The chances of East Med gas reaching global markets are dwindling. The future is regional
The new year brought with it some interesting developments in the East Med’s energy sector but they are somewhat disconcerting when it comes to Cyprus. Key players like Egypt, Israel and Greece have been discussing potential bilateral gas projects that ultimately leave Cyprus out, in the cold.
Most hydrocarbon activities that involve Cyprus have stalled since 2019, not just because of Covid-19, but also due the belligerent actions of Turkey and its determination to undermine the Republic of Cyprus at every turn as long as the Cyprus problem remains unresolved.
Concerns by neighbouring countries that the window of opportunity to get the East Med’s natural gas to global energy markets is closing fast due to the inexorable move towards clean energy is prompting them to consider options that do not rely on Cyprus.
There is an increasing number of articles appearing in the East Med regional press to suggest that when it comes to natural gas exports Cyprus’ neighbours are getting impatient and not prepared to wait any longer.
Egypt
Egypt has long-aspired to become the East Med’s regional energy hub. Something that in the heydays of optimism engendered by success in offshore licensing, exploration and hydrocarbon discoveries early in the past decade, Cyprus considered to be its natural destiny.
With Cyprus running out of steam, Egypt has seized the opportunity to promote itself for that role and now, in effect, is taking it. As a result, the latest plans to export gas from Israel bypass Cyprus and are being directed through Egypt.
Another area of diverting interests is that Egypt left out of its latest offshore licensing round areas that might conflict with Turkish maritime claims involving Cyprus and Greece. It is not a recognition of Turkey’s claims, but nevertheless Egypt does not want to take a position, and it is prepared to wait until these differences are resolved. In other words, its cooperation with Cyprus and Greece has its limits.
Turkey was of course quick to try and exploit that, with Foreign Minister Mevlut Cavusoglu is offering to negotiate maritime borders directly with Egypt. Something that Egypt has rejected.
Israel and Egypt discuss bilateral cooperation
Perhaps as a result of concern that the window of opportunity to get East Med natural gas to global energy markets is closing fast, Israel is considering export options that do not rely on Cyprus.
In January Chevron, Delek and their partners announced their intention to invest in a new $235million subsea pipeline between the Israeli coastal cities of Ashdod and Ashkelon so that they can expand gas exports from Leviathan to Egypt to 7 billion cubic metres per year (bcm/yr).
Bilateral relations between Israel and Egypt have improved considerably over the last few years and have recently been further reinforced as a result of the Abraham accords.
As a further confirmation of the developing closer relationship Egypt’s Petroleum Minister Tareq El Molla visited Jerusalem on February 21 in the first ever such visit. Following meetings with his Israeli counterpart Yuval Steinitz, the two ministers announced agreement to work together toward the construction of an offshore gas pipeline to transport about 10 bcm/yr gas from Leviathan to Egypt’s liquefaction facilities “in response to growing European demand for natural gas.”
Steinitz said: “This meeting is a direct continuation of the excellent relations between us, and testimony to the successful cooperation on natural gas in particular and energy in general. We both founded the Eastern Mediterranean Gas Forum (EMGF) which brings together Arab and European countries and the State of Israel, and I very much thank minister El-Molla for his leadership of the Forum.”
Responding, El Molla said “This is my first visit to Israel. We maintain close cooperation on energy-related matters in general, and natural gas in particular. The good relations between us led to the establishment of EMGF. We hold meetings between our teams in order to increase and improve the cooperation between the countries in all aspects of energy.”
They agreed to work together to promote exploitation of the region’s gas resources and towards the establishment of a regional energy trading hub in Egypt.
The stark reality of gas exports from the East Med to Europe ever succeeding, due to the challenges of low prices and EU’s decisive move to clean energy without reliance on fossil fuels, is another matter.
Greece and Egypt discuss bilateral cooperation
In their latest discussions on March 4 Egypt’s President Abdel Fattah El Sisi and Greek prime minister Kyriacos Mitsotakis discussed boosting bilateral cooperation, especially in energy and the East Med.
Articles that appeared in the press following these discussions ‘revealed’ that El Sisi suggested diversion of the EastMed gas pipeline. Instead of going to Cyprus, it would go subsea to Egypt and from there by land to the Egypt-Libya border, from where it would go to Crete through a subsea pipeline.
Such a development would leave Cyprus on the sidelines and with reduced influence, thus explaining Nicosia’s concerns in response to the news.
As it subsequently appeared, these reports may be a misinterpretation of the agreement between El Molla and Steinitz to work towards a pipeline from Leviathan to Egypt’s liquefaction plants.
However, it is important to note that due to the limited quantities of gas in Leviathan, it is not possible for such pipelines to coexist with any form of EastMed gas pipeline. That would require further gas discoveries in Israel and Cyprus.
Where do these developments leave Cyprus?
Cyprus had its opportunities to take the lead in developing its hydrocarbon potential and becoming the regional hub but spurned them. There was momentum in the period 2012-2014. It was wasted, missed. And like much else in the energy sector, you have to seize your opportunities as they come. Once they go, they do not return.
Increasingly Cyprus’ neighbours are considering other options to export their gas, in effect sidelining Cyprus. But with global markets becoming saturated with plentiful low-cost supply options and gas prices remaining low in the longer-term, as the inexorable march of clean energy takes hold, the chances of East Med gas reaching global markets are dwindling. The future is regional, with gas supporting renewables to provide cleaner and cheaper energy. The newly constituted EMGF can become instrumental in achieving this.
Dr Charles Ellinas is Senior Fellow, Global Energy Center, Atlantic Council
