incyprus — 19/09/2015
By Charles Ellinas
We had some powerful messages coming out of meetings in Berlin and Brussels this week.
As a follow-up to the East Med regional expert workshops organised by the Friedrich-Ebert-Stiftung (FES) Foundation and PRIO in Nicosia and Istanbul, and reported in the Cyprus Weekly last June, high-level meetings took place this week in Berlin and Brussels.
These included industry, the Federal Ministry for Economic Affairs and Energy, the Federal Chancellery and the Ministry of Foreign Affairs in Berlin, and MEPs at the European Parliament, EU Directorate General for Neighbourhood Policy and Enlargement, Directorate General for Energy, European External Action Service, the Norwegian Embassy and a number of think tanks in Brussels.
The key message to Berlin and Brussels was that the European Union should recognise the East Med as an important source of hydrocarbons for Europe and assist the countries of the region to cooperate in order to achieve this.
In a regional environment of rapidly changing realities, there is a sense of urgency for regional platforms of dialogue, including civil society in addition to regional governments, to contribute to the social and economic welfare of the local populations and the protection of the regional environment.
A number of important and sometimes surprising messages came out of these meetings which are discussed in the remainder of this article.
Messages from Berlin
There was considerable interest from EoN and BP to see gas from the East Med exported to Europe through the Southern Corridor pipeline. However, timing is important.
Delay the decision making process and the opportunity may not be there in a few years. Gas consumption in Europe is not actually increasing, due the push to renewables led by Germany.
But Europe still needs to replace the depletion of indigenous gas resources in the North Sea and the Netherlands. This, combined with the drive in Europe to diversify supplies, has created opportunities but there are currently many competing sources of gas to fill this gap.
These include piped gas from Russia, the Caspian region, Iran, North Africa and LNG from North America. It will not take long before the European gas markets are saturated, leaving no room for East Med gas.
This demand may not be there in three-five years. East Med gas is not a priority for western Europe’s energy needs.
The other major factor is prices. Gas markets are changing rapidly.
Russia has now lowered its gas prices to Europe down to about $6.2 per mmBTU, as a result of oil price indexation.
East Med gas will have to compete with cheap gas if it is to gain an entry into Europe. In the end when it comes to gas sales commercial realities prevail, not politics.
The German position is that the energy sector should be regulated by markets. State governments and the EU have no role in building infrastructure, gas trading or producing and delivering energy. These must be driven by industry.
Germany, and Europe, want diversification of supplies to reduce excessive dependence on Russia, but not to endanger the relationship, which they have found dependable even at difficult times.
There is awareness that lack of transparency in the region is feeding corruption and they are supportive of the Extractive Industries Transparency Initiative (EITI), but it is for countries in the region to adopt and apply.
With regards to safety of offshore oil and gas operations and protection of the environment the EU offshore directive should help but it needs to be adopted by all countries in the region, not just Cyprus.
Germany is interested in the East Med region, but mostly in terms of security and stability, and for political and economic reasons – not for its gas. They see gas as having a bridging function as they move to renewables – they have a target to achieve zero emissions by the end of this century.
There is no interest to import electricity from North Africa or the East Med to Europe – this is now overtaken by the switch to renewables. The focus for Germany is to empower countries to supply themselves with renewable energy.
Messages from Brussels
Energy security and climate change are the key issues. Gas is needed as a bridging resource as Europe moves to renewables. The EU supports regional cooperation and the area through which to achieve it could be energy.
The EU is ready to assist Cyprus to develop its hydrocarbons and even more so if gas can assist reconciliation. The possibility of a gas pipeline through Cyprus EEZ to Turkey, provided the Cyprus problem is resolved, to transport Israeli and Cypriot gas and feed the Southern Corridor is of interest and would support it.
Southern Corridor is a priority project. But East Med gas must be competitive against European gas prices, it must secure markets and meet time schedules.
They are following the recent developments in the region with the massive discovery by ENI in Egypt. ENI’s CEO Descalzi was in Brussels this week expounding his ambitious goals to turn Egypt into a regional energy hub.
But there was some scepticism that perhaps this may be a little bit too ambitious and commercial realities and the challenges in Egypt might temper what can be achieved. I was actually challenged to a bet on this, when I said ENI has the incentives to drive this project.
The East Med gas is attracting considerable interest from policy-makers in the EU, but in their view it still needs to be developed and mature. It is a region with major geopolitical challenges.
As such it is a region of top priority to the EU, not because of its gas but because of the need to achieve stability and cooperation in the development of this gas to satisfy regional demand and help regional economies. In this context the new gas discovery in Egypt should contribute to its self-sufficiency and possibly the resumption of LNG exports to generate additional revenue for the country.
