys electricity from RES at a higher cost & # 8230; ». All this is analyzed in “Politis” by the negotiator of the Greek Cypriot side for the Cyprus issue, Andreas Mavrogiannis, who, among other things, served as Cyprus's ambassador to the UN, the EU, Ireland and France, as well as Deputy Presidency for European Affairs (had the overall responsibility of preparing and conducting the Cypriot Presidency of the Council of the EU in the second half of 2012). On the next page, the Senior Associate at the World Energy Center of the Atlantic Council, Charalambos Ellinas, analyzes the technocracy of Energy and Cypriot gas.

We cut back

< p> After the developments in Ukraine, should we redesign our energy policy in Cyprus?

In my opinion, this should have been done a long time ago. Even now, however, if we redesign it, it will be fine. Because, in the year 2022, Cyprus remains the only EU country that does not use natural gas, violating its commitment to the EU since the time of our accession (for natural use in 2011). At the same time, a station is currently being built in Vasiliko – for storage and regasification of liquefied natural gas (LNG) – without planning for the supply. In addition, the story with EastMed went bankrupt, although now we are told that due to Ukraine it is coming back & # 8211; I do not believe he is coming back. That is, as I have said before, only if it becomes C & # 8217; During World War II, prices will reach such a point that it will be in the companies' interest to extract gas from our areas, because the quantities are small and they are at a great depth. In addition, we have to keep in mind that after the Biden election in the US, we have entered an energy transition and the big companies, especially the American ones that currently have huge reserves, both from drilling and shale, are in the process of getting rid of them quickly. , because they know that the horizon is not very far away. And this transition will accelerate after Ukraine. Therefore, one must not think that there is unlimited scope ahead of us for the exploitation of natural gas. There is no. They are just math.

The essence

I mean?

That is, it's not an advantageous choice to think that we can suddenly become oil or gas suppliers, even if we have large quantities & # 8230; which so far we do not seem to have. To have a sense of proportion. But we could meet our own needs. Because, by covering our own needs with our own natural gas – and this is of great importance – we could divide the energy cost of our island by two. Our reserves may be small, but only with “Aphrodite” we can meet our needs for 60 years and reduce energy costs by about half. This would mean a new economic landscape for our country, since we will be able to have industry and benefit, to reduce the cost of tourism product by 30%, to have agriculture & # 8211; and agriculture today requires energy. In addition, we need to look at the political dimension of what I am saying. If we supply the T/Cs with natural gas at a cost price, as we will get it, we will pull the carpet under their feet in relation to what they accuse us of. I have said all this for ten years, I do not say it now, I said it at a conference in Crete in June 2012, when I was Undersecretary for the EU Presidency. But, our official policy then was to make LNG and sell to Asia & # 8230; I said similar things at another Conference, 5-6 years ago. The bottom line is that we could have great economic and political benefits with a small pipeline from Aphrodite to Cyprus.

Is there a European fund we could get for & # 8217; these infrastructures?

Of course there is, but this small pipeline could also be built by companies. The amount is not large for the EU. The cost is about the same as the funding received by the EusoAsia Interconnector project. Yes, there is a possibility, in the context of European policy-making “Connecting Europe”, that says that no EU Member State should be isolated. The most important thing at the moment is not to be left out of all the geopolitical developments that we are witnessing happening in our region, in the wider European area, all over the world. We must help our country, meet our energy needs, seriously build a new economic mix for our country, and later, if and when conditions allow, do the rest we plan. It does not make sense to do nothing today, under the pretext that one day we will do, one day we will exploit the Cypriot natural gas & # 8230;

They do not need us

Does Europe need Cypriot deposits for dependence on Russian gas?

No, since they are not financially viable. And the quantities are very small. And since the EU's policy is to improve its energy security, it makes no sense to talk about improvement, if instead of pipelines through Ukraine or Georgia that have problems with Russia, we talk about through Turkey, because again Union will be blackmailed and held hostage. So improving energy security does not only mean diversifying transit countries, it also means diversifying sources. If the Eastern Mediterranean could offer other sources and alternative routes, which was EastMed's idea, it would be fine, but it's not worth it either.

Waking up

So what is the scenery in our area?

The big companies in the Eastern Mediterranean are certainly still interested, but to have a significant portfolio. When and how they will use the stocks are open issues and with the current data it is not profitable to exploit them. And, in fact, in a period of oversupply. With Turkey, things are moving. Turkey will find ways to get gas from Israel – the pipeline will not necessarily pass through our EEZ. Now that Israel has signed an agreement with Lebanon, the pipeline does not need to pass through our EEZ, it can pass through the EEZs of Israel, Lebanon, Syria, Turkey and bypass us.

