Prospects for Cyprus' natural gas 'promising', experts at Energy Symposium say
CNA - NICOSIA 8/12/2015 17:09
The challenges and opportunities in the energy sector for Cyprus were the focus of a discussion among experts during the 4th Energy Symposium, held on Tuesday in Nicosia.
The demand and the supply of natural gas in Egypt will continue to increase and Egypt continues to be very interested in the Cypriot natural gas, said Dimitris Fessas, Manager at Cyprus Hydrocarbons Company. He added that a few weeks after the discovery of Zhor gas field, in the Egyptian offshore, there was a reassessment of the new situation, but it became apparent that Cyprus' strategy still remains on the table.
He added that Egypt`s plan on Zhor is to meet the needs of the domestic market, noting that the liquefaction terminals of BG and those at the city of Damietta are potential buyers of Cypriot gas.
Fessas said that there are potential buyers who resell domestically and explained that the final agreement will depend on various parameters such as quantities, prices and guarantees given.
According to Fessas, the discovery of Zhor in Egypt can be considered competition as well as an opportunity for synergies in the region. He said the joint development of deposits will create economies of scale, reduce costs and increase profits.
Greece is willing to act as a transit country for Cypriot and Israeli natural gas, on its way to Europe, Greece`s Minister of Environment and Energy Panos Skourletis has noted. In a written address that was read at the symposium, Skourletis notes that this can be done either through tankers, or directly through the EastMed pipeline, yet to be constructed.
Skourletis highlighted Greece`s ambition to become an energy hub in South East Europe and contribute to the continent`s energy security. He remarked that there is particular mobility as of late concerning LNG, with an aim to enhance the security for natural gas in the region.
Athens seeks to play a central role in the region, due to a combination of gas pipelines running through the country, the Greek Minister said, making particular reference to IGB connecting Bulgaria with Greece, the natural gas hub in northern Greece and the designs for a new Russian gas pipeline, expected to extend to Greece and Italy.
Speaking about the discovery of natural gas resources in Cyprus` exclusive economic zone, Skourletis said this has altered the geopolitical facts in the region, putting the country at the center of the energy map of Southeastern Mediterranean.
Petroleum geologist Constantinos Nicolaou appeared optimistic that Cyprus has similar geological structures such as those discovered in Zhor. He explained that the giant discovery in Egypt` offshore was made possible when ENI changed its geological model and searched reefs instead of drilling in sandy areas with rocks.
CEO at Cyprus Natural Hydrocarbons Company Ltd, Charles Ellinas said that Cyprus should keep all options open in relation to the development of its natural gas and should develop a plan B and C, because of the increasingly reduced price of natural gas.
Ellinas also said that Cyprus must reconsider the option of compressed gas in order to achieve more competitive prices.
According to Ellinas, “we have put all our eggs in one basket” and he appeared concerned over the fact that Egypt has large gas reserves which will be developed over the next few years.
Ellinas also said that the recent decision to end talks between Israel and Egypt complicates the situation in the region.
Former Director of the Energy Department at the Energy Ministry, Solon Kasinis said that the proximity of Zhor deposit to Cyprus` exclusive economic zone (EEZ) is very promising, adding that it seems that “we will be key players in the region.”
He expressed hope that drilling in Block 11 by French company Total in 2016 will yield significant results.
CNA/TNE/GS/AGK/KCH/MM/2015
ENDS, CYPRUS NEWS AGENCY
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East Med: Hydrocarbon Potential, Exports and Routes
Natural Gas Europe had the pleasure to be a guest at the recent third Mare Forum that took place in the historical city of Paphos in Cyprus. The conference gathered politicians and executives from the oil, gas, shipping and maritime industries who engaged in a constructive dialogue mainly centered around oil and gas exploration and production, distribution and transportation of Eastern Mediterranean gas to Europe and the world and regional and world geopolitics. The speakers gave useful presentations containing updates on Cyprus’ onshore LNG terminal project, information on the scheduled drilling activities offshore Cyprus and insight on the island’s export options and on the targeted export markets.
