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Next Previous” Egypt the most attractive for Cypriot gas “HOME • INSIDER • CYPRUS •” Egypt the most attractive for Cypriot gas “
Interview with Adamos Adamou
The gas of the Eastern Mediterranean, with the future inclusion in it of the Cypriot gas produced, has the potential to contribute significantly to the gradual independence of the EU from Russian gas. This is emphasized in an interview with “Phileleftheros” by the acting general manager of the Cyprus Hydrocarbons Company (EYK) Dimitris Fessas, who adds that “we should not consider that all quantities of natural gas in the Eastern Mediterranean are available for export to the European market. due to the natural gas needs of the countries that own the deposits “.
In the interview, Mr. Fessas mentions that for the current or any subsequent discoveries in Cyprus there are various parameters that must be taken into account, regarding the way the deposits could be exploited.
, Mr. Fessas states that based on the current conditions and data and examining the discoveries, we see the export of Cypriot gas to Egypt by pipeline (either for export in liquefied form to other markets, or for use by Egypt) be the most attractive choice.
Unprofitable without exports
What are the confirmed deposits of Cyprus today and in what ways can we exploit them?
As you know, they have been made three major discoveries of natural gas deposits in the Cypriot EEZ. These are “Aphrodite”, in block 12, in 2011, by Noble Energy (now managed by Chevron), “Kalypso” in block 6, in 2018, by EMI, and “Glafkos” in block 10, in 2019, by Exxon Mobil.
For the discoveries of Cyprus there are various parameters that must be taken into account, regarding the way in which the deposits could be exploited. These include the size and location of the discovery, the options for their development and the route of the produced gas to the markets for which they are intended. Our discoveries to date are in deep water (& gt; 1500m), without existing infrastructure and with distances from the coasts greater than 200 km. Developing a new deep-water gas project requires significant infrastructure investments, which will then generate significant quantities of natural gas to make the development project economically viable.
An extremely important parameter for determining the viability of a field development project is access to gas markets. Demand in the Cypriot gas market is projected to be less than 1 bcm (billion cubic meters) per year, for the near future. This demand is estimated to be about one-fifth of the annual output required to make a project sustainable …
Therefore, the discoveries of Cyprus must first ensure an export route to the markets, in order to become investable and sustainable. Having secured a market for the export and sale of quantities from a deposit in the EEZ of the Republic of Cyprus, then the promotion of quantities to the Cypriot market may follow. The opposite is true for other peripheral countries, as the demand for gas for their country's needs is sufficient to support their initial investment. For the & nbsp; Aphrodite deposit, according to the government-approved Development Plan, the plan is to export gas via pipeline to Egypt, with Egypt having a significant domestic market (60bcm per year) and liquefied natural gas facilities ( LNG) for export.
What is your opinion on what everyone in Europe is saying, that the EU should become independent of Russian gas? Can Cyprus also contribute to this goal?
With the recent crisis in Ukraine, the EU has made clear its position on decoupling imports from Russian gas and therefore any access to immediate or long-term alternative supply will be of interest to the EU. Eastern Mediterranean gas, with integration of Cypriot natural gas, has the potential to contribute significantly to the gradual independence of the EU from Russian gas. However, we should not assume that all quantities of natural gas in the Eastern Mediterranean are available for export to the European market, precisely because of the natural gas needs of the countries that own the deposits. I am aware that the Minister of Energy, Trade and Industry, Ms. Pileidou, has already sent a letter to the EU Energy Commissioner, stating the readiness of the Republic of Cyprus to assist the EU with specific projects and actions. So, in this context, we are in consultation with the EU on how Cyprus can help achieve the EU's goal of independence from Russian gas.
High prices are an ally <
What could be the competitiveness of Cyprus's gas in Europe?
The prices of the Cypriot or natural gas of the Eastern Mediterranean will be a result of its production costs and its transportation costs. Natural gas produced in deep water may be more expensive than land-based gas, however with appropriate synergies and offshore development, on a scale scale, higher production costs can be mitigated. In terms of transport costs, the existence of LNG export facilities in the region can be competitive with new LNG export facilities in other areas. At the same time, gas sales prices in Europe have soared in the last year from $ 8/mmbtu (million British thermal units) in January 2021 to over $ 30/mmbtu for a number of reasons, culminating in the crisis in Ukraine. Although in the long run today's exorbitant prices will fall significantly, we do not expect them to fall completely and this will significantly help the competitiveness of our resources.
The crisis in Ukraine and the Cypriot plans
Developments in Ukraine may force Cyprus to change its energy plans and goals, Mr. Fessa?
With our existing discoveries we would anticipate the period 2026-2030 to start production from them and with the impact on the energy markets of recent events we see further positive encouragement for our projects to move forward. At the same time, we expect in the coming months further exploration in the EEZ by the ENI/TOTAL consortium and the continuous evaluation of the potential of the hydrocarbon resources of Cyprus.
Cyprus's energy policy is centered around the National Climate and Energy Plan and the objectives set by this framework. At the same time, it is in the process of revising its Plan for alignment with the new EU targets from the Green Agreement and “Fit for 55”. Cyprus will seek to align itself with the overall ambitions of the EU and will have much to contribute in terms of the Energy Transition. For its part, the SSC believes that Cyprus has much to offer to the EU's ambitions, both in the use of its offshore gas as a bridge fuel in cleaner energy, but also in the ability of its offshore regions to provide large-scale solutions for renewable energy. energy sources, using floating solar parks or floating wind farms.
Options for Cyprus, Egypt and the FLNG
What are the most feasible and effective ways to exploit Cypriot gas?
Based on the current conditions and data and looking at the discoveries, we see the export of natural gas from Cyprus to Egypt by pipeline (either for export in liquefied form to other markets, or for domestic use in Egypt), to be the most attractive. The onshore LNG in Cyprus (liquefaction terminal) would still be considered less attractive at this stage due to the small amounts of gas we have discovered to date and the significantly high new capital required for such an infrastructure.
It is It is interesting to note, however, that a smaller floating LNG export unit (FLNG) could have some advantages. For the East Med pipeline, viability assessments have not yet been completed, so it would be important to wait for the results. Significant funds will be required for the pipeline, so it must be assessed how it is financed and how this translates into transport costs. As for the pipeline to Turkey, any investor would seek security through intergovernmental agreements, which would be difficult to predict given the current geopolitical conditions. However, it should be noted that the export route to Turkey is something that requires new pipelines and additional investments, in order for gas to reach European markets.