In summary, where should we focus here in Cyprus?

If we want cleaner solutions we have to think about the whole island. Both in terms of RES and in terms of natural gas. And to make plans keeping in mind the whole of Cyprus. We could bring the Cypriot natural gas to our place and cover our own needs and those of the Turkish Cypriots, giving them the opportunity to become independent from Turkey. Let the Ukrainians wake us up and think about what we should do for our country and our relationship with Turkey, because one brings the other. Turkey has great energy needs and we are watching its moves. It has started talking to Israel, it is starting to improve its relations with Egypt and possibly if this is done with Cyprus, the conditions could be created for Turkey to enter the game as a consumer. Why not?

X. Greek for coming fa .: Urgent re-evaluation of the project at the Royal before it is too late

Experts consider it funny & # 8230;

The Ministry of Energy, Trade and Industry announced last Monday (21/3/2022) that the natural gas of the drilling target “Glafkos” of block “10” of the Cyprus EEZ is of high quality. As for the quantity, however, not the slightest word was said either by the competent ministry or by the ExxonMobil – Qatar Petroleum consortium that has the rights for research in the “10”. Asked about this, Dr. Charalambos Ellinas, senior associate at the World Energy Center of the Atlantic Council, said that “Glafkos” is of good quality, like all other natural gas fields discovered in the Eastern Mediterranean so far – I would not expect something else”. But, we still do not know the quantity, he pointed out. “Nothing has been announced that gives any indication of the quantity. We remain in the statements made after the first drilling in 2019, ie that the reserves are estimated to be between 142 and 227 bcm (billion cubic meters). The quantity will be confirmed after the analysis of the measurements, but I estimate that it will take time. It is expected, however, that ExxonMobil will proceed with seismic investigations in the “5” section. He has not announced further drilling, something that will probably be revised based on developments and results “, added the Greek.

What are the confirmed deposits that we have in the Cypriot EEZ?

The only confirmed deposit we have is “Aphrodite” with 116 bcm (billion cubic meters) natural gas. In November 2019, it was triumphantly announced that the goal “to start the production of natural gas from the '' Aphrodite '' field is in 2025 and with estimated revenues for Cyprus of $ 9.3 billion for a period of 18 years”, and that in fact the buyer would be Shell. It was agreed to renew the contract and in return the Republic of Cyprus received binding timetables with “strict conditions” in case of breach, which reach the possibility of terminating the contract. The first milestone would be a second confirmatory drilling, the second the detailed technical studies and the third the final investment decision. None of this has been achieved and no action has been taken so far. According to recent announcements, we may hear news next month. Hopefully it will be positive. The confirmation drilling of the “Glafkos” deposit has just been completed by ExxonMobil, but we do not know the results. The third deposit is “Kalypso” which was discovered by EMI in 2018. However, its size is shrouded in mystery and EMI has not yet committed to further drilling. According to the latest announcements, new drilling is expected this year.

Are we missing the train?

How can we exploit the Cypriot deposits?

This is one of the topics I covered in my presentation and the discussion that followed at the very important and successful European Conference on Natural Gas, which took place in Vienna between 21-23 March. Its purpose was to review the latest developments, promote dialogue between Europe's major gas suppliers and suggest best ways to manage the problems. It also explored key issues in natural gas and liquefied natural gas (LNG), prices and trade, pipelines and connections, new gas and LNG supplies, and the long-term strategy Europe needs. . The options for the development of Cypriot deposits remain the same and are all difficult. With Europe looking for new sources of gas to replace the Russian, opportunities are opening up for the Eastern Mediterranean. But European needs are short-lived, for about five years – they aim to become independent of Russian gas by 2027. Such a period of time is not affordable for the development of new deposits – or even new pipelines – which take five years to build and 20 years of exports to become commercially viable. New European needs favor Egypt's terminals and already developed deposits, such as the Leviathan in Israel. Chevron (currently has the rights to “12”) seems to prioritize this. Not only is the extra investment required relatively low, but it also leads to faster returns. Last month it signed a new agreement for a new pipeline through Jordan that will increase the amount of natural gas it can export to Egypt by 4 bcm.

What does that mean?

This agreement makes it possible for Israel to export up to 11 bcm a year to Egypt, allowing the increase of LNG exports to Europe from now on. This makes it difficult to exploit our own deposits. Not only is there a lack of infrastructure in the Cypriot EEZ, which does not favor rapid growth, but also investors may see the development of Cypriot deposits being subject to geopolitical risk due to the unresolved Cyprus issue. One possibility, however, that would facilitate the development of our own deposits, would be to expand the two terminals in Egypt, Idku and Damietta, with the addition of new liquefaction units. With these LNG production could increase by 10-15 bcm per year. As most of the required infrastructure already exists, this would be cost effective and could be done within three years. Most of the additional LNG can be exported to Europe for as long as needed and then to Asia.