In 2011, Noble Energy discovered the Aphrodite field in Block 12 of Cyprus’ EEZ. The field’s gross resource was later estimated at 3.6 to 6 Tcf with a mean of 5 Tcf. Additional appraisal activities in the field are anticipated in the short term, said John Tomich, Cyprus country manager for Noble Energy at the third mare forum in Paphos. Given the modest domestic demand for natural gas in Cyprus, most of the natural gas found in the island’s EEZ will be allocated for exports. Georges Shammas, Chairman of the Cyprus Energy Regulatory Authority, highlighted that Cyprus’ internal market is estimated to consume less than 1 bcm a year. The hydrocarbon wealth carries a big promise to Cyprus’ financially hit economy. The country’s planned onshore LNG terminal in Vassilikos can help provide long term economic stability added Tomich. The project would constitute the largest investment in the island’s history said Solon Kassinis, founder of Kassinis International Consulting Ltd. and previous Executive Vice President of the Cyprus National Hydrocarbons Company Ltd. (CNHC). He added that the LNG project in Vassilikos would create thousands of jobs in the energy industry and the support industries and generate substantial revenues that would significantly enhance the economy.
Building an onshore LNG terminal would allow Cyprus to play the role of an energy hub, processing gas from neighbouring countries to export markets. An LNG export terminal would also allow Cyprus to generate revenue from the sale of gas to export markets. An LNG terminal would provide the island the flexibility to reach lucrative markets regardless of their geographical location. Cyprus will however need to encounter sufficient amounts of gas before taking a final investment decision regarding the LNG project.
Additional quantities of natural gas will be required to commercially justify a ~5 MTPA train size project in the Vassilikos coastal area of Cyprus, explained Tomich. He added that there is a significant exploration potential in Cyprus’ EEZ. Noble Energy will be conducting further exploratory drilling in a new structure of Block 12 of Cyprus’ EEZ that it operates with a working interest of 70%, Delek Drilling and Avner Oil Exploration having each a 15% working interest in Block 12. In his welcome speech at the mare forum, Shammas revealed good indications from seismic surveys of another six smaller fields in Block 12 estimated to hold 2 tcf each. ENI-Kogas will be drilling in Blocks 2, 3 and 9 of Cyprus’ EEZ in the third quarter of 2014, followed by Total that will be drilling in Blocks 10 and 11 of Cyprus’ EEZ in 2015 revealed Shammas.
Tomich said that exports from the Israeli fields could supplement the Cypriot LNG project. He also exposed alternative development options in the event the onshore project is not viable in an appropriate time frame: a FLNG could be the solution to reach export markets while a pipeline solution would allow Cyprus to reach regional markets, including Egypt’s export LNG plants. Kassinis added that a pipeline through Turkey to Europe is a no-go option for Cyprus as it would give Turkey control over the flow of Cypriot gas. He said that a pipeline to Turkey is only possible on the condition a solution to the Cypriot problem is found first. Kassinis said that the strong ties between Cyprus and Greece suggest that a pipeline through Greece to Central Europe via Italy is an option. He highlighted however that the pipeline scenario would limit flexibility and a pipeline to Greece could prove technically (due to the depth of the sea) and economically unfeasible.
In his presentation, Kassinis highlighted the growing trend in natural gas consumption in the EU paralleled with a declining trend in natural gas production and in the imports from Norway. The International Energy Agency (IEA) predicts global gas demand will rise to about 140 Tcf by 2020 from 117 Tcf in 2012 (IEA, 2012). Current commercial analysis suggests that 9–10 Tcf of the additional 23 Tcf of demand will be in the form of LNG. Part of this demand could potentially be satisfied by expansion of existing facilities and possibly through future US LNG exports. However, it is very likely that there will still be some additional demand to be satisfied by completely new LNG production cap, said Kassinis.
Kassinis sees a window of opportunity for Cyprus to sell its newly found hydrocarbon wealth to the European market given his belief that the share of natural gas in the EU’s energy portfolio will remain high and that the EU maintains reservations against the exploitation of shale gas in Europe. Shammas said that Cyprus’ development plan of the LNG infrastructure is in line with Europe’s energy policy regarding diversification of sources, routes and suppliers of natural gas to enhance security of supply and competitiveness. Kassinis concluded that the Eastern Mediterranean could be a new and secure source of natural gas to Europe, adding that the Asian markets are also attractive to Cyprus.
Karen Ayat is an analyst focused on energy geopolitics. Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat