The best chance since 2013 that Aphrodite may actually resurface – maybe

 

One of our big problems is that governments often talk about developing our gasfields as if they are in full control. As if they are the ones to decide and whatever they decide will be done. Statements like: “we will send our gas to Europe because Europe needs it so that it can ditch Russian gas”, or, “we will bring it to the island for power generation, with the rest to be liquefied and exported,” abound.

But the reality is that while oil companies have an obligation to work with governments, ultimately, they will propose development plans aligned to their business priorities. After all, they foot the bill, they have the required technology and expertise, they take project risk and they have the reach to global markets to sell the gas.

What will happen in the future with East Med natural gas depends to a very large extent on the oil companies and not on regional governments. Governments have the power to approve, or not, development plans proposed by the oil companies, but not approving them entails a risk that a project may not progress.

The best approach is to cooperate closely and support the companies to ensure that such plans progress to implementation, if we are to benefit and not end up talking again in a few years about missed opportunities.

I am struck by the cynicism I get from many Cypriots when any optimism is expressed that a project may actually progress. But people are right to be cautious and often outright cynical. Many premature promises were made in the past, only to fall by the wayside.

A good example is the potential exploitation of the Aphrodite gasfield. There were missed opportunities, followed at regular intervals by promises that exports will start by a certain date, only for that date to become a moving target that never arrives. I have reasons to believe that there is now the best chance since 2013 that Aphrodite may actually “re-surface”, but…then I must confess that not everything I hear gives me full confidence.

Our gas to Europe – or not to Europe

We keep talking persistently about sending our gas to Europe because “Europe needs it to replace Russian gas.” But there are two big problems with this. First, Europe’s needs to replace Russian gas are confined to the next few years, and certainly not beyond 2030 – its REPowerEU strategy makes that abundantly clear. The same strategy is targeting reduction of gas demand in Europe by 30 per cent by 2030, and to continue reducing it all the way to net-zero emissions by 2030. Europe actually achieved a 17.7 per cent

reduction in the period August 2022-March 2023, compared with the average gas consumption for the same months between 2017 and 2022.

With such targets the EU is not looking into new long-term gas supplies. The oil companies operating in the East Med have made it abundantly clear that without long-term commitments from EU buyers of gas they will not proceed with development of projects solely dedicated to supplying gas to Europe.

It they do, it will be for the Asian energy markets, where demand for gas is forecast to continue well into the future.

Chevron is proceeding in Israel with expanding gas production at Tamar Leviathan to feed its FLNG project to export gas to Asia and to more than double its gas exports to Egypt, that is desperate for new gas supplies because its own production is faltering. Incidentally, Egypt is also very keen on gas from Aphrodite.

Chevron is going ahead with these plans, even though not that long ago Benjamin Netanyahu was talking about gas to Italy and from there to Europe and now gas to Europe through Turkey. And in between, the suggestion of Israeli gas being sent to Cyprus, for Cyprus’ own use, but also for liquefaction and export…to Europe.

As a result, East Med gas development plans often have a longer-term horizon. The oil companies will proceed with gas development projects over time, in response to market opportunities needed to underpin such projects and guarantee long-term, profitable, low-risk sales.

Associated with East Med’s volatile geopolitics, low-risk is key. The oil companies, and banks, will not invest in projects potentially subject to geopolitical risk over their lifetime.

Solution of Cyprus problem is crucial in this context. Hopefully Tukey’s rapprochement with Greece, Israel and Egypt, and its need of Europe’s goodwill and cooperation, driven by its economic woes, will offer a new opportunity.

Renewables

With development of our gas not in our hands and not likely to contribute to Cyprus immediate energy needs, we will do best to concentrate our efforts on renewables that are completely in our hands.

At last, there is some movement on the much-talked-about, but stalled, installation of battery systems for storage of excess electricity and grid stability. The minister of energy went as far as to say that these will be in place within two years. A good development, but what do the thousands of

Cypriots that are keen to install rooftop solar do between now and then? As usual, we have left this too late and now we are trying to play catch-up from behind.

Another such example it the EuroAsia Interconnector. Given the latest cycle of discussions and spread of often uninformed confusion regarding this project, the European Commission (EC) must be looking at us aghast…in bewilderment.

The project was first proposed in 2011. It went through all evaluation stages, in Cyprus by Cera and the state, and by the EC. Following selection as Project of Common Interest (PCI), it was awarded €657million by the the EC in January 2022, one of the biggest PCI awards ever.

It was hailed as a great success and the then government allocated €100million grant to the project from EU’s Recovery and Resilience Facility.

In October 2022, at a ceremony in Nicosia, European Commissioner for Energy, Kadri Simson, together with the then-President Anastasiades, and the ministers for energy of Cyprus and Greece, marked the start of the construction stage of the project.

The press release by the EC at the time stated “The project, which has been politically and financially supported by the EU, will bring an end to Cyprus’ energy isolation…The EuroAsia Interconnector will reinforce the security of energy supply for Cyprus and Crete, integrating their energy systems with the European networks through mainland Greece. By boosting electricity interconnectivity, it will also help the integration of renewable energy sources in the region” – spot-on.

It is bewildering, and embarrassing, to see that there are attempts to set all this scrutiny and approvals and the above statements aside and start from scratch. Let’s hope that sense prevails and soon.

 

Dr Charles Ellinas, @CharlesEllinas, is a senior fellow at the Global Energy Centre of the Atlantic Council