By Elias Hazou
Cyprus’ plans to sell its offshore gas to the Egyptians are most likely dead in the water, following the announcement of a 30 trillion cubic feet (tcf) gas find off the coast of Egypt.
Although the government tried to put on a brave face about ENI’s massive discovery – the spokesman saying they are ‘evaluating the situation’ – the reality is that for Cyprus the Egypt option is off the cards.
Likewise energy minister Giorgos Lakkotrypis, who commenting on the development, brushed aside the notion that it adversely impacts Cyprus’ plans to sell gas to Egypt.
Lakkotrypis said he spoke on the phone with his Egyptian counterpart on Monday morning, and that plans to transport Cypriot gas to Egypt via a subsea pipeline remained on track.
He said also that since the Zohr find is in close proximity to three of Cyprus’ licensed offshore blocks (10, 11 and 12), that could revive hopes for more gas discoveries on the Cypriot side.
Should the Zohr discovery be verified, this would have “geological, geopolitical and commercial ramifications,” he added.
But for one energy expert, it is too little, too late.
“Our plans to sell natural gas to Egypt, always financially non-viable, are now completely scuppered,” Charles Ellinas told the Cyprus Mail.
To call ENI’s 30 tcf Zohr prospect a game-changer is an understatement, Ellinas said. Not only does the new find negate Egypt’s need to import Cypriot gas, but Israeli gas as well.
Putting things into context, the expert said that once the Zohr field is developed, its total capacity potential is estimated to be around 30 billion cubic meters (bcm).
Egypt needs approximately an additional 2 to 3 bcm to cover its domestic energy consumption shortfall. And as far as LNG exports go, the two liquefaction plants in Egypt, operating at full capacity, would generate a combined 17 bcm. All in, that works out to 20 bcm.
So the Zohr prospect covers both Egypt’s domestic and export needs, with lots of gas – around 10 bcm – to spare.
As ENI itself stated, the Zohr field can help meet Egypt’s gas needs for decades. It is the largest ever natural gas discovery in the Mediterranean, larger even than Israel’s Leviathan field, which holds an estimated 22 tcf.
Moreover, as things stand, the prospect can be developed faster than any other new project proposed to Egyptian officials.
Ellinas estimates that appraisal, or follow-up drilling, at the Zohr well will take place sometime next year, with the first construction – an FPSO sitting on top of the well, plus a pipeline to the Egyptian shore – likely to begin in 2017. Actual production from the field could therefore be possible by 2020.
Plus, it is the cheapest option, as Egypt has no reason to pay a premium for importing gas from either Cyprus or Israel, when it has its own gas.
The 30 tcf is a preliminary assessment, with a 50 per cent probability, and more prospecting will be needed to narrow down the number.
But as Ellinas points out, the amount announced by ENI is quite reliable, since it is based on both earlier seismic data as well as the results of the first drill at Zohr.
Additionally, Zohr may eventually yield more hydrocarbons. As ENI stated in a press release, the “structure has also a deeper Cretaceous upside that will be targeted in the future with a dedicated well.”
So what next for Cyprus? Ellinas says the government urgently needs to formulate a Plan B for developing the Aphrodite reservoir.
The two options are well-known: a pipeline to Turkey, and then possibly onto Europe; or combining the resources of Leviathan and Cyprus’ Aphrodite fields via an LNG plant here, for export to Europe.