Cooperation between Cyprus and Israel to develop their gas and possibly export it by pipeline to Turkey and Europe or as LNG should help regional stability.
Environmental issues are very important and require regional coordination to ensure the safety of offshore operations.
The EU offshore directive can help achieve this and in addition to Cyprus, the EU is assisting Lebanon and Israel in this direction. However, it is a regional issue and regional outreach strategies must evolve to achieve it.
Key messages
East Med gas is not a top priority for Europe. There is a market but it will not be available forever. Global gas markets are shifting rapidly, with supply outstripping demand, with LNG gaining ground and prices being very competitive.
If East Med wishes to join these markets it must secure firm gas sales and meet these competitive prices. The EU is politically very supportive of the Southern Corridor and this might provide an opportunity for the region to export its gas, but not at any price and at any time!
SOURCE
Saturday, September 19, 2015
Friday, September 18, 2015
Zhor stretching into Cyprus’ EEZ | in-cyprus.com (Cyprus Weekly)
Zhor stretching into Cyprus’ EEZ
The first analyses of the structural and geological data of Zhor deposits by Italian company ENI shows the reservoir stretching, albeit not by much, into Cyprus’ Exclusive Economic Zone (EEZ).
However, additional studies and drilling are required to find out whether the gas in the reservoir comes this far.
This largely depends on the depth of the well and whether its lowest point lies higher in the part that falls with the Cyprus EEZ.
French specialists of French Petroleum Institute BEICIP leave muffed hopes for that.
This conclusion is derived from the study of seismic data in the region of Cyprus’ EEZ and the limited available data on the mammoth Zhor reservoir.
The picture may change, but current data do not leave much room for hope.
Seismographic data indicates a significant decline in our end of the well, meaning that its ‘thickness’ diminishes as it extends this way.
The study of the data continues, and Energy Minister expects to be updated next week.
As the analysis progresses and drilling continues on EMI’s part, the scope and outline of the reservoir will be assessed in collaboration with the government, as provided by international and bilateral regulations.
Meanwhile, Energy Minister Yiorgos Lakkotrypis will be in Houston, US on Monday, where he will have meetings with top-ranking officials of Noble Energy.
Plans for the development of Aphrodite well will be on the agenda as well as the amendments the government has submitted on Noble’s plan and implementation timetables.
The main focus of Lakkotrypis’ discussions with Noble in Texas will be issues relating to buyers of Cypriot gas.
Lakkotrypis will be paving the way for President Anastasiades’ scheduled talks with the head of Noble Energy in New York.
Energy Minister will be returning to Brussels for the informal meeting of EU Energy Ministers and set meetings with Energy and Energy Safety Commissioners aimed at promoting Cyprus as an alternative natural gas supply and distribution centre for Europe.
Source: http://in-cyprus.com/zhor-stretching-into-cyprus-eez/
Energy developments in the Eastern Med Keep on | ALL ABOUT SHIPPING
Dr. Loukas G. Glyptis
If one told you 10 years ago that Cyprus would position attractively as a promising new player in the energy market, you would probably think they are speaking nonsense. However, the identification of natural gas reserves in Cyprus’s declared EEZ, has converted this island-Republic at the far eastern borders of the EU to a focal European partner contributing to an incessantly updated energy agenda, which is not independent of environmental considerations, and certainly, ongoing geopolitical developments affecting the Continent. Dr Loukas G. Glyptis* writes:
Zhor - Managing expectations | SigmaLive
Zhor - Managing expectations
Ever since the announcement of the discovery of Zhor by ENI fever has been rising in Cyprus, with the inevitable build-up of expectations.
I spent the last four days participating in high level meetings with ministries in Berlin and the European Commission in Brussels. There the tone is different and references to the East Med are measured and non-committal.
Eni's CEO Descalzi was also in Brussels this week expounding his very ambitious plans for Egypt and a major hub for gas exports. Commissioner Canete responded to this with enthusiasm mostly because he is desperate to show that there are other sources of gas to Europe than Russian gas. But most others in the EU are more sober and measured.
And for a good reason. Gazprom has just lowered its gas prices to $6.2 per mmBTU as oil-indexation kicked-in. It is difficult for most other suppliers to match such a price. And the EU made it clear that even though they set up political priorities and guidelines, they leave it to commercial companies to decide where to invest, where to get their gas, how to generate energy and which projects and areas to invest in. These companies base their decisions mostly on commercial factors and risk.
