One cannot fault the energy minister for lack of ideas, other than his fixation on natural gas. He made that his priority immediately on taking over the ministry, as the means to reduce energy prices -which of course must be the top priority, by any which-way possible.
But this is turning into an energy odyssey. A question that must be asked is: are the new energy plans feasible?
New energy plans
First, a meeting was called in Nicosia in May to prioritise development of Cyprus’ gasfields and bring the gas to the island for power generation. But the international oil companies (IOCs) operating in Cyprus EEZ did not show interest. A few days later, NewMed submitted a development plan on behalf of the Aphrodite consortium based on sending the gas to Egypt by subsea pipeline -pending the result of the appraisal drilling currently in progress.
ExxonMobil’s plans are longer-term, likely by the end of the decade, requiring discovery of more gas. It is continuing exploration in block 5. Eni and Total are yet to announce what they plan to do with their small gasfield discoveries in block 6. Eni would likely send the gas to its underutilized facilities at Zohr in Egypt, but has not yet announced any plans – other than the bombshell reminder by its CEO, Claudio Descalzi, that Turkey has a role to play in East Med gas developments.
The next idea put forward by the minister was to bring gas from Israel to Cyprus for liquefaction using a small-scale LNG facility at Vasilikos for export to Europe, as well as to supply gas to Cyprus for electricity generation. This was discussed with his Israeli counterpart during his visit to Israel earlier this month. But even this idea is facing uphill challenges.
Chevron, the operator of Israel’s two biggest gasfields Tamar and Leviathan, is planning to double exports to Egypt that is facing serious gas shortages. Chevron is also considering placing a 4.6million tonnes/annum floating liquefaction facility (FLNG) at Leviathan to enable export of LNG to Asia. It has no plans for gas to Cyprus.
The other company with gas in Israel is Energean, that previously proposed to export gas to Cyprus, including liquefaction and export to global markets using a leased FLNG at Vasilikos. But that was contingent of making sufficient new gas discoveries. Unfortunately, the discoveries made so far proved to be too small to support such a project. Energean has indicated that it is still willing to sell gas to Cyprus, but somebody else must build the pipeline. It is also considering gas sales to Israel’s growing domestic energy market –in May the government announced two new gas-fired power plants- and even exports to Egypt. Undoubtedly the company will give preference to the highest bidder. The price of such gas to Cyprus will be even higher, as it will have to include the cost of the pipeline. Given Cyprus quest for cheap gas to bring electricity prices down that would be a challenge.
A subsea pipeline from Israel to Cyprus also faces challenges. It is understood that Israel’s national pipeline company, INGL, might be interested in such a project. But being a state company, it needs to secure the required investment, but also the gas, before it can proceed further.
During their meeting in Israel, Cyprus’ and Israel’s energy ministers discussed transfer of Israeli natural gas through Cyprus to Europe as LNG, as well as a ‘gas-to-power’ project. The idea behind the latter is to bring Israeli gas to Cyprus, use if to generate electricity, with some of it for Cyprus own use, but with the bulk of it to be exported back to Israel using the EuroAsia interconnector, that received strong support -but requires investment and time to materialise.
Gas-to-power first surfaced soon after the European Commission (EC) included the EuroAsia interconnector as a ‘Project of Common Interest’ in 2013. An Israeli company proposed this project for security reasons, in case Israeli energy installations are incapacitated by war. Over the years the idea gained traction, but to fly it needs access to cheap gas, which -for the reasons explained earlier- can only come from Cyprus EEZ.
As far as production of LNG is concerned, the gas resources of the East Med are substantial, but not sufficient to support a number of liquefaction projects. Egypt has two LNG plants at Idku and Damietta with a combined capacity of 12.7million tonnes/annum. But due to declining gas production these plants are currently idle, unable to export LNG due to lack of gas. IOCs and financial institutions will not invest in new liquefaction facilities until the Egyptian LNG plants achieve full utilization.
Another challenge is the lingering project to import LNG at Vasilikos. We still do not know what is happening with this.
Prioritise renewables
Instead of prioritizing natural gas, development of which is completely in the hands of IOCs and their commercial interests, Cyprus should shift priority to exploiting its vast renewable resources (RES) that are currently massively underutilized -something that it is completely under its control.
Cyprus should heed EC’s Maroš Šefčovič advice when he visited Cyprus in 2016. He said, for energy don’t look down, look up – solar is the future, not gas. Wise words we should heed and give priority to whatever is needed to unlock solar energy.
In doing so, Cyprus can learn a lot from Greece that is now a global leader in the development of RES.
Greece presented the draft of its revised 2030 National Energy and Climate Plan (NECP) in January this year. The revisions reflect EU’s new climate targets. Greece is aiming to increase the share of RES in the gross final energy consumption to more than 45% and to electricity to more than 80%. It has already achieved over 40% production of electricity from RES, compared to Cyprus’ less that 15%.
Cyprus has yet to present its revised NECP for public consultation, even though the deadline for submission is 30 June. If it is to meet EU’s new climate targets it will have to increase its own substantially compared to now. The share of RES in electricity consumption will have to increase at least by a factor 4 by 2030, in comparison to current levels.
This will not be possible without a massive change of direction in the implementation of renewables. We know what is needed: modernization of the grid, installation of battery storage, completion of the EuroAsia interconnector. We have known this for may years. It is time to stop just talking about it and actually do it -as a matter of top priority.
Dr Charles Ellinas is senior fellow at the Global Energy Centre of the Atlantic Council @CharlesEllinas
Click here to change your cookie preferences