Laugh OutsideCan we use the Cypriot deposits for our domestic needs?

Our domestic needs are too small, around 1 billion cubic meters (bcm) per year, to justify the development of “Aphrodite” only for us. “Aphrodite” can produce somewhere 7-8 bcm per year. And with the project for import of LNG already under construction, this market is lost for at least the next 10 years.

Why bring gas from elsewhere and sell our own in Egypt? Why don't we bring our own to Cyprus?

Good question. If we really ensure natural gas sales in Egypt, the best way would be to build a small diameter pipeline to bring natural gas from “Aphrodite” directly to Cyprus in parallel with these exports. With prices expected to be valid in the future in international markets, such a project would be economically viable and certainly natural gas through such a pipeline would be cheaper than imported LNG. But, I hear proposals for its transfer to Egypt, liquefaction and resumption in Cyprus and re-aeration at the new LNG import terminal in Vasiliko. Something that is completely unjustified and something that colleagues abroad, experts in natural gas, consider as a joke – they can not believe that such a thing can be considered as a serious suggestion. The challenge, however, is to secure Aphrodite's gas sales to Egypt.How are the works for the infrastructure that is being built to bring natural gas to Cyprus?

Unfortunately, they are not doing well. Problems are constantly encountered in the construction of infrastructure in the Royal, but also with the contractors in China for the FSRU. Costs go up and delays and claims increase. May it end in 2024. Everything remains vague. Even after the changes in the contract for the new schedule and the increase of the project cost by 25 million euros, there seem to be difficulties and delays. There is an urgent need to re-evaluate the project before it is too late.

We are late & # 8230;

green policies of the EU, but also of geopolitical developments?

For sure. With the rapid developments due to Ukraine, the EU is accelerating the transition to RES. It will soon announce new climate change targets. Proposals are heard that include an increase in the RES target from 32% now, to 38% -40% by 2030. This translates into 60% -65% RES in electricity generation by 2030. In addition, a more ambitious binding reduction target will be set. of final and primary energy consumption by 36% and 39% over the same period. Cyprus will be called upon to respond. With new goals – global commitments to achieve zero emissions by 2050 – and the determination of financial institutions to shift their investments to renewable energy, away from fossil fuels, new fossil fuel projects are becoming increasingly difficult. We should have taken advantage of the opportunities we had in 2013.

New strategy

Following the developments in Ukraine, we need to redesign our energy policy in Cyprus?

Yes we must. The EU aims to break free from Russian gas by 2030, move faster to RES and hydrogen, and reduce gas use by 30% by 2030 and 80% by 2050. Whether Europe achieves these goals is doubtful. What matters is that this is what Europe is aiming for now. Without a change in this policy for the long-term use of natural gas, its long-term export to Europe remains difficult. This includes exporting gas from the Eastern Mediterranean to Europe via pipelines. Investors in long-term projects need clear policies. Uncertainty about the future of gas demand in Europe discourages long-term investment. There is also opposition from the European Commission and activists to investing in new fossil fuel projects. As the EU's transition to green energy accelerates, the energy future of the Eastern Mediterranean needs a new strategy based on the rapid growth of RES, combined with energy storage, electricity interconnections and regional gas use to support RES during the energy transition.

RES demand

Does the EU need Cypriot natural gas?

Theoretically, yes. But, unfortunately, the needs of the EU remain short-term, while the Cypriot gas needs years to develop. The EU has already concluded new agreements with the US and Qatar for the import of LNG and is promoting the supply of more natural gas through pipelines from Norway, Algeria and Azerbaijan. The European Commission announced on Friday that it would work with EU Member States to ensure a steady supply of LNG from the US up to 15 bcm this year and an additional 50 bcm a year by 2030. But these new gas sources come at a high cost. something that will keep energy prices high in Europe for years. The EU is also taking steps to increase the use of RES and hydrogen, energy efficiency, nuclear energy and even coal, the use of which has already doubled in one year. The EU's priority now is security of energy supply and not necessarily the reduction of carbon dioxide emissions. In the long run, Cyprus could export electricity to Europe through the electricity interconnection with Crete, which will be ready in early 2026. But this requires a huge increase in RES, much higher than current levels. There are prospects, but we need a new energy strategy that promotes low-cost RES & # 8211; completely different from what is happening now.

Source: politis.com.cy

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