To take gas from Cyprus to Egypt it will cost at least $6-7 per mmBTU and then you need to add liquefaction, transportation to Europe and re-gasification costs. Allowing for profits the total cost could be more than $12 per mmBTU. How does that compare with Gazprom's prices.
That is one of the reasons that major European companies teamed up with Gazprom, and have now signed agreements, to build Nord Stream 2 to carry 55 bcm of gas to Germany, despite Mr Canete's lack of support. Needless to say that the project has the tacit support of Germany.
When asked in Brussels, ENI sources said there are no indications that Zhor extends into Cyprus' EEZ, but next year's appraisal drilling will show. Yet, in Cyprus expectations are building up.
Europe has plenty of gas and projections are that future needs will at best remain stagnant. They want diversification and prefer to avoid excessive dependence on Russia. But note that the operative word is 'excessive'. Western Europe consider Russia a reliable and dependable partner.
In this context there is a lot of political support for the Southern Gas Corridor. They urge the East Med to consider this as a strong option for sending its gas to Europe, realizing of course that this pre-supposes solution of Cyprob. But not at any price and at any time - both are limited. East Med gas must first find buyers, competing with current gas prices in Europe. And it is important to note that the limited demand for gas in Europe will not be there for long. Other suppliers are ahead of the East Med.
The drive in Europe is renewables - not gas. We need to recognize the above and divert our attention on how best to utilize our limited opportunities.
Thursday, September 17, 2015
Egypt’s Energy Renaissance Good for Egypt, Good for the Energy Industry | Diplomatic Courier
Egypt’s Energy Renaissance Good for Egypt, Good for the Energy Industry
Egypt is undertaking a complete transformation of its energy sector, embarking on an ambitious path to increase and improve the efficiency of the supply of electricity for the Egyptian people. The government’s comprehensive energy strategy will bring new, world class technology while diversifying fuel sources on the grid – including the addition of wind and solar energy – while simultaneously making existing generation plants larger and more efficient. Upon execution, the plan will help meet growing domestic power demand while attracting foreign investment and technology to strengthen Egypt’s energy infrastructure – ultimately expanding access to electricity while making it more affordable and reliable. This energy strategy is an important condition for an economic renaissance that supports the growth of small businesses and entrepreneurs as electricity supply becomes more secure. The government’s important initiative has the potential not only to reform and diversify Egypt’s energy sources but, given its strategic geographic location, could also turn the country into a global hub for energy trading.
Energy is fundamental to economic development, fulfilling a crucial need that helps increase gross national products and lift people from poverty. Without energy, schools struggle to function. Medical services suffer. Communities have difficulty obtaining and maintaining high standards of living. Entrepreneurs lack the tools they need to create new businesses and to operate existing businesses. The government’s awareness of these dynamics drives the strategy. President Sisi himself understands the link between energy and economic development. In 2014, he announced that his government would focus on overcoming the energy challenges that have hindered the country from meeting its domestic energy demand and attracting much-needed international investment. These were not just words. Since then, the government has implemented a number of key policies, including establishing a solar feed-in-tariff, undertaking energy subsidization reforms, adopting a prioritized natural gas distribution plan, and making creditor repayments to stimulate the economy. The energy strategy is delivering results, not the least of which is an upgrade of Egypt’s credit rating, which has gained the attention of the global energy and financial communities.
As Egypt’s financial position becomes more stable, investor confidence has also grown. Due in no small part to the thoughtful design of Egypt’s energy strategy, the international energy and financial communities are starting to partner with Egypt to invest heavily in energy infrastructure. Egypt has forged a path for secure and profitable investments that will deliver a diverse and efficient energy mix. The government has clearly articulated its objective of obtaining a diversified energy portfolio – including natural gas, renewables, nuclear, and cleaner coal – to ensure that there will be ample energy resources to power the expanding economy. While Egypt is fortunate to have significant hydrocarbon reserves, it traditionally looked beyond its borders to meet its energy needs. The international energy community will play a vital role in developing additional domestic resources, in building interconnections with other countries, and in using fuels more efficiently.
Earlier this year, the Minister of Electricity and Renewable Energy, Dr. Mohamed Shaker, announced the implementation of a key first phase of the country’s energy vision, adding 1,707 megawatts to the national power grid. Additionally, Egypt has taken actions that include adding exploration wells, expanding refineries and increasing renewable energy projects. The global energy investment community is taking notice as the country becomes more inter-connected and builds out infrastructure to deliver power to previously under-served population centers – particularly in remote areas such as the desert. Egypt is opening up vital new markets for goods and services, leading to tens of billions of dollars in energy investments.
