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A Cypriot Answer To Egypt's Energy Woes
Christopher CoatsContributor
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I write about energy and policy issues facing the Mediterranean region
This week, Egyptian officials announced that they would accelerate talks with Nicosia ahead of an expected natural gas boom in Cyprus. According to a Reuters report, Cairo moved to expedite the import process to help Egypt deal with a newly found role as a gas importer, with the country’s Minister of Petroleum and Mineral Resources Sherif Ismail telling reporters in Nicosia that a pipeline would be the most viable path forward.
Over the last five years, Egypt has steadily moved from a net exporter of natural gas to an importer, hampered by political and economic insecurity and waning confidence from foreign investors. The country’s decline in domestic production has exacerbated a challenging energy environment for the country’s 85 million residents. Widespread shortages and blackouts have become commonplace as successive governments have struggled to address demand while still managing an unsustainable public subsidy system.
Recently, the country’s exports have also suffered. Egypt’s export decline can be traced to a damaging combination of increasing domestic consumption during the hot summer months, which made up 65.2 percent of local natural gas, and lower production levels that have plagued the country since the collapse of the government of Hosni Mubarak in early 2011. Coupled with attacks on energy infrastructure in the country’s eastern Sinai region, Egypt’s energy standing has struggled to find its footing.
To help cope with shortages without adding to the country’s multi-billion debt to foreign producers, Cairo has sought out affordable, often local import solutions, which now include Cyprus.
“Egypt has a very huge (natural gas) infrastructure and can accommodate the production coming from the Cyprus economic waters,” Ismail told Reuters. “It will be very fruitful for both countries to work together to materialize this cooperation in terms of developing the resources in Cyprus and exporting it.”
Although Cyprus currently lays claim to an estimated 50 to 60 trillion cubic feet of gas and 1.7 billion barrels of crude in waters off its southeastern coast, the country faces substantial financial challenges associated with export options, such as pipeline projects or possible Liquefied Natural Gas plants. For Egypt, a Mediterranean pipeline appears to be the preferred option.
Egypt has previously explored possible import options with other regional providers, most notably Israel. Recent reports suggested a pipeline projectlinking Israel’s Tamar gas field with an export facility in Egypt run by Spain’s Union Fenosa Gas. However, for many reasons, pursuing Israeli gas remains a challenge for Cairo.
In recent years, the possibility of buying Israeli gas has become a political land mine as critics were quick to cite investigations that allege years of selling Egyptian gas to Israel for far less than market prices. Revealed in the weeks after the collapse of the Mubarak government, the allegations included payments to Mubarak officials in exchange for low cost gas, including a now-cancelled 20-year agreement.
Coupled with ongoing tension between the governments of the two countries, the recent memory of these agreements and lost revenue that resulted from them, the possibility of a revived trade agreement has been a difficult policy to sell.
Link to source: http://www.forbes.com/sites/christophercoats/2014/11/27/a-cypriot-answer-to-egypts-energy-woes/
