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Cyprus and Egypt Pipeline Deal: a New Chapter for Eastern Mediterranean Gas?

Cyprus-Egypt-Gas-Deal

The development of Eastern Mediterranean gas resources has reached a milestone on the 19th of September, with the agreement between Cyprus and Egypt to bring Cypriot gas to Egypt and further.

Egypt’s oil minister Tarek el-Molla and Cyprus’ energy minister, Georgios Lakkotrypis signed a deal to export natural gas offshore Cyprus to Egypt.
A subsea pipeline would connect the Cypriot Aphrodite deposit – estimated to contain 4.5 Tcf of natural gas – with the LNG export facilities of Damietta and Idku, located on the Egyptian coast.
Once processed the LNG can be shipped to European markets and maybe even to Asian markets.

Upon arrival to Egypt though, part of the imported gas would be used to meet Egyptian domestic demand, at least in a first stage.
In fact, Egypt might well become independent from imports quite soon as new discoveries and development of already known deposits proceed.
Eni is rapidly increasing gas production from the supergiant Zohr field and has made new gas discoveries in the Obayed concession in the Western Desert.

EastMed Gas Ready to Leave

The whole Mediterranean region is rich in natural gas and many plans to make it profitable have been made.
The pipeline, estimated to cost around $1 bn, could potentially be just a starting point to develop the gas resources in the Eastern Mediterranean region well beyond the Aphrodite gas field.
The Calypso-1 field – discovered by Italian Eni offshore Cyprus– is estimated to hold around 8tcf of natural gas.
Other companies, as Exxon Mobil and Total, are engaged in hydrocarbon search offshore Cyprus.
Israel as well has considerable availability of gas resources, in the Tamar and Leviathan field, that is eager to export.

A Feasible Pipeline

Among the many projects to develop the gas potential of the East Med region, this pipeline could be a winner.
If compared with other projects, for example with the EastMed pipeline, that is planned to bring gas from Eastern Mediterranean deposits to Italy through Greece, the one just agreed by Cyprus and Egypt could be more feasible.

Big international static infrastructure are very controversial.
They require long-term contracts that are not anymore desirable by many.
Crossing international waters and national borders raises problems of geopolitical, legal and environmental nature. The TAP pipeline is a perfect example, and the tension it is creating in Italy will hardly allow another pipeline to land in its southern regions.

The pipeline agreed between Cyprus and Egypt will be much shorter and will cross the EEZ of the two agreement parties. Once in Egypt the gas would be exported using the flexible and convenient LNG technology, so that routes and quantities of exports can be adapted to meet market demand.

As for the European market, everything that can decrease the dependence from Russia is welcomed by the majority of the countries and EU institutions.

Tensions in the region

The future seems bright, but the gas discoveries in the Eastern Mediterranean have always been accompanied by problems and disputes.
Turkey is constantly interfering in the affairs of Cyprus as the island remains
divided between Greeks and Turkish Cypriots.
Israel had disputes with Lebanon and the Palestinian authority on the ownership of the gas deposits.

Will the agreement between Cyprus and Egypt be the staring point of increased energy cooperation in the region or will rivalries and disputes make the agreement void?

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