As the foreign investments grow, the government is taking steps to create a favorable environment to attract energy investors. More importantly, it is taking additional actions to ensure that it will sustain these global energy investments. “If investors believe in the country and its leadership, then naturally the investment will flow in,” Prime Minister Ibrahim Mahlab said in an interview ahead of a global economic conference in Egypt in March. “We will change the perception of Egypt and prepare the country for a future of growth and prosperity.”
The Prime Minister’s words have been backstopped by effective action. Egyptian leaders have recognized that the gaps between the country’s energy supply and growing demand require urgent action and are taking steps accordingly. The new focus is on energy use in public buildings, street lighting and eventual elimination of low-efficiency light bulbs in homes, among other changes.
Expectations are high in this youthful, fast-growing country. Sixty percent of Egyptians are age 30 or younger. Currently 82 million, Egypt’s population has been projected to exceed 100 million residents by 2020.
Investments for an energy-hungry nation
A wide array of international stakeholders has made commitments to help Egypt meet the energy needs of the growing population. Oil and gas contracts, renewable energy ventures, and preliminary agreements for new power plants are all in the works.
In February, a German-owned group operating in Bahrain announced $3.5 billion in solar energy projects in Egypt. Backers said the investment in plants, equipment and education would yield direct and indirect benefits, including more than 50,000 construction and operational jobs over the life of the project.
In March, a cluster of foreign firms announced a total of $35 billion in commitments to Egypt to support natural gas production and power generation. The investments included pledges from British, Italian and Saudi Arabian groups to fund power stations and wind parks, as well as the equipment to keep the installations functioning.
GE was among the companies announcing investment plans and contracts during that round. GE will build a $200 million “Multi-Modal Facility” for manufacturing and training. Our company also announced an agreement with the Egyptian government to deliver 2.6 gigawatts of electricity – enough energy to power the equivalent of more than 2.5 million homes. As part of its commitment, GE agreed to supply 46 gas turbines to begin generating power in May – a remarkably ambitious target for delivering large amounts of power after only five months of construction. GE is executing on its commitments to help Egypt meet its energy goals. We are proud to be long-term partners with a strong and growing local Egyptian team.
Also in May, Egypt inaugurated a 750 megawatt power plant north of Cairo. The $500 million combined-cycle gas turbine plant uses gas- and steam-powered turbines to generate power in a highly efficient manner. It’s a key part of the five-year effort to provide environmentally-friendly electricity.
“Greening” and public awareness
Government leaders also are working to ensure Egyptians understand the urgency for clean and sustainable energy. A recent United Nations Environment Program study called for a “greening” of the Egyptian economy. The authors made a series of recommendations toward sustainable development, from public awareness campaigns on sustainability to increased spending on green goods and investments to create markets and demand for such products.
The paper called for public-private partnerships to encourage a transition to green energy. Households need to shift to energy efficient appliances to help curb energy consumption, while businesses need equipment upgrades to meet efficiency targets, the report said.
Human capital is another significant area of focus in the “greening” initiative. The inclusion of environmental and sustainability information in educational and vocational programs can help build a pipeline of talent to support the green economy. The results of such efforts can be seen in organizations such as OneraSystems, which produces solar power for Egypt’s energy grid.
In parallel with its green energy efforts, Egyptian leaders have made it clear that they’ll need to rely on a mix of sources – including coal, and natural gas – to satisfy the country’s energy needs. Reliability is, of course, one of the key mainstays of an effective grid system, and Egypt recognizes correctly that reliability depends in part upon a diversity of supply. It is critical to ensure that the diverse fuel sources are converted as efficiently as possible into electricity, so that the imperative for reliability does not undermine the good work being done to “green” the economy. Egypt’s leaders seem to have struck the right balance in dealing with this challenging dynamic.
Egypt has some key advantages as it develops affordable and reliable energy sources, including its geographic location and suitability for solar and wind energy. The country sits at an energy crossroads, literally and figuratively, occupying a prime location along the Suez Canal linking the Persian Gulf to Europe and ultimately the United States. I recently attended Egypt’s celebration of the Suez Canal expansion; the government’s investment in energy and infrastructure for the canal serve as yet another testament to its commitment to being world class. This key location places Egypt in a strategic position with respect to the trade and flow of energy resources.
Egyptians are the largest consumers of oil and natural gas in Africa, and the country also has the largest oil refining capacity on the continent. But this potential is not being fully optimized. Oil consumption has grown by an annual average of 3 percent during the past decade, leaving Egyptians in need of more fuel as consumption has consistently outpaced production.
