Amid growing tensions in the Eastern Mediterranean, Egypt and Cyprus are intensifying talks to start building an offshore gas pipeline from the Aphrodite gas field to Cairo in preparation for re-export to Europe, in a more general context of the economic uncertainty of the gas and oil industry, as part of the consequences of the coronavirus pandemic and the decline in global prices due to oversupply.
During the last weeks, the Egyptian and Greek Cypriot officials have re-opened discussions over the preparations for the joint gas pipeline project aimed at transforming Egypt into a regional energy trade hub. The current discussions are based on the agreement signed by Egypt and Cyprus in September 2018 to establish the marine pipeline project.
According to the officials, the joint scheme would see natural gas from the offshore Aphrodite gas field in Cyprus piped to liquefaction plants (which convert gas into a liquid state) in Egypt for re-export to European countries and for use in local markets.
Previous government statements said that Egypt would start receiving Cypriot gas during 2022, while at present times, estimations see the project finalized around the year 2024-2025.
During a recent virtual meeting, Egyptian Petroleum and Mineral Resources Minister Tareq Al-Mulla and Cypriot Minister of Energy Natasa Pilides discussed cooperation between the two countries in the field of oil and natural gas and ongoing collaboration under the regional EastMed Gas Forum platform.
The minister said that the Egyptian-Cypriot gas pipeline will contribute to supporting growth and offsetting the economic repercussions of the coronavirus pandemic, hence the need to accelerate the implementation of the new project.
In terms of resources, Egypt has two natural gas liquefaction plants, one east of Alexandria at Idku owned by Egyptian Liquefied Natural Gas, and the other in the port city of Damietta belonging to the Spanish-Italian Union Fenosa.
The government’s Ministry of Petroleum and Mineral Resources contributes to the Idku plant through the Egyptian Natural Gas Holding Co. (EGAS) by 12 percent, the Egyptian General Petroleum Corp. (EGPC) also by 12 percent, Shell by 35.5 percent, and Malaysia’s oil and gas company Petronas with 35.5 percent. French multinational Total now contributes about 5 percent to the plant. Also, the Spanish company, Union Fenosa, manages the Damietta site where 80 percent of the project is under joint ownership between Union Fossa and Eni with the EGPC and the EGAS owning the rest of the shares at 10 percent each.
In August 2020, Egypt brought a new crude oil pipeline at the al-Hamra petroleum port on the Mediterranean Sea and set out other planned improvements to the port as part of the country’s efforts to become a regional energy hub. The 8-kilometer Hamra-Shamandoura loading pipeline, which links the port with an additional offshore tanker loading facility, will increase the port’s shipping capacity to 1 million barrels of crude per day and will be a key part of the port’s capabilities.
Petroleum Minister Al-Mulla said crude storage at al-Hamra had increased, boosting capacity by 250,000 barrels to a total of 1.5 million barrels, to “securely receive quantities of crude oil … from companies operating fields in [Egypt’s] the Western Desert,” according to a public statement.
The Hamra petroleum port lies around 120 kilometers west of Alexandria, Egypt’s second-largest city, and is run by the Western Desert Operating Petroleum Co (WEPCO).
Moreover, Cyprus and Egypt are also going ahead with a 498km electricity interconnector that will have an initial capacity to export about 1GW (1,000MW) of power from Egypt’s vast renewable resources, mainly from solar energy parks, to Europe through Cyprus. With an investment of €1 bln, the EuroAfrica Interconnector will be ready in December 2023.
In 2017, the United States Geological Survey estimated the natural gas reserve in the Mediterranean at 340-360 trillion cubic feet with a financial value ranging between $700 billion and $3 trillion.
In January 2019, Egypt, Cyprus, Greece, Israel, Italy, Jordan, and the Palestinian Authority established the Eastern Mediterranean Gas Forum in an attempt to create a regional gas market, reduce infrastructure costs, and offer competitive prices.
There were several reactions of experts on the present matter, expressed through the Al-Monitor channel.
Gamal al-Qalyubi, a professor of petroleum and energy engineering at the American University of Cairo, told Al-Monitor that Egypt has all the capabilities and infrastructure needed to complete the project, whose cost is estimated at $1.3 billion, and bring it to fruition. He said that Egypt is outperforming its Eastern Mediterranean neighbors in developing deep-water energy projects.
Maher Aziz, a member of the World Energy Council, stated that the pipeline between Egypt and Cyprus is another reason for Egypt to be a focal point for energy exchange and trade in the region. Aziz noted that Egypt is seeking to become one of the leading gas exporters to Europe.
Zenonas Tziarras, a researcher focusing on the geopolitics of the Eastern Mediterranean at the PRIO Cyprus Center, declared by email that the initial plan was for Egypt to receive Cypriot gas by 2022. However, he said, this goal seems somewhat ambitious at this stage given how the coronavirus pandemic has led to a slowdown in energy markets around the world and given the important hydrocarbon discoveries in Egypt, which culminated in Egypt’s announcement that it would achieve self-sufficiency in natural gas by the end of 2018. Cypriot gas may not be as important to Egypt as it was before, he said. Also, Tziarras noted that it is unclear whether the Egyptian liquefied natural gas stations would have sufficient capacity to absorb Cypriot gas given the abundance of Egyptian gas. He said that there are also pending negotiations between Israel and Cyprus on the Aphrodite gas field that must be resolved before Cyprus can liquefy the gas without any problems.
These experts Al-Monitor spoke with the believe that the project of transporting the Aphrodite field gas via a pipeline from Cyprus to Egypt faces two other challenges, one of which is financial, related to the development of the field itself, and the other is political, related to Turkey.
Another challenge facing the Egyptian Cypriot pipeline is that Turkey argues that proceeds from sales of Cypriot gas should benefit all citizens of Cyprus, including Turkish Cypriots. “Turkey will certainly try to undermine the project and this could inflame the already existing tensions in the region,” Tziarras concluded.
While Eastern Mediterranean countries have ambitious projects to gain a foothold in the European market with natural gas exports, the EU is seeking alternatives to its dependency on Russian gas, as Russia is the third-largest oil producer in the world.
As such, the project between Egypt and Cyprus is supported by the EU, given the result of the pipeline implementation which is the re-export of gas to the European market.
This article was edited using data from the following websites: www.al-monitor.com, www.hellenicshippingnews.com, www.arabnews.com, www.financialmirror.com, www.middleeastmonitor.com, www.aa.com.tr, and www.oilgas360.com.