The country also faces other key challenges, such as the need for highly skilled labor and a culture that espouse continuous maintenance of energy systems. In addition, a basic lack of public awareness of energy issues could impede the country’s development of a more diverse energy infrastructure over the long term.
These issues, if not addressed, could become more significant as the country’s energy needs increase and economic growth accelerates. Egypt’s current gross domestic product growth is estimated at 2.2 percent, compared to 7.2 percent in 2008. By 2020, however, the International Monetary Fund is predicting that Egypt will hit 5 percent growth.
The growth of Egypt’s emerging economy is the result of opportunities and good policy, and it serves as an example for the entire region. A more reliable and accessible energy infrastructure will be crucial in boosting entrepreneurship, building local manufacturing industries and lowering import bills. These advances, in turn, will lead to far-reaching benefits for Egyptians and their neighbors: economic growth, improved access to utilities and social services, and improved quality of life for all of Egypt’s citizens. This is truly a win-win proposition: good for Egypt and good for energy industry as whole.
Steve Bolze is Senior Vice President at the General Electric Company and President and CEO of GE Power & Water.
Source: http://www.diplomaticourier.com/egypts-energy-renaissance-good-for-egypt-good-for-the-energy-industry/
Wednesday, September 16, 2015
Cyprus May Claim Part of Egypt’s Massive Zohr Field | Egypt Oil & Gas
NEWS > Egypt NEWS > Worldwide
Cyprus May Claim Part of Egypt’s Massive Zohr Field
Wednesday, 16th September 2015
Cyprus Energy Minister Giorgos Lakkotrypis said that in the next few days Cyprus will have an idea of whether the large natural gas reserve recently discovered [Zohr] off the coast of Egypt extends inside the island’s Exclusive Economic Zone (EEZ), reported Cyprus Mail.
Sigmaville quoted the Lakkotrypis saying “Two things must extend to our EEZ, the geological structure of the sea bed and the gas field as such.” He adds “We are already working on the geological evidence and we will have a certain picture in the coming days” he said, adding that “Zhor” borders Cyprus’ block 11.”
According to ENI, the prospect covers an area of about 100 square kilometres, and has a hydrocarbon column of 630 meters.
If the reservoir does overlap, the unitization agreement signed between Cyprus and Egypt in December 2013 would presumably kick in.
Hypothetically, should part of the Zohr prospect cross over into the Cypriot EEZ, this could represent a windfall for the state – the share of proceeds under the unitization agreement with Egypt – without Cyprus spending a cent on development.
Source: http://www.egyptoil-gas.com/news/cyprus-in-effort-to-claim-part-of-egypts-mega-gas-discovery/
Tuesday, September 15, 2015
Eni plans to hold the keys for east Mediterranean gas exports | Reuters
Eni plans to hold the keys for east Mediterranean gas exports
* Eni envisions new Egyptian export hub
* Plans to link gas assets in Libya, Cyprus with Egypt
By Stephen Jewkes and Oleg Vukmanovic
MILAN, Sept 15 (Reuters) - Braving all the political risks of the region, Italy's Eni aims to pull together its east Mediterranean gas empire headed by a giant Egypt find, into a major hub to supply Europe.
State-controlled Eni, the biggest foreign oil and gas major in Africa, wants to use its deep ties with Egypt and Libya to help create the export hub for liquefied natural gas.
It expects Libyan gas to flow into a hub when conflict abates, hopes to attract other producers seeking an export outlet from Israel and accelerate plans to send Cypriot gas owned by other companies into the facility, likely to be located in Egypt.
The project would help diversify gas supply to Europe, now dependent on Russia for about a third of its needs, but faces long odds given the region's mix of political disputes, conflict zones and state involvement in energy policy.
Its scope of tying together a multi-national gas supply network may be unprecedented. Pipelines would need to be built linking the various gas deposits scattered across the region to an LNG plant.
"The area (Egypt) could restart exporting LNG and, as it's very close to Italy and Spain where LNG import terminals are idle or underused, it's very likely it will come in there," Eni CEO Claudio Descalzi told Italy's parliament last week.
Descalzi, who has already flown to see heads of state in Egypt and Cyprus where the idea of a gas export hub was discussed, told senators the hub could be established to bring together the resources of Egypt, Cyprus, Israel and at some later point Libya.
"There's massive potential here for Europe and room for Italy to increase its clout in the area. It's clear there are huge amounts of gas, including off Libya," a person familiar with the matter said.
EGYPTIAN LNG
Fuel shortages have forced Egypt to idle its two liquefied natural gas (LNG) export plants, which chill gas into liquid form for transport on ships.
Pooling the region's rich energy resources could spur investment in previously stranded gas fields in Israel and Cyprus, while resuscitating once-bustling LNG export plants like BG's Idku as well as Eni's dormant Damietta in Egypt.
In Cyprus, Eni itself has not yet discovered any gas deposits but is focused on doing so, the company said last week.
Still, the firm's bumper gas find in Egyptian waters this month, the biggest ever in the Mediterranean, may help unlock aspects of the problem by providing large new supplies to feed the gas export hub.
While gas from the newfound Zohr field, holding 30 trillion cubic feet of reserves, will mainly feed domestic Egyptian demand only, a deeper reservoir below it could be a candidate for gas exports.
"Egypt had a plan to double its LNG export capacity and if the hub grows it could do it," Descalzi told Italy's parliament.
The CEO said Eni has made big gas discoveries in Libya that have lain dormant for years because they were unable to develop them as conflict raged, seeing Egypt as one export outlet.
Zohr is also close to Cyprus' offshore block 11 which is licensed to French major Total and the reservoir may extend across the maritime border, creating opportunities for explorers on the Cypriot side.
Israel and Cyprus already have plans to export gas to Egypt but progress has been slowed by regulatory interference and dragging negotiations.
Pulling off the hub project will not be easy given the region's tangle of political disputes.
Turkey opposes any export of Cypriot gas reserves until a long-standing dispute over territory is cleared up and a mechanism for sharing gas profits between the Turkish and Cypriot sides of the island are put in place.
Turkey also sees itself as the region's energy hub, as new pipelines feeding Caspian gas to Europe run across its territory, and may balk at potentially losing ground to Egypt.
Developing Israel's giant gas finds has proven treacherous following policy reversals holding up investment and most recent regulatory disputes have put development on ice. (Additional reporting by Giancarlo Navach, editing by William Hardy)
Source: http://in.reuters.com/article/2015/09/15/eni-mediterranean-gas-idINL5N11H18O20150915
“Zhor” gas indications for Cyprus within days | in-cyprus.com (Cyprus Weekly)
“Zhor” gas indications for Cyprus within days
Energy Minister George Lakkotrypis on Tuesday said that indications as to whether Egypt’s giant natural gas “Zhor” field extends into Cyprus’ Exclusive Economic Zone (EEZ) or not will be made available in the next few days.
“We will have an overall picture in the next few days”, Lakkotrypis said when asked whether “Zhor”, which holds as much as 30 trillion cubic feet of gas, extends into Cyprus’ EEZ.
“Two things must extend to our EEZ, the geological structure of the sea bed and the gas field as such”, he added.
Lakkotrypis was talking to journalists after a meeting with Secretary General of opposition left-wing Akel party Andros Kyprianou.
Regarding Italian energy giant ENI’s research program offshore Cyprus, the Minister said they had begun processing the geological data. And that only some geological details were left.
Lakkotrypis repeated that there are positive prospects as regards the geology of the region and Cyprus’ EEZ following the discovery of natural gas in “Zhor” field.
Source: http://in-cyprus.com/zhor-gas-indications-for-cyprus-within-days/
Monday, September 14, 2015
Israeli gas in a wider regional context: interview with Shaul Zemach - NATURAL GAS EUROPE
September 14th, 2015
Natural Gas Europe had the pleasure to speak again with Shaul Zemach, Former Director General of Israel's Ministry of Energy and Water Resources. We spoke about how ENI’s discovery off Egypt is a game changer. “With two Majors substantially investing in the Egyptian offshore gas targets it would be reasonable to anticipate results in new discoveries. The amazement was due to the scale of the discovery at Zohr field, given its location and interesting geological structure.” At the same time, according to Zemach, the Zohr discovery could “modify certain terms and conditions of future regional gas supply contracts, including gas prices and contracts duration.”
Among specialists, the announcement of ENI’s giant discovery offshore Egypt has casted doubts over Israel’s attractiveness as a natural gas supplier for Egypt. For instance, consultancy WoodMackenzie wrote that Eni's giant discovery is set to transform Egypt's gas outlook. On the other hand, Egyptian authorities confirmed their interest for Israeli gas at least in the short-run. What should we think?
Sunday, September 13, 2015
Egypt will take Cyprus gas | in-cyprus.com (Cyprus Weekly)
Egypt will take Cyprus gas
By Annie Charalambous
The recent discovery of giant natural gas deposits in Egypt’s Zohr plot does not negate the country’s export deal with Cyprus, newly-accredited ambassador Hussein Mubarak told the Cyprus Weekly.
Although Nicosia is looking into different scenarios, Cairo’s offer to import the gas from the Aphrodite plot offshore Cyprus, liquefy it in Egypt and sell it to Europe is there.
“The discovery of the new natural gas at plot Zohr will not change the policy of Egypt towards Cyprus, Egypt is a huge country with huge energy needs,” Mubarak said.
“Egypt has offered to import Cyprus natural gas for domestic use and also for liquefication at the plant in Egypt and then sell it to Europe, everywhere.
“I think, economically, to start a liquefication plant is very costly, we already have a plant to treat it and liquefy it and sell it to Europe,” he added. The ambassador also said that a pipeline could transport gas from Cyprus to Port Said and from there it will be transferred to other facilities in Egypt.
This proposal by Cairo was made in Nicosia in August at a trilateral meeting between Cyprus, Greece and Egypt – the second of its kind.
Greece is to host a third trilateral meeting most probably in November.
But, the ambassador said, Cyprus will take big decisions on its own – without Athens.
“Now they are studying the offer, not only the Cyprus government but also (involved) gas companies, they are all studying it. (US energy firm) Noble and BG and ENI and Total are all looking into this offer and a decision has to be made soon,” Mubarak said.
“What I know is that some companies are taking advantage of the offer already and are holding talks with Egyptian counterparts for the liquefication of gas, because all will benefit from this decision which is the most profitable option.”
Mubarak argued that the good news is that if Egypt finds additional natural gas Cyprus will follow suit.
“(Because) it’s in the neighbourhood, it is there, you will find more gas too. Everybody needs to do more drillings,” he said. “The Zohr finds give every country in the region a spirit of hope, new deposits mean new development in economies.”
Cyprus problem not a hurdle
The Cyprus problem does not affect economic plans between Cairo and Nicosia, the ambassador said.
“We deal with the Cyprus government and President Abdel Fattah al-Sisi and President Nicos Anastasiades have the best of relations we had in years, we have the best cooperation framework.”
Cyprus has been divided since 1974 following a Turkish invasion and continued occupation of over one-third of the Mediterranean island.
Ankara has stirred turmoil in the past after violating Cyprus’ exclusive economic zone while international oil and gas companies were carrying out drills.
Since the announcement of the Zohr finds ten days ago, Energy Minister George Lakkotrypis has been in frequent communication with his Egyptian counterpart, Sherif Ismail. And according to a Twitter post by the government spokesman, Anastasiades had spoken on the phone with al-Sisi last week.
Moreover, unnamed government sources were quoted saying that “important developments are expected soon…and very soon events will disprove the critics of our energy plans.”
Who is Hussein Mubarak
Born in Tripoli in 1960, the neighbouring country’s new ambassador who presented his credentials to President Anastasiades last week is the son of a judge serving in Libya at the time.
Hussein is also a trained lawyer and got his degrees from Cairo University and Berkley University in California.
The career diplomat joined the foreign service in 1984 and is married to Hwaida Mubarak who is also a diplomat now serving as consul general in Kuwait.
They have two daughters – Hanna and Myrna – and a son called Omar.
“One of my daughters is at the level of university and studies law, the other two are still at high school.
“They are with their mother in Kuwait, they will be visiting Cyprus a lot, during school holidays,” Mubarak said.
Previous postings of the ambassador were in New York at their United Nations diplomatic delegation and then at the embassy in Washington DC.
He also served as consul general in New York.
Source: http://in-cyprus.com/egypt-will-take-cyprus-gas/
Maybe the best is yet to come | Cyprus Mail
Maybe the best is yet to come
IT TOOK the drilling of just one well to put the eastern Mediterranean back on the world map of hydrocarbons. The timing could not be better for Egypt, currently experiencing power cuts due to insufficient electricity production. The announcement of the Zohr find by ENI has manifestly upset the plans of the Noble-Delek consortium which holds the concession on Israel’s Leviathan gas field. In Cyprus, government sources were meanwhile focusing exclusively on the positive prospects of the discovery.
Perhaps the most positive development as far as Cyprus is concerned, is the size of the Egyptian Zohr prospect as well as its proximity to Cyprus’ offshore block 11, currently licensed to French oil major Total. The size of the gas field, in the order of 30 trillion cubic feet (tcf), or 5.5 billion barrels of oil equivalent, in conjunction with the fact the well is located just 6.5km from block 11, is a potential game changer.
If one considers that oil and natural gas reservoirs know no geographical boundaries, there are strong indications that the reservoir may extend into Cyprus’ Exclusive Economic Zone (EEZ). A similar situation holds for a plethora of oil and natural gas fields around the world, notably the 800 tcf North Field/South Pars gas field in the Persian Gulf, shared by Qatar and Iran. Another example, closer to home, is Cyprus’ Aphrodite reservoir in block 12 which extends into the Israeli EEZ.
But a single well alone is not sufficient to give a full picture of a reservoir’s potential, its production capacity, composition of the hydrocarbons, the scale of the field or the formation’s geological attributes. Depending on the geological structure of the field, it will take at least one to two appraisal drills to reduce uncertainties and narrow down the quantities present in Zohr. It is even possible that the estimated amounts may be upgraded at a future date although, as experience with the Aphrodite reservoir has shown, the opposite cannot be ruled out.
At this stage it would be wise for the government and Total to reassess the 2D and 3D data from seismic surveys for block 11, seeking clues as to whether the Zohr prospect does extend into Cyprus’ EEZ. But what if it does?
The benefits to Cyprus might turn out to be more significant than developing Aphrodite. Naturally this will depend chiefly on how much of the Zohr gas is located within block 11. But before production of natural gas from Zohr can commence, the inter-state agreement between Cyprus and Egypt, signed in 2010, delineating their respective EEZs, will be activated, as also the unitization agreement concluded between the two countries in 2013.
Thereafter, negotiations would take place between the Egyptian government and ENI on the one hand, and the Cyprus government on the other, to determine the respective quantities. The fact that ENI operates both in Egypt and in Cyprus, in conjunction with the close relations between the governments of Cyprus and Egypt, should act as a catalyst for achieving a mutually beneficial agreement within a reasonable timeframe.
Such an initial agreement would allow for the speedy development of the Zohr field and the extraction of natural gas for Egypt’s domestic market but also for LNG exports, possibly via the LNG facility in Damietta, Egypt, in which ENI owns 50 per cent of the shares.
The norm in the petroleum industry is that, once hydrocarbons production has begun, the parties usually hammer out an updated agreement that factors in the recoverable quantities as well as the new state of affairs emerging from a better understanding of the geology and how much gas can be actually recovered.
Essentially, should Zohr turn out to be a shared reservoir, then Cyprus may benefit financially from natural gas production by investing almost nothing in the project. Naturally the distribution of the proceeds would factor in the investment expenses. Moreover, cooperation between the parties is key to the successful joint exploitation of the natural gas.
Cognizant of Egypt’s natural gas needs, ENI has conveyed its readiness to speed up development of the Zohr field. Considering the time needed to carry out appraisal, or follow-up, drilling, laying subsea pipelines and putting in place other infrastructures, the production of natural gas could begin, under the optimistic scenario, by 2020.
One may reasonably ask, how will Egypt cover its energy needs until then? In all likelihood it will continue to import LNG, while at the same time seek to develop other reservoirs. There is also the possibility of importing natural gas via subsea pipelines, either from Israel or Cyprus.
What the Leviathan and Aphrodite fields have in common is that their development is 1.5 to 2 years ahead of Zohr, since the gas quantities have already been confirmed and the companies have come up with the field development plans. A major obstacle to providing Egypt with Israeli natural gas is Egyptian public opinion, which will not easily accept such an arrangement, particularly now after the discovery of the Zohr field.
As far as a pipeline from the Aphrodite field to Egypt goes, this would be quite a expensive project due to the greater distance (some 200km) and the cost of a pipeline. Until the Zohr field is developed, the alternative interim solution for Egypt would be to generate electricity from heavy fuel oil, coal, or importing natural gas from Jordan.
The other positive development from the Zohr discovery will be the heightened interest by energy companies in the eastern Med, which has now been upgraded into an energy-rich province. Right now, perhaps the biggest factor holding back further prospecting for hydrocarbons are collapsing oil, and consequently natural gas, prices.
Industry watchers are meantime waiting with bated breath a possible future announcement by ENI on the presence (or not) of hydrocarbon condensates (light oil) within Zohr. The liquid form of the condensates, and primarily the ease of use – as no pipelines or liquefaction are needed – make them more valuable compared to natural gas.
Meanwhile, the presence of hydrocarbon condensates in Aphrodite is an important discovery, however the relatively small amounts do not allow for developing the field exclusively for their extraction.
In closing, the discovery of the Zohr field may overall be called a positive development, despite the fact it has caused consternation over the development of Aphrodite. That said, it will take more drilling and synergies in order to evaluate the find and elucidate the gas potential within the Cypriot EEZ. Let’s hope that, with a little luck, the best is yet to come.
Constantinos Hadjistassou is assistant professor at the University of Nicosia and a researcher with the KIOS Centre, University of Cyprus
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